The mechanism for the establishment, organization, management and operation of innovative start-up investment funds and the use of local budgets for investment in small and medium innovative start-up enterprises are notable new provisions prescribed in Decree No. 38/2018/ND-CP issued by the Government on 11 March 2018. Specifically:
1. Innovative start-up investment funds
An innovative start-up investment fund have no legal status, established by maximum thirty (30) investors on the basis of the charter of the fund who are not allowed to contribute capital to other innovative start-up investment funds. The innovative start-up investment fund is organized and managed in one of the following models: (i) General Meeting of Investors, the company managing the innovative start-up investment fund; (ii) General Meeting of Investors, Fund Representative Board or Fund Manager, the company managing the innovative start-up investment fund; or (iii) General Meeting of Investors, Fund Representative Board and Fund Manager, the company managing the innovative start-up investment fund.
Assets contributed may be in Vietnam dong, gold, the value of land use rights and other assets that can be valued in Vietnam dong. Particularly noteworthy, investors cannot use loans to contribute capital to set up innovative star-up investment funds. The portfolio and investment activities of the innovative star-up investment funds include: To deposit at commercial banks in accordance with the law; To invest no more than fifty percent (50%) of the charter capital of small and medium innovative start-up enterprise after receiving the investment.
2. Mechanism for use of local budgets for investment in small and medium innovative start-up enterprise
Based on local budget conditions, local financial institutions with financial investment functions authorized by the competent authority (the “Financial Institution”) will invest in small and medium innovative start-up enterprises. The Financial Institution selects an innovative start-up investment fund that ensures the following conditions (the “Investment Fund”) for joint investment: (i) To have commitment with the local State finance agency to invest in small and medium innovative start-up enterprises; (ii) to have at least one (01) year experience in implementing innovative investment activities; (iii) to be able to cover expenses when participating in investment; and (iv) other conditions (if any).
Small and medium innovative start-up enterprises that meet the following criteria will be considered for receipt of investment from the Financial Institutions and the Investment Funds: (i) To operate in sectors with priority given to local development; and (ii) must be chosen to be invested by at least one of the innovative start-up investment funds that meet the statutory conditions. The investment capital from a Financial Institution to an invested enterprise must not exceed thirty percent (30%) of the total investment capital that such enterprise mobilizes from the Investment Fund. The time limit for investment from the local budget is five (05) years from the date of investment. The time of investment is the date of signing the investment contract between the local financial institution and the invested enterprise.