Decree No. 38/2018/NĐ-CP detailing regulations on investment for small and medium-sized enterprises engaged in innovative startups

DECREE

Detailed regulations on investment for small and medium-sized enterprises engaged in innovative startups

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Pursuant to the Law on Government Organization dated June 19, 2015;

Pursuant to the Enterprise Law dated November 16, 2014;

Pursuant to the Investment Law dated November 26, 2014;

Pursuant to the Law on Management and Use of State Capital for Investment in Production and Business at Enterprises dated November 26, 2014;

Pursuant to the State Budget Law dated June 25, 2015;

Pursuant to the Law on Supporting Small and Medium Enterprises dated June 12, 2017;

At the proposal of the Minister of Planning and Investment;

The Government promulgates this Decree detailing regulations on investment for small and medium-sized enterprises engaged in innovative startups.

PART I

GENERAL PROVISIONS

Article 1. Scope and objects regulated

2. Applicability:

This Decree guides investment for small and medium-sized enterprises engaged in innovative startups; the establishment, organizational management, and operation of venture capital funds for innovative startups and the mechanism for using local budgets to invest in small and medium-sized enterprises engaged in innovative startups.

2. Scope of application:

a) Investors for small and medium-sized enterprises engaged in innovative startups as stipulated in Clause 1, Article 18 of the Small and Medium-Sized Enterprises Support Law;

b) Small and medium-sized enterprises engaged in innovative startups as defined in Clause 2, Article 3 of the Small and Medium-Sized Enterprises Support Law;

c) Agencies, organizations, and individuals related to the implementation of this Decree.

In this Decree, the following terms are understood as follows:

1. Investment for small and medium-sized enterprises engaged in innovative startups (hereinafter referred to as startup investment) is the act of investors contributing capital to engage in business activities through establishing new enterprises, purchasing shares, or contributing capital to small and medium-sized enterprises engaged in innovative startups that are not yet public companies.

2. Venture capital fund for innovative startups is a fund formed from the contributions of private investors to carry out startup investment.

3. Capital contribution of the fund is the total value of assets contributed by investors into the venture capital fund for innovative startups.

4. A company managing a venture capital fund for innovative startups is a company established under enterprise laws, with the industry and profession of managing a venture capital fund for innovative startups.

Article 3. Startup Investment

1. Investors as stipulated in Clause 1, Article 18 of the Small and Medium-Sized Enterprises Support Law have the right to engage in startup investment activities according to forms not prohibited by law, including:

a) Contributing capital to establish new enterprises, purchase shares, or contribute capital to small and medium-sized enterprises engaged in innovative startups;

b) Establishing or contributing capital to venture capital funds for innovative startups to carry out investment.

2. Enterprises may use their science and technology development funds to engage in startup investment according to the provisions of the Technology Transfer Law and this Decree. State-owned enterprises engaging in startup investment activities shall comply with regulations on the management and use of state capital invested in production and business operations at enterprises and relevant laws.

3. Investors are responsible under the law for the lawful origin of the investment funds, without violating domestic and international laws on anti-money laundering.

Article 4. Enterprises Engaging in Startup Investment Activities

1. Enterprises registered for establishment under the Enterprise Law have the right to engage in startup investment activities according to the provisions of this Decree.

2. Enterprises have the responsibility to supplement the registration of industries and professions for startup investment activities according to the law on enterprise registration when engaging in such activities.

3. Business registration authorities have the responsibility to examine the validity of the documents and supplement the registration of industries and professions for startup investment activities according to the law on enterprise registration.

Chapter II

 VENTURE CAPITAL FUNDS FOR INNOVATIVE STARTUPS

1. The venture capital fund does not have legal personality, established by up to 30 investors contributing capital based on the fund's charter. The venture capital fund shall not contribute capital to another venture capital fund.

2. Contributed assets may be in Vietnamese Dong, gold, land use rights value, and other assets that can be valued in Vietnamese Dong. Investors shall not use borrowed funds to contribute capital to establish a venture capital fund.

3. The investment portfolio and activities of the venture capital fund include:

a) Depositing money at commercial banks in accordance with the provisions of the law;

b) Investing no more than 50% of the charter capital of small and medium-sized enterprises engaged in innovation startups after receiving investment.

4. All contributed capital and assets of investors in the fund must be independently accounted for separately from the company managing the fund.

5. Investors contributing capital to establish the fund shall agree among themselves regarding the authority to decide on the investment portfolio, and this must be stipulated in the fund's charter and contract with the company managing the fund (if any).

Article 6. Charter of the Venture Capital Fund

1. The charter of the venture capital fund must be approved by all investors.

2. The charter includes the following main contents:

a) Name of the venture capital fund, date of establishment, duration of operation of the fund, company managing the fund;

b) Objectives of operation; investment fields; operating principles; duration of operation of the fund;

c) Capital contributions of the fund and regulations on increasing or decreasing the fund's capital contributions;

d) Rights and obligations (including salaries, bonuses, management fees) of the company managing the fund, Board of Representatives of the fund, Fund Director; cases of changing the company managing the fund, Board of Representatives of the fund, Fund Director;

đ) Regulations on the General Meeting of Investors;

e) Regulations on the authority to decide on the investment portfolio;

g) Regulations on keeping the register of investors of the fund;

h) Regulations on profit distribution;

i) Regulations on resolving conflicts of interest;

k) Regulations on reporting systems;

l) Regulations on dissolution and liquidation of the fund;

m) Regulations on transferring shares of investors;

n) Procedures for amending and supplementing the fund's charter;

o) Other contents (if any).

3. The section on operational objectives in the fund's charter must clearly state the following warning: This fund aims to invest in small and medium-sized enterprises engaged in innovation startups. Investment in this fund is only suitable for investors willing to accept high potential risks from the fund's investments. Investors in this fund need to carefully consider before participating in capital contribution and making investment decisions.

Article 7. Management of the Venture Capital Fund

1. The venture capital fund may be managed according to one of the following models:

a) General Meeting of Investors, company managing the venture capital fund;

b) General Meeting of Investors, Board of Representatives of the fund or Fund Director, company managing the venture capital fund;

c) General Meeting of Investors, Board of Representatives of the fund and Fund Director, company managing the venture capital fund.

3. The management of the venture capital fund as prescribed in this Decree shall be carried out in accordance with the fund's charter, contracts signed with the fund (if any), and shall not be subject to regulation by securities law.

4. Unless otherwise provided in the fund's charter, the company managing the fund shall report to the Board of Representatives of the fund, Fund Director quarterly information including:

a) Information about the fund's investment portfolio, including the amount invested in each small and medium-sized enterprise engaged in innovation startups.

b) Information about the investment plan, expected divestment (if any).

c) Management costs, bonus fees (if any) paid to the company managing the fund, Board of Representatives of the fund, Fund Director, and other service fees stipulated in the Fund Charter arising during the reporting period.

d) Other information as required by the Board of Representatives of the fund, Fund Director.

5. The transfer of shares of founding shareholders in the company managing the venture capital fund shall be carried out in accordance with the Law on Enterprises.

Article 8. Investor General Meeting

1. The Investor General Meeting consists of all investors who have contributed capital to the fund and is the highest decision-making body of the fund. The Investor General Meeting decides on the following matters:

a) Amending and supplementing the fund's charter, contracts with the management company;

b) Changing the fund's investment policy and objectives; replacing the management company, the Fund Board, and the Fund Director;

c) Dissolving the fund; increasing or decreasing the fund's capital contribution; extending the term of operation of the fund;

d) Deciding on contracts and transactions as prescribed in Article 10 of this Decree;

đ) Approving the selection of an auditing organization approved to audit the fund's annual financial reports, independent valuation organizations (if any); approving financial reports and annual reports on assets and operations of the fund;

e) Reviewing and handling violations by the management company that cause losses to the fund;

g) Other issues within the authority as stipulated in the fund's charter.

2. Decisions of the Investor General Meeting are passed through voting at meetings, or by written ballot or other forms as prescribed in the fund's charter. Each investor has a number of votes corresponding to their proportionate capital contribution to the fund.

3. The Investor General Meeting is organized according to the provisions of the fund's charter.

4. The management company is responsible for convening extraordinary meetings of the Investor General Meeting upon request of the Fund Board, the Fund Director, an investor, or a group of investors holding more than 10% of the total capital contribution continuously for at least six months or another ratio smaller than that specified in the fund's charter in the following cases:

a) There is verified evidence of the management company violating the rights of investors, or the obligations of the management company, or making decisions exceeding the authority stipulated in the fund's charter or delegated by the Investor General Meeting, causing losses to the fund;

b) Other cases as prescribed in the fund's charter.

5. The organization of extraordinary meetings of the Investor General Meeting must be carried out within thirty days from the date the management company receives the request to convene an extraordinary meeting of the Investor General Meeting. At least fifteen days before the meeting takes place, the management company must send the entire agenda, content of the meeting, and related documents to all investors, clearly stating the reasons and objectives of the meeting.

6. In case the management company does not convene the Investor General Meeting as prescribed in Clause 4 and Clause 5 of this Article, the management company shall bear legal responsibility and compensate for any losses incurred by the fund (if any).

Article 9. Fund Board, Fund Director

1. The Fund Board and the Fund Director are elected by the Investor General Meeting to represent the investors. The rights and obligations of the Fund Board and the Fund Director are stipulated in the fund's charter.

2. Decisions of the Fund Board are passed through voting at meetings, or by written ballot or other forms as prescribed in the fund's charter. Each member of the Fund Board has an equal vote.

3. Unless otherwise provided in the fund's charter, the Fund Board and the Fund Director have the duty:

a) To check compliance, reasonableness, legality, honesty, and prudence in the activities of the management company;

b) To review the completeness, legality, and honesty of reports sent by the management company;

c) To review, inspect, and evaluate the effectiveness of the management company, risk management, and warn investors.

Article 10. Transactions must be approved by the Investors' General Meeting and the notification of related interests

1. The following transactions of the fund must be approved by the Investors' General Meeting before implementation:

a) Transactions between the fund and small and medium-sized innovative enterprises where the legal representative of the small and medium-sized innovative enterprise is a person related to the investor who has contributed at least 35% of the total capital contribution of the fund or another smaller ratio as stipulated in the fund's charter. In this case, the related investor shall not have the right to vote. The contract or transaction shall be approved if at least 65% of the remaining voting shares represented by investors agree;

b) Other transactions as provided for in the fund's charter.

2. Where the fund's charter does not provide otherwise, the company managing the fund must notify the Board of Directors of the Fund and the Fund Director within seven days from the date of occurrence, and simultaneously notify the Investors' General Meeting at the annual meeting with the following information:

a) List of persons related to the company managing the fund;

b) Name, business registration code, main office address of the enterprise in which members of the Board of Members, members of the Management Board, Director or General Director of the company managing the fund hold equity or shares; the proportion and time of holding such equity or shares.

3. Related parties are determined according to the provisions of Article 4 of the Enterprise Law.

1. Within five working days from the date of establishment of the venture capital investment fund, the company managing the fund must send notice in Form No. 01a and 01b attached to this Decree on the establishment of the fund to the business registration authority at the location of the company's main office before the fund operates. The notice shall include the following documents:

a) Charter of the fund;

b) Contract for hiring the company managing the fund (if any);

c) Bank confirmation regarding the scale of contributed capital;

d) Certified copies of identity cards, passports, citizen identification cards for individual investors; decisions on establishment, business registration certificates or equivalent documents for organizational investors;

đ) Minutes of meetings and decisions of the Shareholders' General Meeting or Management Board, decisions of the Board of Members or owner in accordance with the company's charter of organizational investors contributing capital regarding participation in capital contribution to the fund, regarding appointment of authorized representatives along with their personal files.

2. The business registration authority is responsible for examining the validity of the notice and accompanying documents within fifteen working days from the date of receipt of the notice.

3. If the notice and accompanying documents are valid, the business registration authority shall issue a document to the company managing the fund confirming the lawful establishment of the fund. If the notice and accompanying documents are not valid as prescribed in this Decree, the business registration authority shall inform the company managing the fund in writing and specify the reasons, any required amendments or supplements (if any).

4. Within five working days from the date of lawful notice of establishment of the fund, the company managing the fund shall publish information on the establishment of the venture capital investment fund on its electronic website or electronic portal (hereinafter referred to as the electronic portal) and send a copy of the notice of establishment of the fund to the Ministry of Planning and Investment for publication on the National Portal for Supporting Small and Medium-Sized Enterprises. The fund may only operate after the information about the fund is published on the National Portal for Supporting Small and Medium-Sized Enterprises.

5. The company managing the fund shall be liable under the law for the truthfulness and accuracy of the content of the notice of establishment of the fund and accompanying documents. The business registration authority shall be responsible for the validity of the notice of establishment of the fund and accompanying documents, and shall not be liable for any violations of the law by the company managing the fund and investors.

6. The business registration authority shall not resolve disputes among investors, between investors and the company managing the fund, or between investors and other organizations or individuals.

7. The following changes must be notified to the business registration authority at the location of the company managing the fund's main office for public disclosure on the National Portal for Business Registration: Increase or decrease in the fund's capital contributions; extension of the fund's operating period; liquidation or dissolution of the fund; transfer of equity interests among fund investors.

Article 12. Increase or decrease in the contribution capital of venture capital funds for startups

1. The increase or decrease in the contribution capital of venture capital funds for startups shall comply with the following provisions:

a) The fund's charter provides for the increase or decrease in the contribution capital of the fund;

b) The increase or decrease in the contribution capital of the fund has been approved by the Fund Investor General Meeting.

2. Venture capital funds for startups increase their capital through additional fundraising from existing investors, or raising capital from new investors. In this case, the number of investors in the fund must still comply with the provisions set forth in Article 5 of this Decree.

3. In the event of a reduction in capital, the assets allocated to investors may be in the form of money or other assets according to the decision of the Fund Investor General Meeting. The company managing the fund is responsible for allocating assets fairly corresponding to each investor's contribution ratio. The transfer of asset names and registration of asset ownership to investors, tax obligations to the State, shall be carried out in accordance with relevant laws.

a) Notification of the increase or decrease in the venture capital fund's capital according to Model No. 02 attached as an appendix to this Decree;

b) Minutes of meetings and resolutions of the Fund Investor General Meeting regarding the increase or decrease in capital and related documents;

c) Amended fund charter;

d) Minutes of the agreement on capital contribution and list of investors, amount of capital contributed, ownership ratio before and after the increase or decrease in the fund's capital contribution;

d) Certificate issued by the company managing the fund regarding the additional contributed capital, the asset portfolio invested in the fund. In the case of reducing capital: Confirmation letter issued by the company managing the fund regarding the allocation of assets to each investor, specifying the asset portfolio allocated to the investor.

Article 13. Notification of Extension of Operating Period for Venture Capital Funds for Startups

1. The extension of the operating period of the fund is implemented according to the decision of the Fund Investor General Meeting.

a) Notification of the extension of the fund's operating period according to Model No. 03 attached as an appendix to this Decree;

b) Minutes of meetings and resolutions of the Fund Investor General Meeting regarding the extension of the fund's operating period, specifying the extended operating period of the fund;

c) Detailed investment portfolio and net asset value report of the fund at the latest valuation date up to the submission of the extension dossier;

d) Changes in investors and the fund charter (if any).

Article 14. Dissolution of the Fund

1. The liquidation and dissolution of the fund shall be carried out in the following cases:

a) Upon expiration of the operating period specified in the fund's charter;

b) The Fund Investor General Meeting decides to dissolve the fund before the expiration of the operating period specified in the fund's charter;

c) The company managing the fund is dissolved, bankrupted, or had its business registration certificate revoked, and the fund's board of representatives cannot establish a replacement management company within two months from the date of the event;

d) Other cases as provided for in the fund's charter.

2. Within thirty days from the date of the fund's dissolution as stipulated in Point b, c, d of Clause 1 of this Article, or three months prior to the date of the fund's dissolution as stipulated in Point a of Clause 1 of this Article, the company managing the fund shall convene the Fund Investor General Meeting to approve the dissolution plan of the fund.

3. The Fund Investor General Meeting has the right to appoint an independent auditing organization to conduct inspections, evaluations, and supervision of all activities related to liquidation, valuation, revaluation, and distribution of fund assets to investors; or maintain the operation of the fund's board of representatives and the incumbent fund director to supervise the liquidation and distribution process of fund assets.

4. The company managing the fund is responsible for carrying out the liquidation and distribution of assets to investors according to the plan approved by the Fund Investor General Meeting.

5. The Fund Investor General Meeting agrees on the date of the fund's dissolution. From the date of the fund's dissolution, the company managing the fund shall not:

a) Carry out investment activities or purchase assets for the fund;

b) Gift or donate fund assets to other organizations or individuals;

c) Engage in other transactions aimed at dissipating fund assets.

6. The assets of the dissolving fund include:

a) Assets and rights to assets that the fund possesses at the time it is required to dissolve;

b) Profits, assets, and rights to assets that the fund will have due to transactions established before the time the fund is required to dissolve.

7. Proceeds from the liquidation of fund assets and remaining assets shall be paid in the following priority order:

a) Financial obligations to the State;

b) Amounts owed to the company managing the fund, the fund's board of representatives, the fund director, and other amounts owed and liquidation costs. In the case of compulsory dissolution of the fund as stipulated in Point c of Clause 1 of this Article, the fund does not need to pay management fees, board fees, and director fees according to contracts from the date of the event;

c) Remaining assets shall be used to repay investors proportionate to their contribution ratios to the fund.

8. The results of the liquidation of fund assets must be confirmed by the company managing the fund and approved by the fund's board of representatives or the fund director supervising the liquidation process.

1. Within seven days from the date when the Investor General Meeting approves the dissolution of the fund, the company managing the fund must notify the business registration authority at the location where the company is headquartered about the dissolution of the fund using Model No. 04 attached to this Decree.

2. The announcement regarding the liquidation and dissolution of the fund shall include the following documents:

a) Minutes of the meeting and resolutions of the Investor General Meeting on the dissolution of the fund, accompanied by the plan and timeline for liquidation and distribution of assets approved by the Investor General Meeting, specifying the principles for determining asset value on the day of dissolution and the time frame for the fund to liquidate assets in accordance with the law, the charter of the fund, and the valuation manual; the method of distributing assets to investors and providing information to investors about the liquidation and distribution of assets;

b) A written commitment signed by the legal representative of the company managing the fund to take responsibility for completing all procedures for liquidating assets to dissolve the fund.

3. The procedure for announcing the liquidation and dissolution of the fund, the responsibilities of the company managing the fund, and the business registration authority shall follow the procedure for announcing the establishment of the fund as stipulated in Clauses 2, 3, 4, 5, and 6 of Article 11 of this Decree.

4. The liquidation of assets and the liquidation period of the fund shall be carried out according to the dissolution plan approved by the Investor General Meeting, but not exceeding one year from the date of publication of the notice of the fund's dissolution. During the period when the fund is liquidating assets for dissolution, management fees, supervision fees, and other costs shall be collected according to the fee schedule approved by the Investor General Meeting. After the dissolution of the fund, the company managing the fund shall provide investors with monthly information on the payment amount per Contributed Share, expenses incurred during the period, the remaining net asset value of the fund, and the asset value distributed to investors. Notifications sent to investors must be provided to the business registration authority for monitoring and supervision.

5. Within five working days from the completion of the dissolution of the fund, the company managing the fund has the responsibility to publish information about the completion of liquidation, distribution, and dissolution of the fund on the company’s electronic portal, while simultaneously reporting the results of the dissolution of the fund to the business registration authority and the Ministry of Planning and Investment for publication on the National Portal Supporting Small and Medium Enterprises.

6. In cases where the report on the results of the dissolution is inaccurate or there are forged documents, the company managing the fund and related organizations and individuals must jointly bear the responsibility for paying off outstanding debts and bear personal liability under the law for any consequences arising within three years from the date of reporting the results of the dissolution to the business registration authority.

Article 16. Distribution of Profits of the Fund

1. Investors shall receive profits from the fund according to the profit distribution policy stipulated in the fund's charter and the distribution plan approved by the most recent Investor General Meeting. The payment of fund profits shall ensure the following principles:

a) The fund may only distribute profits to investors if it has made a profit from its investment activities, fulfilled its tax obligations, and other financial obligations as required by law;

b) Consistent with the profit distribution policy stipulated in the fund's charter;

c) The level of profit payment shall be decided by the Investor General Meeting, consistent with the investment objectives and the provisions in the fund's charter regarding the profit distribution policy.

2. At least fifteen days before the distribution of profits, the company managing the fund must notify the registered address of the investor.

1. Except where the fund charter or law provides otherwise, investors contributing capital to the fund may freely transfer their contributed capital shares in the fund. The transfer of one or all of the contributed capital shares in the fund must ensure that, after the transfer, the number of investors in the fund still meets the conditions stipulated in Article 5 of this Decree.

2. Within fifteen days from the completion of the transaction, the company managing the fund shall notify the business registration authority about the transfer of the contributed capital shares of the investors as follows:

a) Notify about the transfer of the contributed capital shares of the investors according to Model No. 05 attached to this Decree, specifying information on the parties involved in the transaction, ownership ratio of each party (before and after the transaction), and the value of the transaction.

b) A certified copy of the share transfer agreement of the investors by the fund management company.

1. Before January 15th of each year, enterprises engaged in start-up investment activities, companies managing start-up investment funds have the responsibility to submit activity reports according to Model No. 06 attached to this Decree to the Ministry of Planning and Investment for publication on the National Portal for Supporting Small and Medium-sized Enterprises.

2. The business registration authority has the right to directly or request competent state agencies to inspect, in accordance with the provisions of law, the company managing the fund regarding the contents in the notification of establishment of the fund, changes to the fund, and other documents concerning the fund as prescribed in this Decree.

Article 19. Accounting and Financial Regulations

1. The accounting regulations of enterprises engaged in start-up investment activities, companies managing start-up investment funds, and start-up investment funds shall be implemented in accordance with the provisions of the law on accounting.

2. The transfer of investment capital, profits into and out of Vietnam by foreign investors when investing in small and medium-sized start-up enterprises shall be carried out in accordance with the provisions of the law on investment and foreign exchange management.

Chapter III

MECHANISM FOR USING LOCAL BUDGETS TO INVEST IN SMALL AND MEDIUM-SIZED ENTERPRISES ENGAGED IN START-UP ACTIVITIES

Article 20. Provisions on Using Local Budgets to Invest in Small and Medium-sized Enterprises Engaged in Start-Up Activities

1. Based on local budget conditions, the People's Committee of provinces and centrally-administered cities (hereinafter referred to collectively as the provincial-level People's Committee) shall submit to the People's Council at the same level to allocate tasks to state financial organizations in the locality with the function of financial investment to implement investments in small and medium-sized start-up enterprises.

2. In cases where state financial organizations in the locality organize and operate under the model of state financial funds outside the budget, the allocation of tasks and support of registered capital for state financial funds outside the budget must comply with the provisions of Clause 11, Article 8 of the State Budget Law.

3. In cases where state financial organizations in the locality organize and operate under the enterprise model, the additional registered capital must comply with the provisions of Articles 4, 13, 14, and 15 of the Law on Management and Use of State Capital for Production and Business Operations in Enterprises.

4. The principle of start-up investment of state financial organizations in the locality shall be implemented in accordance with the provisions of Clause 4, Article 18 of the Law on Support for Small and Medium-sized Enterprises.

5. State financial organizations in the locality shall exercise the rights and responsibilities of the representative owner when implementing investments in small and medium-sized start-up enterprises.

6. Information on start-up investment activities using local budgets must be publicly disclosed on the electronic portal of the provincial-level People's Committee where the activities are carried out.

Article 21. Selection of venture capital funds for joint investment

1. Local state financial organizations shall select venture capital funds for joint investment ensuring at least the following conditions:

a) Commitment to jointly invest with local state financial organizations in small and medium-sized enterprises engaged in innovative startups;

b) At least one year of experience in implementing venture capital investment activities for startups;

c) Ability to cover costs when participating in investment activities;

d) Other conditions (if any).

2. Annually, local state financial organizations shall conduct evaluations, adjustments, and publish lists of selected venture capital funds for startup investments on their own local government financial organization's electronic portal and the provincial People's Committee's website.

Article 22. Enterprises Receiving Investment

1. Enterprises receiving investment from local state financial organizations are small and medium-sized enterprises engaged in innovative startups that meet the following criteria:

a) Operating in priority sectors promoted by the locality;

b) Selected for investment by at least one of the venture capital funds specified in Article 21 of this Decree.

2. Quarterly, local state financial organizations shall update and publish lists of enterprises receiving investment on their own local government financial organization's electronic portal and the provincial People's Committee's website.

Article 23. Forms and Methods of Investment

1. Venture capital funds specified in Article 21 of this Decree shall evaluate and propose schemes for selecting small and medium-sized enterprises engaged in innovative startups, submitting them to local state financial organizations for review and decision-making on joint investment.

2. In cases where local state financial organizations operate and function under a state-owned enterprise model, procedures and methods for investing in small and medium-sized enterprises engaged in innovative startups and managing the contributed capital shall be carried out in accordance with Articles 28 and 30 of the Law on Management and Use of State Capital for Production and Business Operations in Enterprises.

3. In cases where local state financial organizations operate and function under a non-budgetary state financial fund model, procedures and methods for investing in small and medium-sized enterprises engaged in innovative startups and managing the contributed capital shall be carried out in accordance with the organizational and operational regulations of such funds and the Law on Management and Use of State Capital for Production and Business Operations in Enterprises.

4. The decision to invest in small and medium-sized enterprises engaged in innovative startups from the capital of venture capital funds does not depend on the investment decision of local state financial organizations.

5. The amount of investment from local state financial organizations to an enterprise receiving investment as stipulated in Article 22 of this Decree shall not exceed 30% of the total investment raised by that enterprise from venture capital funds for joint investment.

Article 24. Investment Period

The maximum investment period from the local budget is five years from the date of investment. The date of investment is the signing date of the investment contract between the local state financial organization and the enterprise receiving investment.

Article 25. Transfer of Investment Capital

1. Within five years from the date of investment, the local state financial organization shall transfer shares or equity stakes at the invested enterprise to private investors. Priority shall be given to transferring capital to the same venture capital fund that co-invested, and existing shareholders of the invested enterprise.

2. The transfer of investment shall be carried out in accordance with the provisions set forth in Article 31 of the Law on Management and Use of State Capital for Production and Business Operations at Enterprises.

3. The entire value obtained from the transfer of capital, after deducting transfer costs and tax liabilities (if any), must be remitted to the state budget.

Article 26. Establishment of Risk Reserve Fund

Local state financial organizations must establish a risk reserve fund for their investments in accordance with the financial management mechanism applicable to local state financial organizations.

Local state financial organizations shall organize the evaluation of the results of startup innovation investment activities using local budgets, and report to the People's Committee and the Ministry of Planning and Investment in accordance with the provisions of Article 31 of the Law on Supporting Small and Medium-sized Enterprises.

Chapter IV

STATE MANAGEMENT OF STARTUP INNOVATION INVESTMENT ACTIVITIES AND IMPLEMENTATION OF THE DECREE

To take the lead and coordinate with ministries, sectors, and provincial-level people's committees under central cities in monitoring, summarizing, and evaluating the implementation of the Decree, and proposing amendments and supplements to this Decree when necessary.

To provide guidance on accounting treatment for enterprises engaged in startup innovation investment activities, management companies of startup innovation funds, and startup innovation funds when encountering difficulties during operations.

Article 30. Responsibilities of Provincial-level People's Committees under Central Cities

1. State management over startup innovation investment activities in the locality; organizing inspections and supervision of the activities of management companies of startup innovation funds and startup innovation funds.

2. Publicizing the local budget allocated for investment in small and medium-sized enterprises engaged in startup innovation activities and bearing responsibility for violations within the scope of management according to the law when entrusting local state financial organizations to invest in such enterprises.

4. Proposing solutions to address difficulties in implementing startup innovation investment from the local budget; proposing supplements and amendments to mechanisms and policies for startup innovation investment activities.

Article 31. Responsibilities of Local State Financial Organizations

1. Fulfilling the rights and responsibilities of the representative body of the owner regarding the portion of capital from the local budget invested in startup companies in accordance with the Law on Management and Use of State Capital for Production and Business Operations at Enterprises.

2. Proposing solutions to address difficulties in implementing startup innovation investment.

Article 32. Responsibilities of small and medium-sized innovative enterprises receiving investment

1. Provide truthful information during the process of raising investment capital.

2. Use investment capital carefully in accordance with the provisions of contracts signed with investors.

Article 33. Implementation Provisions

1. This Decree takes effect from the date of issuance.

2. During the implementation process, the Government shall review and amend the Decree when necessary.

3. The Ministers, Heads of ministerial-level agencies, Heads of governmental agencies, Chairpersons of provincial People's Committees under the central government, Chairpersons of management councils and directors of state financial organizations at the local level, heads of relevant agencies and organizations are responsible for implementing this Decree./.