As Vietnam’s startup ecosystem continues to flourish, venture capital (VC) funds are playing an increasingly critical role in financing innovation and high-growth enterprises. Yet, the regulatory framework for these funds in Vietnam is still evolving—and at times, unclear. This article explores how Vietnamese law governs venture capital funds, the challenges investors may face, and what legal pathways currently exist for venture capital operations in the country.
1. What Is a Venture Capital Fund Under Vietnamese Law?
Unlike jurisdictions such as the United States or Singapore, Vietnamese law does not explicitly define “venture capital funds” in a comprehensive, standalone statute. Instead, the legal treatment of venture capital falls under several overlapping regulatory frameworks, most notably:
- The Law on Securities 2019, which governs public and private investment funds;
- The Law on Enterprises 2020, which regulates corporate entities used to structure funds;
- Regulations from the Ministry of Planning and Investment (MPI) and the State Securities Commission (SSC) regarding private equity, fund management, and startup investments.
In this context, venture capital funds are usually structured either as:
- Private equity investment funds licensed under the Securities Law; or
- Investment holding companies formed under the Enterprise Law.
2. Private Investment Funds: A Regulated Pathway
Under the Law on Securities 2019, a non-public investment fund is defined as a fund that does not offer its units to the public and operates under the management of a licensed fund management company. These funds can invest in startups, tech ventures, or high-risk assets.
Key regulatory requirements include:
- Fund managers must obtain an operating license from the SSC;
- Investors must meet certain professional investor qualifications;
- The fund must be registered with the SSC, and report periodically on its operations;
- Investment scopes are limited to what is allowed under the fund’s charter and the law.
While this route offers legal certainty, it also imposes significant compliance costs and regulatory scrutiny—factors that often deter early-stage investors and informal VCs.
3. Unregulated Venture Capital: The Startup Investment Club Model
In practice, many early-stage VC funds in Vietnam operate outside the scope of formal fund regulation by forming limited liability companies (LLCs) or joint stock companies (JSCs) to pool capital from multiple investors and invest in startups.
This model is often referred to as the “startup investment club” model, and is relatively popular due to its simplicity and flexibility. However, such entities are not recognized as “investment funds” under Vietnamese law, and thus:
- Do not benefit from regulatory protections or incentives for fund operations;
- Cannot raise funds from the public or conduct fund management as a licensed activity;
- Face legal uncertainty in taxation, foreign investment control, and governance.
Foreign VC investors must also comply with foreign ownership restrictions under the Law on Investment and foreign exchange regulations, which can complicate the investment structure, especially when the fund is not licensed.
4. Foreign VC Funds Operating in Vietnam
Many global VC funds choose to invest in Vietnamese startups indirectly—either through offshore SPVs (special purpose vehicles) or by entering into SAFE agreements (Simple Agreement for Future Equity) or convertible notes. These structures bypass the need for local licensing, but may raise:
- Issues under Vietnam’s foreign exchange and capital control laws;
- Taxation risks if the deal involves “deemed” capital contributions or offshore profit transfers;
- Regulatory scrutiny if repatriation of profits or capital is involved.
While the government has shown openness to VC investments—particularly through innovation policies—no unified legal framework yet exists to support foreign VC operations in a streamlined way.
5. Toward a Legal Framework for Venture Capital
Recognizing the importance of venture capital in driving innovation, the Vietnamese government has taken steps to encourage startup investment, such as:
- Decision No. 844/QĐ-TTg on supporting the national startup ecosystem;
- Decree No. 38/2018/NĐ-CP on innovative startup investments, which provides some recognition of private startup funds and angel networks;
- Ongoing efforts by the Ministry of Planning and Investment to draft a Law on Innovation and Startups.
However, these instruments remain policy-level or pilot initiatives, and do not yet provide a robust legal basis for formally regulated venture capital operations comparable to global standards.
Conclusion
Vietnamese law currently lacks a dedicated legal framework for venture capital funds, leaving investors to operate under general corporate or securities regulations. While there are legal pathways—such as forming a licensed private fund or establishing an investment company—the regulatory environment remains fragmented and at times uncertain.
Investors, startups, and legal advisors must navigate this landscape carefully, balancing compliance with flexibility. As Vietnam continues to position itself as a hub for innovation, a clearer and more supportive legal framework for venture capital will be essential to sustaining growth and attracting both domestic and foreign capital.
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