In recent years, Vietnam has become one of the most attractive
destinations for foreign direct investment (FDI) in Southeast Asia,
offering foreign investors a wide range of opportunities to
undertake investment projects. These investment opportunities
include
1. Investment in the form of establishing a company
2. Execution of an investment project
3. Investment in the form of a business cooperation contract
4. Investment in the form of capital contribution or purchase of
shares or capital
Specific provisions apply to foreign direct investment in Vietnam,
both before, during and after the commencement of business
activities in Vietnam. It is crucial to understand, that compliance
with the laws and regulations as well as effective communication
with the local authorities are a decisive factor for the success of
the investment. But how are the market access conditions for
foreign investors in Vietnam? Access to the Vietnamese market is
mainly regulated by the Law on Investment and the Law on Enterprise
of 2020. These laws provide the framework for FDI, including the
requirements for setting up businesses and obtaining licences. In
addition, they also stipulate the specific sectors (conditional
sectors) and business activities (conditional business activities)
in which investments may be made.
Both the Investment Law and the Enterprise Law require that
investment projects must apply for an Investment Registration
Certificate (IRC) and an Enterprise Registration Certificate (ERC)
from the local competent authorities. In this context, investors
must submit a detailed investment application that provides
information about the project, the financing and the planned
business activities. This can be very time-consuming and involves
the submission of a large number of documents, so early planning is
advisable.
The IRC forms the basis for business activities of foreign
investors and may also be a prerequisite for applying for further
licences It contains information on the most important details of
the investment project, including the investment objective, the
duration, the investment capital (equity and debt) and the names of
the investors. The issuance of the IRC takes an average of 15 days
from the date of receipt of the complete application documents by
the competent investment authority. The application is submitted to
the local Department of Investment and Planning (DIP).
In the next step, the investor needs to register the legal
entity/project company that will carry out the investment at the
business registrar of the DPI and obtain an ERC. Once the ERC is
issued, the project company is officially established with a legal
entity status and can commence its commercial operations under its
own name pursuant to Vietnamese law.
A total of four company forms are eligible for registration:
1. Sole proprietorship
A sole proprietorship is one that consists of a single person who
is liable for the entire business with his or her total assets. It
may not issue securities, contribute capital or acquire shares in
partnerships, limited liability companies or public limited
companies when it is founded. At the same time, the owner of the
sole proprietorship may not himself be the owner of a family
business or a general partner/personally liable partner in a
partnership.
2. Partnership
A partnership is an enterprise in which there are at least two
partners that are joint owners of the company and do business under
the same name ("general partner"). There can be capital
contributing partners in addition to the general partners. A
general partner shall be an individual whose liability for the
company's obligations is equal to all of his/her assets. A
capital contributing partner can be an organization or an
individual whose liability for the company's debts is equal to
the promised capital contribution. A partnership must nost issue
any kinds of securities.
3. Multi-member limited liability company (LLC) and Joint Stock
Company (JSC)
A multi-member limited liability company is an enterprise owned by
2-5 organizations or individuals ("members"). The
member's liability for the company's debts and other
liabilities shall be equal to the amount of charter capital
contributed to the company by the member. The company must not
issue shares except for upon conversion into a joint stock company.
However, it may issue bonds.
A joint stock company is an enterprise in which the charter capital
is divided into units of equal value called shares. Shareholders
can be organizations and individuals. The minimum number of
shareholders is three, while there is no limit on the maximum
number of shareholders. A shareholder's liability for the
company's debt and other liabilities is equal to the amount of
capital contributed to the company by the shareholder. Shareholders
may transfer their shares to other persons in accordance with the
Law on Enterprise.
4. Single-member limited liability company
A single-member limited liability company is an enterprise owned by
a single organization or individual ("owner"). The
owner's liability for the company's debts and other
liabilities shall be equal to the company's charter capital.
The company may only issue shares for the purpose of converting
into a joint stock company. Bonds can generally be issued.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.