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When should Investors carry out Investment Registration Procedures?

When should Investors carry out Investment Registration Procedures?
When should Investors carry out Investment Registration Procedures?

When doing business in Vietnam, not all projects are required to do investment registration procedure(s) and/or apply for investment registration certificate. The Law on investment 2020 stipulates that the investors must apply for investment registration in certain cases. So, in which cases should investors register the investment project? Let’s find out through the following article.

According to the Law on investment 2020, certain groups are required to apply for investment application. They are specified as follows:

  1. Cases required to carry out investment registration procedure(s)

    1.1 Investment projects of foreign investors to establish economic organizations

Foreign investors investing to establish organization in Vietnam must carry out procedures to obtain Investment registration certificate (“IRC“).

1.2 Investment projects of foreign-invested economic organizations

When establishing a business organization, or making investment by contributing capital, or purchasing shares, or purchasing stakes of a business organization or investing under a business cooperation contract in one of the following cases, the foreign investor must satisfy the conditions and follow the investment procedures applicable to foreign investors:

a. Over 50% of its charter capital or more is held by a foreign investor(s) or majority of the general partners are foreigners if the business organization is a partnership (hereinafter referred to as “foreign-invested economic organizations”).

b. Over 50% of its charter capital or more is held by a foreign-invested economic organizations.

c. Over 50% of its charter capital or more is held by a foreign investor(s) and foreign-invested economic organizations.

Please refer to the article:

What are the steps to obtain an Investment Certificate (IC) in Vietnam?

Establishment of a 100% owned foreign company

1.3 Investors operating in fields prescribed by law must obtain approval for investment guidelines

These are businesses with large-scale impacts, located in the fields that affect national security, politics, society, natural resources, environment, etc. Such projects need to be controlled and must follow appropriate mechanisms and policies. Accordingly, not only foreign investors but even Vietnamese investors must obtain investment approval from competent state agencies (National Assembly, Prime Minister, Provincial People’s Committee) before investment and operation of such projects.

Please refer to the article:

Authority to approve investment projects

1.4 Investment in the form of capital contribution, or purchase of shares or stakes

Foreign investors must carry out procedures for registration of capital contribution, purchase of shares, or stakes of an economic organization before changing members or shareholders if they fall into one of the following cases:

a. The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business organization conducting business in the restricted business lines.

b. The capital contribution or purchase of shares or stakes results in a foreign investor or business organization holding over 50% of the charter capital of the business organization, applicable to the following cases:

    • The holding of charter capital by the foreign investor is increased from less than/equal to 50% to over 50%.
    • The holding of charter capital by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business organization.

c. The foreign investor that contributes capital, purchases shares or stakes of a business organization which has a certificate of rights to use land on an island or along the border, or in a coastal commune, or in an area that affects national defence and security.

Please refer to the article:

Capital contribution, share purchase

  1. Cases in which investment procedure(s) can be carried out as per demand

    2.1 Apply for the IRC

Case 1: Foreign investors who do not fall into the cases mentioned in Section 1.2 of this article but have been demanded to get the IRC have the right to carry out procedures according to the same regulations as those required to apply for an IRC. They include:

a. Foreign investors hold 50% or less of the charter capital, or no majority of general partners are foreign individuals (for economic organizations being partnerships).

b. There is a foreign-invested economic organization holding 50% or less of the charter capital.

c. There are foreign investors and foreign-invested economic organizations holding 50% or less of charter capital.

Case 2: Vietnamese investors can actively apply for an IRC if they wish to obtain an IRC for their business investment project.

2.2 Register for capital contribution, or purchase of shares, or stakes

In case foreign investors do not fall into the cases mentioned in section 1.4 of this article and wish to apply for approval to contribute capital, purchase shares or stakes, the investor still has the right to carry out registration procedures according to the provisions of law when:

a. The contribution of capital, purchase of shares or purchase of contributed capital does not increase the foreign investor’s ownership ratio in the economic organization conducting conditional market access for foreign investors.

b. Capital contribution, share purchase, or purchase of contributed capital of foreign investors or foreign-invested economic organizations in which, after investment, foreign investors hold 50% or less than 50% of charter capital in economic organization.

c. The foreign investor who contributes capital, or purchases shares or stakes of a business organization which is not on an island or along a border, or in a coastal commune, or in an area that affects national defence and security.

The article is based on the current law at the time of recording as above and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases that the reader wants to apply. Therefore, the article is for reference only.

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