FDI Company Investment Project Termination Procedures in Vietnam

During the operations in Vietnam, foreign direct investment companies (FDI) may, for various reasons, choose to terminate part or all of their investment projects. This is a crucial step, requiring investors to comply with legal regulations to avoid legal consequences. In the article below, Viet An Law will provide a comprehensive and detailed overview of the procedures for terminating FDI company investment projects in Vietnam, helping investors understand and implement them efficiently.

Legal basis for FDI company investment project termination procedures in Vietnam

The termination of investment projects by FDI enterprises is governed by the following legal documents:

• Law on Investment 2020
• Decree 31/2021/ND-CP guiding the implementation of the Law on Investment
• Law on Enterprises 2020
• Decree No. 01/2021/ND-CP on enterprise registration
• Circular No. 03/2021/TT-BKHDT stipulating the templates and forms for investment procedures

Cases of termination of investment projects by FDI companies

Cases in which the investors terminate foreign investment projects

According to Clause 1, Article 48 of the Law on Investment 2020, an investor shall terminate their investment project in the following:

• The investor decides to terminate the project;
• The project has to be terminated according to the conditions set out in the contract or charter of the enterprise;
• The project duration is over.

Additionally, Article 44 of the Law on Investment 2020 stipulates that the duration of an investment project inside an economic zone shall not exceed 70 years, and the duration of an investment project outside an economic zone shall not exceed 50 years. The duration of an investment project in a disadvantaged area or extremely disadvantaged area, or a project with large investment capital but with a slow rate of capital recovery, may be longer but shall not exceed 70 years. Upon the expiration of such duration, the investor shall carry out the investment project termination procedures.

Cases in which the investment registration authority in Vietnam terminates foreign investment projects

In accordance with Clause 2, Article 48 of the Law on Investment 2020, the investment registration authority shall terminate an investment project in part or in full in the following cases:

• Failure to remedy violations leading to suspension: If an investment project is suspended for reasons such as the protection of historical or cultural relics, environmental protection, labor safety, or according to a court judgment or arbitral award, if the investor fails to remedy the violations, the project may be subject to termination.
• Violation of investment conditions: If the investor fails to comply with the contents of the investment registration certificate or the approval of investment policy and continues to commit violations after being administratively sanctioned.
• Causing harm to national defense or security: The Prime Minister may decide to suspend or terminate an investment project if there are indications that the project poses a threat to national defense or security.
• Failure to operate at the registered investment location: If the investor fails to utilize the registered investment location for 06 months without carrying out procedures to adjust the investment location as prescribed.
• Cessation of operations and inability to contact the investor: If the project has ceased operations for 12 consecutive months, and the investment registration agency cannot contact the investor or the investor’s legal representative.
• Land repossession as specified in the land law: If the enterprise fails to put the allocated land into use or significantly delays the land use schedule, the land may be repossessed by the land law, resulting in the termination of the investment project.
• Failure to fulfill deposit obligations: The investor fails to make deposits or obtain guarantees for deposit obligations, following the law for investment projects requiring security for implementation.
• Project based on a false civil transaction: If the investment is determined to have been made through a false transaction that does not reflect the true nature of the agreement, the project shall be terminated in accordance with civil law.
• Under a court judgment or ruling or an arbitral award.

FDI company investment project termination procedures in Vietnam

According to the Law on Investment 2020, the operation of an investment project may be terminated under various circumstances, depending on the specific causes and the authority involved. Below are four common scenarios and the corresponding procedures:

Voluntary termination by the investor

This is the most common case, where the investor voluntarily decides to terminate the operation of the investment project based on internal business considerations, expiration of the investment project’s operational term as stated in the investment registration certificate, or following the charter/provisions of a cooperation agreement.

• Step 1: Within 15 days from the date of the decision to terminate the investment project, the investor must submit a written notification along with relevant legal documents to the investment registration authority (Department of Finance).
• Step 2: Upon receipt of the application, the Department of Finance shall notify relevant authorities to coordinate in processing information related to the terminated investment project.
• Step 3: If the termination of the investment project results in the cessation of the enterprise’s operations, the investor must carry out the enterprise dissolution procedures, including the finalization of tax obligations with the tax authority.
• Step 4: Complete the procedure for removing the enterprise’s name from the Business Registration Office.

Note: In cases where only the investment project is terminated but the enterprise continues its operations, the investor is only required to complete up to Step 2.

Termination of the investment project by the decision of the state authority

State authorities may decide to terminate an investment project in the following cases: the project has expired, is not implemented according to the approved schedule, seriously violates the law, or is subject to land recovery and revocation of the investment certificate.

• Step 1: The investment registration authority prepares a written record assessing the violations or legal basis for the termination of the investment project.
• Step 2: A decision is issued to terminate the project’s operation and revoke the Investment Registration Certificate. The certificate becomes invalid as of the date the termination decision takes effect.
• Step 3: If the project was previously licensed with combined business registration and investment registration content, the business registration authority shall update and revoke the business-related contents associated with the project.
• Step 4: The competent land authority proceeds with land recovery procedures, including recovery of land already allocated, leased, or transferred.
• Step 5: The competent authority officially issues the decision on termination of the investment project.

Note: The procedures for land recovery and termination of investment activities under point d, Clause 2, Article 48 of the Law on Investment 2020 only apply in certain exceptional circumstances. If only part of the project is terminated, the investor may continue to implement the remaining part and carry out procedures to amend the project content accordingly.

Inability of state authorities to contact the investor

This applies where the competent authority can not contact the investor after a prolonged period of project inactivity without justification, thereby affecting state management and economic security

• Step 1: The investment registration authority prepares a record confirming that the project has ceased operations and that the investor cannot be contacted.
• Step 2: An official notice is sent to the registered address, requesting the investor to respond and coordinate resolution.
• Step 3: If no response is received within 30 days, the authority will coordinate with the commune-level People’s Committee (for domestic individual investors) or with diplomatic missions (for foreign investors) to seek further information. At the same time, a public notice is published on the National Investment Portal for 90 days.
• Step 4: If, after 12 months of applying these measures, the investor still cannot be reached, the investment registration authority is entitled to unilaterally issue a decision on termination of the project

Termination based on a final court judgment or arbitral award

An investment project may be wholly or partially terminated based on an enforceable court decision or arbitral award (for instance, if the project was established based on a false transaction or arises from an international commercial dispute).

• Step 1: Upon the judgment or award taking legal effect, the relevant parties shall submit it to the investment registration authority.
• Step 2: The investment registration authority shall carry out the necessary procedures by either case 2 or case 3 above, depending on the extent and scope of the termination

The application includes:

According to Clause 2, Article 57 of Decree 31/2021/ND-CP, the application includes:

• Notification of project termination, using Form A.I. 15 issued together with Circular No. 03/2021/TT-BKHĐT.
• A copy of the Investment Registration Certificate (if any).
• Decision/resolution on project termination issued by the investor.
• Report on liquidation of assets, labor, and related financial obligations (if applicable).
• Documents proving the fulfillment of obligations related to tax, social insurance, and customs with competent state authorities (if required).

Legal consequences of investment project termination

The investor is responsible for liquidating the investment project following the laws on asset liquidation, unless otherwise provided by law.

• The disposal of land use rights and assets attached to land upon termination of project activities shall comply with the provisions of the land law and other relevant legal regulations.
• The investment registration authority shall revoke the Investment Registration Certificate in cases where the investment project is terminated under Clause 2, Article 48 of the Law on Investment 2020, as mentioned above, except where the investment project is partly terminated.

Supporting services for FDI company investment project termination procedures in Vietnam

• Representative working with an investment regulatory agency;
• Drafting documents, forms, decisions, notices;
• Consulting on business dissolution, if any;
• Legal advice on asset liquidation and labor handling;
• Representative to submit application;
• Support for tax settlement, insurance, tax code payment;

If there is any unclear content or you need specific advice related to FDI company investment project termination procedures in Vietnam, please contact Viet An Law Firm for the fastest answers and support.