Via the receipt and reply system to business recommendations, Ms. Le Thi Bich (Hanoi) requested guidance on conditions and procedures for converting a wholly Vietnamese-owned high school or college to a wholly foreign-owned school through the form of buying shares and capital contributions of business organizations.

According to Ms. Bich's opinion, based on the Articles 24, 25, 26 of the Law on Investment 2014 and Article 46 of the Decree 118/2015/ND-CP, to follow the procedures for buying shares and capital contributions of the business organizations owning the school, foreign investors must satisfy the conditions of foreign investors according to international commitments to which Vietnam is a member and specialized laws.

Currently, the system of legal documents regulating investment activities of foreign investors in the Vietnamese education sector includes two groups: Decree 86/2018/ND-CP applicable to pre-schools, compulsory, higher educational institutions; Law on Vocational Education 2014, Decree 15/2019/ND-CP, Decree 143/2016/ND-CP, Decree 48/2015/ND-CP applicable to vocational education institutions.

These documents provide the conditions and procedures for establishing a new foreign-invested educational institution. However, no regulations stipulated on how for a case that a school (high school or college) operating as a wholly Vietnamese-owned school now becomes a wholly foreign-invested school because the Vietnamese owner has sold all of its shares to a foreign investor. The problem here is that according to the above documents, the procedures to establish a school will include three steps:

- Step 1: Apply for an Investment Registration Certificate at the Department of Planning and Investment.

- Step 2: Apply for a decision on the establishment of a school at the People's Committee of province or the Ministry of Labor, Invalids and Social Affairs, or the Ministry of Education and Training, the Prime Minister depending on the type of educational institution.

- Step 3: Apply for a license for educational operating.

However, according to the provisions of Article 46 of Decree 118/2015/ND-CP, in case of buying shares or capital contributions from business organizations, foreign investors are not required to apply for an Investment Registration Certificate. Most of the wholly Vietnamese-owned schools were established without Investment Registration Certificate (not required by law). The conditions and authorities that applied for issuance of the establishment and operating between schools with wholly Vietnamese capital and with wholly foreign capital are also different (for example, in terms of capital, a pre-school with foreign capital must have a minimum investment rate of 30 million VND per child and establishment decision granted by the People's Committee of province, operating license granted by the Department of Education and Training, while the Vietnamese-owned school has no requirement for investment rate and is granted by the People's Committee of district for the establishment, by the Division of Education and Training for operating).

As per Ms. Bich, in this case, the foreign investor still follows the procedures for registering to buy shares and capital contributions at the Department of Planning and Investment and adjusting the enterprise registration information to become the owner of the business organization and the school. After completing these procedures, the foreign investor follows procedures to apply for an Investment Registration Certificate at the Department of Planning and Investment with the content of executing a school operation project instead of establishing a school (the investor will check the school's conditions and in case the school has not met with the conditions of the foreign-invested school such as in term of capital, the investor will increase the school's capital to ensure the conditions satisfied).

Since the school has been granted a license for establishment and operation, the decision on the establishment and operating is still valid and the foreign investor does not need to re-implement the procedures for establishing the school or applying for an operating permit. In case there is a change in the school’s operation scope and contents, the school shall follow the procedures for adjusting the operation license as for a foreign-invested school.

Ms. Bich asked if her understanding as above is correct or not? In the wrong case, she asked to be guided on conditions and procedures to convert from a wholly Vietnamese-owned school to a wholly foreign-owned school.

After the foreign investor buys shares, capital contributions from the owner of a wholly Vietnamese-owned school, does the foreign investor have to apply for an Investment Registration Certificate or not? Does it need to re-implement the procedures of applying for a decision on the establishment of a school and a license for operating the school? If it needs to apply for re-issuance, which forms and procedures are to follow?

In this matter, the Ministry of Planning and Investment replied as follows:

Conditions for foreign investors to purchase shares or capital contributions of business organizations specified in Clause 2, Article 25 of the Law on Investment 2014.

Procedures for registering the capital contributions, shares, or capital contributions purchased by investors comply with the provisions of Article 26 of the Law on Investment 2014 and Clause 3, Article 46 of Decree No. 118/2015/ND-CP dated November 12, 2015 of the Government guidelines for some articles of the Law on Investment.

Clause 1, Article 46 of Decree No. 118/2015/ND-CP stipulates that foreign investors who make investments through capital contribution or purchase of shares, capital contributions in business organizations are not required to obtain Investment Registration Certificates.

According to the provisions in Annex 4 issued together with the Law No. 03/2016/QH14 on amendment and supplement to Article 6 and Annex 4 on the list of conditional business lines stipulated in the Law on Investment, operations of secondary school education institutions, higher education institutions, foreign-invested education institutions, representative offices of foreign education institutions in Vietnam, branches of foreign-invested education institutions are on the list of conditional business lines.

Therefore, after converting to wholly foreign-owned schools, pre-school, compulsory, and higher education institutions must satisfy the conditions specified in Decree No. 86/2018/ND-CP dated June 6, 2018 of the Government on foreign cooperation and investment in education and relevant legal documents.

Vocational education institutions must satisfy the conditions specified in the Law on Vocational Education 2014, Decree No. 15/2019/ND-CP dated February 1, 2019 of the Government providing guidelines for some articles and implementation of the Law on Vocational Education, Decree No. 143/2016/ND-CP dated October 14, 2016 of the Government on investment and operation in vocational education and relevant legal documents.

Regarding the procedures related to the establishment of the school and granting the operating license of the school, it is suggested that Ms. Le Thi Bich contact the Ministry of Education and Training for specific instructions.