Vietnam: Use of local government budgets to make investments in startups

Prominent in Decree No. 38/2018/NĐ-CP of Vietnam’s Government is the regulations on use of local government budgets to make investments in startups. To be specific:

Invested enterprises

An enterprise invested by the local financial agency must be a startup that:

- operates in priority industries or sectors; and

- is invested by at least one venture capital fund prescribed in Article 21 herein.

The local financial agency shall quarterly update and publish the list of invested enterprises on its website and the website of Provincial People's Committee.

Investment form and method

Venture capital funds shall evaluate and propose the plan on selection of potential startups to the local financial agency for consideration.

If the local financial agency is organized and operates in the form of a state-owned enterprise, procedures and formalities for investment in startups and management of state funding contributed shall be performed in compliance with regulations in Article 28 and Article 30 of the Law on management and utilization of state capital invested in the enterprises’ manufacturing and business operations of Vietnam.

If the local financial agency is organized and operates in the form of an extra-budgetary fund, procedures and formalities for investment in startups and management of state funding contributed shall be performed in compliance with specific organizational and operational regulations of that fund and the Law on management and utilization of state capital invested in the enterprises’ manufacturing and business operations of Vietnam.

Decision on investments in startups by a venture capital fund shall be independent from that of the local financial agency.

Decree No. 38/2018/NĐ-CP stipulates that the total investment made by the local financial agency in a startup shall not exceed 30% of total investments jointly made by venture capital funds in that startup.

Investment term

The term of an investment with funding from the local government budget shall exceed 05 years from the investment date. The investment date is the date on which the investment agreement is entered into between the local financial agency and the invested startup.

Decree No. 38/2018/NĐ-CP of Vietnam’s Government takes effect from March 11, 2018.

-Thao Uyen-

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