This article delves into the legal complexities involved in setting up a 100% FDI enterprise in Vietnam. We analyze the legal framework, procedural steps, compliance requirements, and regulatory protections to help potential investors understand the establishment process and comply with Vietnamese regulations. Our aim is to offer valuable insights that contribute to sustainable economic development and prosperity in Vietnam.

What is an FDI Company?

FDI stands for "Foreign Direct Investment," a term commonly used in international economic activities.  According to Article 21 of the 2020 Investment Law, the forms of investment for FDI enterprise in Vietnam include:

• Investing in the establishment of economic organizations in Vietnam;

• Investing by contributing capital, purchasing shares, or acquiring capital contributions from other enterprises;

• Investing in the form of a BCC contract (Business Cooperation Contract);

• Implementing investment projects;

• Other forms of investment and new types of economic organizations as regulated by the Government.

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Forms of Establishing a FDI Company

1. Establishing a foreign-invested company through initial capital contribution

   In this approach, the foreign investor contributes capital right from the beginning of the company’s establishment in Vietnam. Depending on the business sector, the foreign investor may contribute from 1% to 100% of the company's charter capital. This case is also called direct investment.

2. Establishing a foreign-invested company through capital contribution or share purchase

   In this form, the foreign investor contributes capital to a Vietnamese company that already holds a Business Registration Certificate. The foreign investor can contribute from 1% to 100% of the capital, depending on the business sector. The investor will proceed with the procedures to purchase equity stakes or shares in the Vietnamese company. Afterward, the Vietnamese company will become a foreign-invested company. This is also known as indirect investment. 

Procedures for Establishing a FDI Company in Vietnam

Establishing an FDI Enterprise with Foreign Investment 

   The process of establishing an FDI company/enterprise in Vietnam involves five basic steps as follows:

Step 1: Submit information about the foreign investment project on the national portal. 

    The investor needs to submit information about the investment project on the national portal. After submitting the application for the investment license, the investor will be provided with an account on this system, which will be used to monitor the status of the application.

Step 2: Prepare the Application for an Investment License

If a foreign investor is establishing an enterprise in Vietnam for the first time, they must apply for an investment registration certificate. The application dossier includes:

• An application form requesting the investment registration certificate from the investment management authority.
• Documents proving the financial capability of the foreign investor.
• Proposal for the investment project, including details on investment capital, investor implementing the project, scale, investment objectives, labor needs, capital mobilization plan, timeline – location – investment progress, proposed investment incentives, and an assessment of the project's impact and effectiveness.
• For individual investors:  
• Copy of identity card, passport, or personal identification card.  
• Documents verifying the balance of the bank account.  
• For organizational investors:
• Business registration certificate or equivalent documents proving legal entity status.  
• Financial statements for the past two years, accompanied by a commitment for capital support from the parent company, a financial support commitment from a financial institution, or a financial capability guarantee, along with documents proving financial capacity.  
• Other relevant documents, such as proof of legal land use rights or a valid lease agreement for office space.

Step 3: Prepare Information for Company Establishment

Whether establishing a Vietnamese-owned company or a foreign-invested enterprise, the preparation of initial information is crucial. Specifically, the company needs to:

Prepare the business registration sector

When setting up an FDI company/enterprise in Vietnam, the business must register the appropriate business sector, aligned with the intended business purpose.

A company can register multiple business sectors. The enterprise must look up the business code according to the level-4 business code system and apply the correct code in order to register for business.

Company Type:

Currently, FDI enterprises in Vietnam typically operate under two main company types: limited liability companies (LLCs) and joint-stock companies (JSCs).

• If choosing an LLC, the minimum number of members required is one (for a single-member LLC) or two (for an LLC with two or more members). The maximum number of members allowed is 50.

• If choosing a JSC, at least three shareholders are required to register this type of company. However, there is no limit on the maximum number of shareholders for a JSC. Therefore, if your company intends to have a large number of shareholders, this option would be preferable.

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The address for the FDI Company in Vietnam

The FDI company in Vietnam must have a specific address. However, the address should not be located in prohibited areas such as residential quarters or apartment buildings.

Declare the Charter Capital for the Company

• When setting up an FDI enterprise, one of the essential tasks is to declare the charter capital for the company. Businesses can register the charter capital according to their financial capacity and conditions if the business activity does not require specific capital conditions.
• However, if the company registers a business sector that requires statutory capital or deposit capital, the declared charter capital must be equal to or greater than the required amount.

Legal Representative for the FDI Company in Vietnam

• The legal representative of the FDI enterprise must meet the legal requirements for such a position. It is advisable to choose individuals with sufficient capability and experience to be accountable for the company’s decisions.

• Companies should note that multiple legal representatives can be appointed. However, there must always be at least one legal representative residing in Vietnam.

Step 4: Prepare the Documents and Procedures for Establishing a FDI Company in Vietnam

The company must draft all necessary documents and paperwork for registering the FDI enterprise in Vietnam.

• Business registration application for establishing a foreign-invested company.

• A detailed list with complete information about shareholders or members of the FDI company in Vietnam.

• For individual investors:

• Copies of identity card, passport, or personal identification card.  
• Documents verifying the bank account balance.

• For organizational investors: 

• Business registration certificate or equivalent legal entity documents.  
• Financial statements from the past two years, along with a commitment for capital support from the parent company, a financial support commitment from a financial institution, or a financial capacity guarantee, accompanied by documents proving financial capability.

• Basic company charter for the FDI enterprise in Vietnam.

• Investment registration certificate.

Step 5: Complete the Post-Establishment Procedures for the FDI Company in Vietnam

After completing the procedures for establishing the FDI enterprise and obtaining a valid license, the company must:

- Publish the company registration information and create a company seal;  

- Display the company name sign at the headquarters;  

- Register a digital signature;  

- Apply for the issuance of electronic invoices;  

- Report the project implementation status as required by the investment registration certificate;  

- File and pay taxes.

Procedure for Establishing a Foreign-Invested Company through Capital Contribution or Share Purchase

In the case where a company is established with foreign capital through capital contribution or share purchase, there are six steps to be followed as outlined below:

Step 1: Establish a Vietnamese Company 

Foreign investors are only allowed to invest or purchase shares in a Vietnamese company after a business has already been established in Vietnam. If the company is not yet formed, the Vietnamese partner must establish a new company with full domestic capital.

Step 2: Prepare the Dossier for Registering Capital Contribution or Share Purchase by Foreign Investors

Foreign investors must prepare the following documents:

- The investment registration dossier for capital contribution or share purchase must include detailed information about the company in which the foreign investor intends to contribute capital or purchase shares. The dossier must clearly state the ownership percentage the foreign investor will hold after contributing capital or purchasing shares.

- For individual investors, a copy of personal legal documents is required; for institutional investors, a copy of the business registration certificate or other legal documents is needed.

- The agreement on capital contribution/share purchase/ownership stake purchase between the foreign investor and the economic organization receiving the investment.

- A declaration (with a copy) of the land use right certificate of the economic organization receiving the investment from the foreign investor.

Step 3: Submit the Dossier

After preparing the necessary documents, the foreign investor submits the dossier to the Investment Registration Office of the Department of Planning and Investment (DPI) in the province where the company is headquartered. Within 15 working days of receiving a complete and valid dossier, the DPI will issue a Notification confirming the fulfillment of conditions required to contribute capital, purchase shares, or acquire an ownership stake in a company in Vietnam.

Step 4: Foreign Investors Purchase Shares, Contribute Capital, or Acquire Ownership Stakes in the Vietnamese Company  

If the foreign investor contributes more than 51% of the charter capital, the Vietnamese company must open a direct investment capital account. The investor will then transfer the contributed capital through this account. Additionally, the members and shareholders transferring the capital must declare and pay personal and corporate income tax (if applicable) according to legal regulations.

Step 5: Amend the Enterprise Registration Certificate

After completing the capital contribution, share purchase, or ownership stake acquisition, the company must proceed with necessary procedures to amend the business registration. This involves updating the foreign investor's contribution and share purchase information in the business registration file at the competent authority. The required documents include:

- Notification of changes to business registration information;

- The company’s decision on the changes (if any);

- The minutes of the meeting of the General Assembly of Shareholders or the Limited Liability Company on the relevant changes (if any);

- The transfer agreement and certified documents confirming the completion of the transfer, signed by the company's legal representative;

- List of capital contributors/foreign shareholders;

- Notarized copy of the passport or business registration certificate of the investor.

The procedure to amend the Enterprise Registration Certificate must be carried out at the Department of Planning and Investment where the company’s headquarters are located.

Step 6: Obtain a Business License or License for Conditional Activities

Companies operating in the retail sector or establishing retail outlets must apply for a Business License. For certain conditional industries, additional licenses may be required to allow the company to operate.

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Foreign-Invested Company Formation Services at NVCS Law Firm

NVCS Law Firn provides services for establishing foreign-invested companies in Vietnam. With a team of professional and experienced legal consultants, we assist foreign investors in setting up their companies quickly and efficiently. By combining international resources and expertise, NVCS Law Firm ensures the delivery of high-quality and reliable legal services to both domestic and international clients. NVCS Law Firm is committed to becoming the leading legal partner for prominent businesses in Vietnam, upholding integrity, understanding, and continuous innovation.

With deep insights and a comprehensive understanding of the business environment in Vietnam, NVCS Law Firm strives to offer optimal legal solutions that safeguard clients' long-term interests. Additionally, NVCS Law Firm continuously innovates to meet the new challenges and opportunities presented in this ever-evolving business landscape.

NVCS Law Firm provides a full package of legal services for the establishment of a 100% foreign-invested enterprise in Vietnam. For more information, please contact NVCS Law Firm for detailed consultation.

Lawyer: Mr. Tony 

Phone: +84 919 195 939

Email: tuulawyer@nvcs.vn

Website: nvcs.vn