Question: Dear Attorney. May I have a question as follows: May foreign investor(s) establish an investment fund in Vietnam? If yes, (i) what is the possible form of that foreign invested fund, and (ii) what is the procedure to establish this fund?
Answer:
SB Law appreciate your interest in our legal consultant services. Regarding your question, we would like to advise you as follows:
1. Ability to set up investment fund
Foreign investor may establish investment fund with foreign investment in Vietnam. However, the investor is not permitted to directly establish investment fund. The investment fund must be established by a fund management company . Hence, in order to set up a fund with foreign investment in Vietnam, the investor has to establish a fund management company first.
A fund management company can be set up with 100% foreign investment capital. However, the investor must meet these conditions as follows :
– Being organization operating in banking, securities, insurance area with a minimum of 02 years of operation preceding the year participating in capital contribution for establishment, share purchase and contributed capital;
– Availablity of bilateral or multilateral cooperation agreement on information exchange, management cooperation, inspection and supervision of securities activities and securities market signed by and between the specialized management and supervision agency in foreign country in the area of banking, securities, insurance and the State Securities Commission;
– Profitable business operation in 02 preceding years;
– Not being in a state of operational control, special control or other warning status at the same time fulfilling the conditions to participate in contribution of capital and investment.
In case the investor meet these mentioned requirements, the investor may estabish a fund management company with 100% foreign investment. After that, the Client shall set up an investment fund through the fund management company.
2. Types of investment fund and procedures to set up each types
There are 2 types of investment fund in accordance with Law on securities of Vietnam, which includes:
Public fund
A public fund is a securities investment fund which conducts public offering of fund certificates. A public fund must satisfy these following conditions:
– At least one hundred investors, excluding professional securities investors, buy fund certificates;
– The total value of sold fund certificates reaches at least VND 50 billion.
A public fund shall be organized under the form of open – ended fund or closed fund. Accordingly, an open – ended fund is a public fund whose certificates, which have undergone a public offering, should be bought back at the request of investors; Meanwhile, a closed fund is a public fund whose certificates, which have undergone a public offering, should not be bought back at the request of investors .
The procedure to establish an open – ended fund shall be briefted as follows:
a) Open – ended fund:
Step 1: Initial public offering of the fund certificates
The fund management company register for the initial public offering of the fund certificates to the State Securities Commission. A dossier of registration for the initial public offering of open-ended fund certificates includes:
– The written application for the public offering of the fund certificates;
– The Fund’s Charter;
– The prospectus, the Simplified prospectus;
– The list enclosed with personal profiles of the fund management staff;
– The principle contract on the supervision; the principle contracts signed with relevant service providers (if any); the principle contracts signed with nominal agents; the principle contracts for the fund certificate distribution; the principle contracts to provide fund administration services (if any). In case the service providers are distributors or nominal agents who have not been issued with Certificates of registration of the fund certificate distribution, such service providers must provide the documents about the registration for the distribution of open-ended fund certificates;
– The advertising documents and introduction of the fund (if any);
– In case the Fund Management Company does not organize the first Investors’ General Meetings, it must provide the additional documents for consulting the investors , including:
+ The list enclosed with personal profiles and other valid documents proving that the Board of Representatives satisfy the requirements;
+ Documents related to other issues that need to be consulted by the investors.
Within 30 days from the date on which complete and valid dossier is received, the State Securities Commission shall issue the certificate of registration of the public offering of open-ended fund certificates.
The initial public offering of the fund certificates shall be carried out after issuance of the Certificate of registration for offering fund certificates. The fund management company must complete the distribution of fund certificates for a period of ninety (90) days from the effective date of registration certificate for selling offer of fund certificates to the public.
Step 2: Registering with the State Securities Commission.
Within 10 days after the date on which the initial public offering is finished, the Fund Management Company must send the dossier of registration for the fund establishment to the State Securities Commission, including:
– The written application for the Fund establishment;
– The report on the offering results;
– The Supervisory bank’s written confirmation on the money gained from the offering;
– The list of nominal agents and all investors including the investors trading via the nominal accounts;
– The summary of investors’ opinions in case the Fund Management Company does not organize the first Investors’ General Meetings.
Within 10 days from the on which the complete and valid dossier is received, the State Securities Commission shall issue the Certificate of the fund establishment registration.
b) Closed fund
Step 1: Initial public offering of the fund certificates
The fund management company register for the initial public offering of the fund certificates to the State Securities Commission. A dossier of registration for the initial public offering of closed fund certificates includes:
– The written application for the public offering of the fund certificates;
– The Fund’s Charter;
– The prospectus and summary prospectus;
– The contract in principle regarding supervisory, supervision activities between the custodian bank and fund management company;
– The contract in principle on the distribution of fund certificate between the fund management company and the distribution agents;
– A list together with the personal records, copies of certificates of fund management practice of at least two (02) fund administrators;
– Underwriting commitments (if any).
Within thirty (30) days from the date of receiving complete and valid dossier as prescribed in Clauses 4 and 5 of this Article, the State Securities Commission issues a first offering registration certificate of fund certificates to the public.
Step 2: Registering with the State Securities Commission.
Within 10 days after the date on which the initial public offering is finished, the Fund Management Company must send the dossier of registration for the fund establishment to the State Securities Commission, including:
– The written application for the Fund establishment;
– The report on the offering results;
– The Supervisory bank’s written confirmation on the money gained from the offering;
Within ten (10) days from the date of receipt of complete and valid dossier, the State Securities Commission shall issue the certificate of fund establishment registration .
Member fund
A member fund is a securities investment fund which consists of at most thirty capital-contributing members being organizations. A member fund has to satisfy following requirements:
– The fund’s minimum contributed capital is VND 50 billion;
– There are at most thirty capital-contributing members being legal persons;
– The fund is managed by a fund management company;
– The fund’s assets are deposited at a depository bank independent from the fund management company.
The procedure to establish a member fund shall be described as follows:
The establishment of member fund must be reported to the State Securities Commission by the Fund Management Company. Report dossier on the establishment of the member fund must include the following documents:
– Application for registration of the operation of the member fund made by the Fund Management Company;
– Fund charter;
– The prospectus, the cover page of the prospectus must be stated clearly the principle of operation of the fund: “This fund must not comply with the provisions of the law governing investment activity of securities investment fund implementing selling offer of fund certificates to the public. The investment in this fund is only suitable for the organizations willing to accept a potential high level of risk from the investment of the fund. Organizations investing in this fund should consider carefully before contributing capital, making investment decision”;
– Asset depository contract;
– Minutes of capital contribution agreement, a list of organizations to contribute capital;
– A certified copy of the establishment decision, business registration certificate or other equivalent document of limited partners. For members as foreign organizations, a copy of the business registration certificate or equivalent document must be certified by the agency where the organizations registered not exceeding six (06) months before the date of completion of dossier registering for fund establishment and must be translated and notarized public in accordance with relevant laws;
– Minutes of the meeting and the decision of the general meeting of shareholders or the Management Board, the decision of the Council of members or the owners in accordance with the provisions of the company charter of the organization to contribute capital on the capital contribution to the fund, on appointment of authorized representative of contributed capital together with the personal records of this person;
– A copy of the certificate of registration of securities trading code of the foreign organization;
– Depository bank’s certification on the scale of contributed capital.
Within fifteen (15) days after receiving a complete record, the State Securities Commission notifies in writing to confirm that the fund management company has reported on the establishment of member fund.
