Regulations for FDI enterprise establishment and investment activities

With a stronger increase in foreign investment, FDI enterprises have become one of the important factors contributing to the economic development of countries around the world, including Vietnam. However, the identification of these enterprises in Vietnamese Law is still unclear.

1. What are the legally regulated FDI enterprises?

In the current legislation of Vietnam, the definition of FDI enterprises has been mentioned but not specified. In particular, the Law on Investment (2020) (hereinafter referred to as the Law on Investment) mentioned this notion through the concept of “foreign-invested economic organization”, which is an economic organization with investors, foreign members or shareholders.

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2. About documents, orders and procedures for the establishment of FDI enterprises

In case of implementation of a new investment project: The foreign investor shall carry out the procedures for approving the investment policy, issue the Investment Registration Certificate for the new investment project and undertake the procedures for establishing an economic organization according to the legal provisions corresponding to each type of economic organization;

In case of transfer of investment projects and establishment of economic organizations: Foreign investors shall carry out procedures for issuance of an Investment Registration Certificate (in case the initial project is not granted such certificate) or adjust the Investment Registration Certificate (in case the project has already been granted the said Certificate) and carry out the procedures for establishing an economic organization in accordance with the relevant laws for each type of economic organization.

The above procedures do not apply in cases of establishment, capital contribution, share purchase, purchase of capital in creative start-up, small and medium enterprises, or innovative start-up investment funds.

Dossiers, orders and procedures for the establishment of an economic organization shall comply with the provisions of the Law on Enterprises (2020) or other laws corresponding to each type of economic organization.

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3. About charter capital

The charter capital of an economic organization established by a foreign investor to execute an investment project is not necessarily equal to the total investment capital of the investment project.

Economic organizations established by foreign investors shall contribute to capital and mobilize other capital sources for the implementation of investment projects according to the schedule specified in the Investment Registration Certificate.

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4. Conditions and principles for carrying out investment activities in the form of capital contribution by FDI enterprises

Foreign investors contributing to capital, purchasing shares or purchasing capital contributions in economic organizations already established in Vietnam must satisfy the conditions specified in Clause 2, Article 24 of the Law on Investment, including:

• Conditions on market access for foreign investors when contributing to capital, buying shares or purchasing capital contributions in economic organizations already established in Vietnam in accordance with the Law;
• Conditions on assurance of national defense and security and land use conditions for economic organizations in which foreign investors contribute to capital, purchase shares or purchase capital contributions, in case such economic organization has Certificates of land use rights in islands, communes, wards, border towns and coastal communes, wards and towns; and other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial parks, export processing zones, hi-tech zones and economic zones established under the Government’s regulations.
• Foreign organizations and individuals receiving shares or capital contributions in economic organizations established in Vietnam through exchange or donation contracts or other ownership transfer contracts in accordance with the Law or through inheritance, must satisfy the conditions prescribed by law and carry out the procedures as prescribed for foreign investors investing in the form of capital contribution, share purchase, purchase of contributed capital.

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In the current context, FDI enterprises have therefore become an indispensable part of the economic activities of countries around the world. Vietnam is one of the countries that has attracted many FDI enterprises and accomplished many important achievements from these investments. However, attracting FDI also poses many challenges and requires reasonable management and adjustment.

At PLF Law Firm

At PLF Law Firm, we stand out for providing tailored solutions on Doing business in Vietnam, Mergers & Acquisitions and Tax & Accounting fields for foreign investors and business owners, helping them build a solid business foundation and minimize legal risks. If business considers to set up company in Vietnam, our team of experts can guide through the entire process, ensuring a smooth and compliant establishment.

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