Recently, a foreign investor reached out to BLawyers Vietnam to ask about the eligibility for investing in a Vietnamese company specializing in video production for advertising (the “Target Company”) in the form of a capital contribution, share purchase, or capital contribution purchase.
In this article, BLawyers Vietnam presents 03 questions that foreign investors should study before implementing the above plan.
1. Should the Target Company’s main business line be considered as one business line or two business lines?
During the process of implementing the investment procedure in a company in Vietnam that has a main business line that includes several sub-business lines, most foreign investors face difficulty about the accurate determination of registered business lines. In connection with this concern, licensing authorities in Vietnam assess a foreign investor’s specific and detailed investment registration dossier and consider and appraise whether it is one or two business lines; accordingly, they request such foreign investor to amend and/or adjust business lines in the dossier.
Regarding the Target Company, although the main service it serves in the market is video production activity, such activity is for advertising purposes. Thus, its main business line is advertising service. However, in practice, several local licensing authorities have opined that in addition to registering the video production service, a foreign investor simultaneously should register the advertising service when investing in video production for advertising in Vietnam.
2. What is Vietnam’s commitments for opening the market to foreign investors for the activity of video production for advertising?
Vietnam has committed to have an open market regarding video production and advertising services under the mode of commercial presence in the Schedule of Specific Commitments in Services No. 318/WTO/CK between Vietnam and WTO as follows:
- For video production service, foreign investors are allowed to invest in this area under the forms of business cooperation contracts or joint ventures with Vietnamese partners who are authorized to provide these services in Vietnam. The foreign investor’s capital contribution shall not exceed 51% of the legal capital of the joint venture.
- For advertising services, foreign investors are allowed to provide these services in Vietnam if they satisfy the condition of establishing joint ventures or business contracts with Vietnamese partners who are legally authorized to do advertising services. Vietnam has not stipulated a limitation on foreign capital contribution in joint ventures in the advertising area.
Thus, foreign investors proceeding to invest in video production activities for advertisement are permitted to contribute their capital up to 99.99% in the joint venture or business contract to Vietnamese partners.
Compared to Item 1 above, a foreign investor should consider the consideration and appraisal of a local licensing authority about the to-be-invested line.
3. How do prevailing Vietnamese laws regulate video production activities used for advertisements in regard to foreign investors?
Under the Vietnamese laws on investment, the production of movies, videos, films, and television programs does not fall into conditional business lines, and at the same time, there is no regulation on the condition of market approach to foreign investors.
On the other hand, advertising services are stipulated as conditional business lines to foreign investors. Under the Law on Advertisement 2012, cooperation and investment with foreign investors in advertising services shall comply with the following provisions:
- Organizations and individuals are allowed to cooperate and invest with Vietnamese partners who are permitted to provide advertising services in Vietnam under the forms of joint ventures and business contracts.
- The cooperation and investment in the advertising services shall comply with the laws on investment.
The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at firstname.lastname@example.org. BLawyers Vietnam would love to hear from you.
Date: 27 October 2023
Writer: Uyen Tran