Vietnam set to roll out new regulations for VC funds independent from securities law

VC backed firms in US, Europe now worth $500b
VC word cloud. Credit:Barrie Entrepreneur Connect

Vietnam is working on a separate set of regulations, independent of the existing securities law, to govern venture capital investment activity in the country. The move is seen to enable a diverse set of investors to participate in startup funding in the country.

The state, which is working on the decree on venture capital fund establishment in the country, is expected to introduce the regulation by the end of the year.

The new move is a departure from its earlier stance when the state was exploring the idea of setting up of such funds under the purview of the  current securities law.

“Regulations on the establishment of securities investment funds are very tight. (…) These regulations do not encourage private investors to contribute capital to set up venture funds,” said a government document.

Therefore, the local technology ministry has proposed the formation of fund management companies, which will operate venture capital funds, as well as startup investment firms.

Each fund is set to have no more than 30 limited partners (LPs). These investors will be not be limited in transferring their capital within the funds.

“The availability of such a dedicated set of regulations will not only boost the fundraising capacity but also protect investors’ interest through tax incentives and a detailed operation guideline,” the document added.

Investors into Vietnamese startups will enjoy income tax reduction or exemption although details of the same have not been made available.

The government is also seeking advice on adding convertible loan to diversify the tools for funding startups.

“Banks and securities investment funds are not targeting funding for startups due to the risk and small scale of the business,” said the government document. “Meanwhile, a lot of local individual and institutional investors are interested in startups but dithered about how to jointly invest.”

Also read:

Vietnam to launch venture capital regulation in 2017