Key Amendments under the Law on Management and Investment of State Capital in enterprises 2025

The Law on Management and Investment of State Capital in Enterprises 2025 (“Law 2025”) has officially replaced the provisions of the Law on Management and Use of State Capital Invested in production,business in Enterprises 2014 (“Law 2014”). Accordingly, a number of provisions under Law 2014 have been further elaborated in Law 2025, thereby creating more favorable conditions for enterprises in exercising their responsibilities and powers in practice, rather than maintaining a “permit-seeking” mechanism for certain matters where the law provided regulations but lacked clarity, resulting in difficulties in implementation. To provide greater clarity, this article highlights the key changes between the former and the new law.

1. Authority representing state Capital Ownership

According to Law No. 69/2014/QH13, the State Capital Ownership Representative Authority was only generally defined as “agencies or organizations authorized by the Government to exercise the rights and responsibilities of the ownership representative,” meaning that no specific designation was provided. The Law 2025 has made a clear change by specifying the following: (a) Ministries, ministerial-level agencies, Governmental agencies, or organizations authorized by the Government; and (b) Provincial People’s Committees as assigned by the Government. This new provision represents a shift from an “open assignment mechanism” to a “closed list mechanism,” thereby ending ambiguity, enhancing transparency, and attaching specific legal accountability.

2. Definition of “State Capital Investment”

Under the previous regulation, “state capital investment in enterprises means the State’s use of funds from the state budget or funds from state-managed funds to invest in enterprises.” The Law 2025 expands the definition as follows: “State capital investment in enterprises means the State’s use of state capital and assets to invest in enterprises.” With this expansion, state capital is to be understood more broadly, no longer limited to the state budget or state-managed funds, this is also expected to encourage state-owned enterprises to be more proactive in making investments, thereby promoting the development of the state sector in the economy. However, from the enterprise’s perspective, it will also be necessary to establish regulations on managing capital sources, as well as methods of determining and valuing assets used for investment purposes. This is to ensure transparency and to guarantee that individuals representing state capital fulfill their role properly, thereby safeguarding the integrity of state capital.

3. Forms of state capital investment

The Law 2014 provided for four forms of state capital investment: establishment of wholly state-owned enterprises; supplementation of charter capital for enterprises; additional investment to maintain the State’s ownership ratio in companies; and acquisition of enterprises. The Law 2025 (Article 10) sets out five forms, adding “investment in capital contribution, share purchase, or acquisition of equity in enterprises without existing state capital.” Accordingly, whereas the State previously invested only in existing enterprises or those in which it already held equity, the new law broadens the scope to recognize the State as a proactive investor directly participating in the market. Thus, after a period of equitization in the past, state-owned enterprises will, under the new mechanism, officially enter the market to “choose carefully whom to trust” in enterprises operating in industries or sectors that were previously considered the counterweight to state-owned companies.. This development also signals potential shifts and increased competition between state-owned and private enterprises, raising the question of whether such competition may pose challenges to private enterprises in certain sectors.

4. Conditions for establishment of wholly state-owned enterprises

Under the Law 2014, the State was permitted to establish enterprises only in the following sectors: essential public services, national defense and security, natural monopoly, and high technology. The Law 2025 (Article 12) expands this scope to include additional cases such as: development of science and technology, innovation, and digital transformation; construction of critical and nationally significant infrastructure; and other key and essential sectors of the economy. The notable change is that the expanded scope is directly aligned with strategies for sustainable development, national infrastructure, and digital transformation. In practice, however, this expansion may also exert competitive pressure on private enterprises operating in the same sectors.

5. Distribution of profit after tax

Under the former law (Article 34), a maximum of 30% of after-tax profit could be retained by the enterprise for development investment, with the remainder, after setting up reward and welfare funds, being remitted to the state budget.. The Law 2025 (Article 25) permits an allocation of up to 50% of profit after tax to the Development Investment Fund and introduces special mechanisms for defense and security enterprises as well as credit institutions. The new point is the increase in the retention rate and the diversification of distribution methods. This provision provides state-owned enterprises with financial resources for reinvestment, in a context where the new regulations create greater opportunities to encourage them not only to manage existing capital effectively but also to actively undertake investment activities and enhance competitiveness.

It should be noted, however, that under the new regulation, the profit serving as the basis for allocation is the profit after tax and after distribution of returns to capital-contributing members under business cooperation contracts (if any), and after offsetting losses of previous years that have expired for deduction from pre-tax profit in accordance with the Law on Corporate Income Tax (if any). Such profit shall then be used to cover the following expenses:

• Expenses to be covered from profit after tax as prescribed under relevant laws;
• Expenses for mineral survey and exploration conducted for investment purposes but ineligible for project implementation in accordance with Government regulations; expenses arising from failed investments in projects or investments of a special and high-risk nature as prescribed by the Government;
• Expenses for performing political tasks assigned by competent authorities in accordance with Government regulations.

The remaining profit after tax, following the above allocations, shall be appropriated at a rate not exceeding 50% to the Development Investment Fund, to be used for the purpose of expanding the enterprise’s business and production activities and supplementing charter capital. For credit institutions, an appropriation not exceeding 50% shall be made to the Charter Capital Supplementary Reserve Fund and the Development Investment Fund in accordance with the Law on Credit Institutions. An appropriation not exceeding three months’ salary may also be made to establish the Reward and Welfare Fund, based on the results of enterprise evaluation and classification.

For enterprises directly serving national defense and security, in cases where profit after tax is insufficient, the State shall provide support to enable the appropriation to the Reward and Welfare Fund at a maximum level not exceeding two months’ salary, based on the results of enterprise evaluation and classification.

6. Presence of Controllers

The Law 2014 only provided for the role of Controllers in wholly state-owned enterprises and set out general provisions regarding the standards, qualifications, working regime, rights, responsibilities, salary, remuneration, and bonuses of Controllers, while stipulating that the scope of their responsibilities would be governed by the law on enterprises. However, under the Law 2025, Controllers are now present in enterprises in which the State holds more than 50% of charter capital. In addition, the standards, qualifications, working regime, rights, and responsibilities of Controllers are to be implemented in accordance with the law on enterprises, other relevant laws, and the rules of operation of Controllers as promulgated by the State Capital Ownership Representative Authority. Accordingly, under the new provisions, state-owned enterprises will need to pay attention to developing operational rules for Controllers, ensuring compliance with the law on enterprises while also adhering to specific rules and regulations relating to the management and use of state capital.

In addition to the key changes mentioned above, the Law 2025 also introduces a “timeline” for certain enterprises to implement the new legal provisions. Accordingly, state-owned enterprises and enterprises with more than 50% state capital must review, adopt, or amend their charters, financial regulations, and internal rules to ensure compliance no later than 31 December 2026. Pending completion, the previous regulations may continue to be applied if not contrary to law, and the new provisions may be applied if they are more favorable. This represents an important innovation by establishing a mandatory implementation schedule, in contrast to previous periods where only general effective dates were provided without a specific deadline.

The Law on Management and Investment of State Capital in Enterprises 2025 introduces a number of significant reforms: from clarifying the designation of ownership representative authorities, expanding the scope and forms of investment, enhancing autonomy while tightening accountability, to establishing mechanisms for supervision and reporting. These changes demonstrate a policy orientation toward improving the efficiency of state capital utilization, ensuring greater transparency in management, and strengthening the State’s role as a strategic investor. However, for the law to be effectively implemented in practice, the key lies not only in its provisions but also in the mechanisms for enforcement, supervision, and the governance capacity of both the representative authorities and the enterprises themselves.

Time of writing: 27/08/2025

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