The Investment Law dated 29 November 2005 provides that foreign investors can carry out investment in Vietnam. “A foreign investor means any foreign organization or individual using capital in order to carry out an investment activity in Vietnam” – Article 3 (5) and “Enterprises with foreign owned capital include any enterprise established by a foreign investor in order to conduct investment activities in Vietnam; or a Vietnamese enterprise in which a foreign investor has purchased its shares, merged with or acquired” – Article 3 (6).
The Enterprise Law and relevant legal document provides that foreign investors can establish a 100% foreign invested company in Vietnam – Article 13 (1).
The Law on Foreign Investment passed by Legislature IX of the National Assembly on 12 November 1996, amended on 09th June 2000 has encouraged direct foreign investment in Vietnam, which has great contribution to GDP growth of the country. In accordance with Article 4 of this law, foreign investors may invest in Vietnam in three forms: (1) business cooperation on the basis of a business cooperation contract, (2) joint venture enterprises, and (3) enterprise with 100 percent foreign owned capital.
Decree No.108/2006/ND-CP was promulgated by the PM on 22 September 2006 (“Decree 108”) detailing and guiding the implementation of a number of articles of the Investment Law dated 29 November 2005. According to this Decree, “Domestic and foreign investors may invest in the form of 100% of their own capital to establish limited liability companies, joint stock companies, partnerships or private enterprises under the provisions of the Enterprise Law and relevant laws” – Article 7. and “Foreign investors may enter into joint venture with domestic investors to establish limited liability companies with two or more members, joint stock companies or partnerships under the provisions of the Enterprise Law and relevant laws” – Article 8 (1).
“The flow of foreign direct investments (FDI) in Vietnam, a member of the World Trade Organization (WTO) since 2007, has increased steadily over the past few years. In 2008, the amount of actually disbursed capital soared to US$11.5 billion, up 43.2 percent compared with 2007.” (http://www.chinapost.com.tw/business/asia/vietnam/2008/12/27/189529/Foreign-direct.htm). By the end of February 2009, “Vietnam has attracted foreign direct investment pledges of 5.3 billion dollars so far this year, down 30 per cent from the same period last year. About 1.5 billion dollars of the money involved 68 new investment projects. The other 3.8 billion dollars came from increases in the registered capital of 10 already existing projects. Most of the new foreign investment was in industrial production.”
According to the annual report of Vietnam Holding Ltd. (VNH), an investment company, launched in June 2006, and incorporated in the Cayman Islands. The Company is listed on the AIM market of the London Stock Exchange, “Vietnam has been extremely successful in attracting foreign investment over the past few years” and “Vietnam is an economy on the move, dynamically growing and continually achieving.”
Foreign direct Investment in Vietnam increased by 4017.70 USD million in the fourth quarter of 2016.
Formation of a 100% foreign invested company is provided in the Law on Foreign Investment in Vietnam.
- “An enterprise with one hundred (100) per cent foreign owned capital shall be established in the form of a limited liability company and shall be a legal entity in accordance with the law of Vietnam.” (Article 15).
- The legal capital of an enterprise with foreign owned capital must be at least thirty (30) per cent of its invested capital. In special cases and subject to approval of the body in charge of State management of foreign investment, this proportion may be lower than thirty (30) per cent. During the course of its operation, an enterprise with foreign owned capital must not reduce its legal capital. (Article 16).
- The duration of an enterprise with foreign owned capital and the duration of a business co-operation contract shall be stated in the investment license for each project in accordance with regulations of the Government, but shall not exceed fifty (50) years. Pursuant to regulations made by the Standing Committee of the National Assembly, the Government may, on a project by project basis, grant a longer duration but the maximum duration shall not exceed seventy (70) years. (Article 17).
- The State of the Socialist Republic of Vietnam shall protect industrial property rights and shall guarantee the legal interests of foreign investors in respect to technology transfers into Vietnam. (Article 21).
These are some basic legislation for a foreign company to do business in Vietnam. Once they want to go to the market, it is very important to study the host law or hire a legal professional in assisting the company’s set-up and during operation.
Procedures for licensing and registration of establishment of 100% foreign invested company in Vietnam:
Required documents include:
- Investment registration request on the stipulated form
- Report on financial capability of the investor (which the investor shall prepare and for which the investor shall be liable). The content of this report must include information on the investment capital’s source, and must confirm the financial ability of the investor to implement the investment project.
- Draft Charter of the enterprise corresponding to the particular form of the enterprise (limited liability company, joint stock company or partnership company)
- List of company members corresponding to the form of the enterprise
- Documents certifying the legal status of each founding member
- Power of attorney made by the investor to be the authorized representative for the capital contribution in cases where the investor is an organization/company; and the notarized copy of the passport or ID card of the authorized representative.
- In the case of a JV, the joint venture contract signed by all parties
- In the case of a JV engaged in an investment project with partial capital contributions from the State, an acceptance paper issued by the relevant authority on the use of state capital for the investment must be included.
- Other files stipulated in the relevant laws and regulations
Details about the procedures, required documentation and evaluation process can be found at Articles 45, 46, 47, 48, 49 and 50 of the Investment Law.
By Hang Do
Source from my published book: Power supply solution to Phu Quoc island, Vietnam