Improving the legal framework for venture capital activities in Viet Nam

Accordingly, this Decree provides regulations on the establishment, organizational structure, operation, management, ratio of capital contributed from the state budget, use of capital, and supervisory mechanism for the National Venture Capital Fund, local venture capital funds, as well as other matters stipulated in Article 40 of the Law on Science, Technology and Innovation.

Operating principles of the fund

According to the regulations, the Fund operates under the following principles:

Venture capital is an investment activity conducted through capital contribution to establish or purchase shares or contributed capital in innovative start-ups, or through the establishment of, or capital contribution to, venture capital funds and innovative start-up investment funds.

1- Comply with the laws of Viet Nam and international treaties to which Viet Nam is a member; comply with the laws of the host country or territory when investing abroad.

2- Operate in accordance with market principles, accept risks in a controlled manner, and ensure publicity, transparency, efficiency, and information confidentiality.

3- Support the innovative start-up ecosystem; prioritize investment in innovative start-up enterprises and projects with high growth potential in high technology, digital technology, strategic technology, technology encouraged for transfer, green economy, circular economy, sustainable development, and those that create positive impacts on the local, national economy, society, and environment.

The National Venture Capital Fund shall be established and operate in the form of a limited liability company with two or more members or a joint-stock company in accordance with the provisions of the Law on Enterprises.

Local venture capital funds shall be established and operate in the form of enterprises in accordance with the provisions of the Law on Enterprises.

The National Venture Capital Fund and local venture capital funds have legal person status, their own seals, and may open accounts at the State Treasury as well as domestic and foreign banks in accordance with relevant laws.

Organizational structure and powers of the fund

According to the regulations, the organizational structure and powers of the Fund shall be prescribed in the Fund’s Charter (Company Charter) in accordance with the provisions of the Law on Enterprises; the rights, responsibilities, salaries, remunerations, bonuses, and other benefits of the representative of the State capital portion in the Fund shall be implemented in accordance with the law on the management and investment of State capital in enterprises.

The Ministry of Science and Technology is the agency representing the State capital ownership in the National Venture Capital Fund and is responsible for appointing the representative of the State capital portion in the fund.

The provincial People’s Committee is the agency representing the State capital ownership in local venture capital funds and is responsible for appointing the representative of the State capital portion in such funds.

The fund may cooperate with or hire professional organizations and individuals, both domestic and foreign, to manage and operate the fund’s activities in accordance with its Charter.

The fund may establish advisory councils and investment appraisal councils to support its investment activities.

Objectives, functions, and tasks of the fund

The objective of the fund is to invest and attract investment resources into innovative start-up enterprises and innovative start-up projects with breakthrough growth potential and the ability to address economic, social, and environmental challenges at local, national, and international levels; to support and promote the development of the national and local innovation start-up ecosystem and the venture capital market in Viet Nam, thereby contributing to the country’s socio-economic development and international integration.

The functions and tasks of the National Venture Capital Fund are as follows: to contribute capital for the establishment, purchase of shares, or acquisition of capital contributions in innovative start-up enterprises in Viet Nam and abroad; to co-invest with other venture capital funds or innovative start-up investment funds, both domestic and foreign, for the establishment, purchase of shares, or acquisition of capital contributions in innovative start-up enterprises; and to establish or contribute capital to other venture capital funds or innovative start-up investment funds in Viet Nam and abroad for the purposes of venture investment and supporting the national innovation start-up ecosystem.

The functions and tasks of local venture capital funds are as follows: to contribute capital for the establishment, purchase of shares, or acquisition of capital contributions in innovative start-up enterprises in Viet Nam; to co-invest with other domestic venture capital funds or innovative start-up investment funds for the establishment, purchase of shares, or acquisition of capital contributions in innovative start-up enterprises; and to support the development of the local innovation start-up ecosystem.

Capital sources of the fund

Under the Decree, the charter capital of the National Venture Capital Fund comprises the following:

- The State’s capital portion allocated from the development investment expenditure estimates of the Ministry of Science and Technology, granted in a single disbursement upon the establishment of the Fund, with the initial capital from the state budget being not less than VND 500 billion.

- Capital contributions from domestic and foreign organizations and individuals (if any), made in accordance with the provisions of law and the Fund’s Charter.

The charter capital scale of the National Venture Capital Fund shall reach at least VND 2,000 billion within the first five years, formed on the basis of the State’s capital allocated from the state budget and the capital mobilized from organizations and individuals.

For local venture capital funds, the charter capital of the fund comprises the following:

- The State’s capital portion allocated from the local development investment expenditure estimates, granted in a single disbursement upon the establishment of the fund, with the proportion of the initial capital from the state budget determined by the provincial People’s Committee.

- Capital contributions from domestic and foreign organizations and individuals (if any), made in accordance with the provisions of law and the fund’s Charter.

Revenue sources of the fund

The revenue sources of the fund include: profits from investment activities in accordance with the fund’s Charter; interest on bank deposits derived from temporarily idle capital between investment cycles, including both charter capital and mobilized capital of the fund; lawful donations, sponsorships, and aid from domestic and foreign organizations and individuals; proceeds from capital withdrawal and liquidation of the fund’s assets; and other lawful revenues as prescribed by law and the fund’s Charter.

Operating expenditures of the fund

The operating expenditures of the fund include: expenses for management, administration, and other activities directly serving the fund’s operations; expenditures for supporting the development of national and local innovation start-up ecosystems, up to a maximum of 5% of the fund’s annual post-tax profit; appropriations for the venture investment risk reserve fund, sourced from the Fund’s annual operating capital, including both charter capital and mobilized capital, in accordance with the fund’s Charter; and other lawful expenditures as prescribed by law and the fund’s Charter.

Investment expenditures of the fund

The investment expenditures of the Fund include: expenditures for capital contribution to establish innovative start-up enterprises; expenditures for purchasing shares or equity interests in innovative start-up enterprises; and expenditures for capital contribution to venture capital funds or other start-up investment funds in accordance with the provisions of law.