How to set up a foreign-invested company in Vietnam

Legal basis

• The Law on Investment 2020
• The Law on Enterprise 2020
• Decree 31/2021/ND-CP guiding the Law on Investment
• WTO Schedule of Commitments

How to establish a foreign-invested company in Vietnam?

To set up a foreign-invested enterprise in Vietnam, foreign investors can choose one of the following methods:

Establishment of a 100% foreign-invested company

For this form, before establishing an enterprise, the foreign investor must have an investment project and carry out procedures for applying for an Investment Registration Certificate at the Department of Planning and Investment. After being granted the Investment Registration Certificate, the enterprise may conduct establishment registration procedures.

Capital contribution, purchase of share or stakes of economic organizations

There are the following forms of capital contribution, purchase of share or stakes:

• Investors may conduct capital contribution to economic organizations in the forms of: Purchase of the initial public shares or additional issued shares of joint-stock companies; Capital contribution to limited liability company (LLC), partnerships; Capital contribution to other economic organizations other than the cases specified at points a and b, Clause 1, Article 25 of the Law on Investment 2020.
• Investors purchase of share or stakes of economic organizations in the forms of: Purchase shares of joint-stock companies from companies or shareholders; Purchase the stakes of a member of a LLC to become a member of a LLC; Purchase stakes of capital contributors in a partnership to become capital contributing members of the partnership; Purchase stakes of members of other economic organizations other than the cases specified at points a, b and c, Clause 2, Article 25 of the Law on Enterprise 2020.

However, foreign investors must carry out procedures for registration of capital contribution, purchase shares or stakes of economic organizations before changing members and shareholders in cases specified in Clause 2, Article 26 of the Law on Investment 2020.

Take away on conditions when establishing a foreign-invested company in Vietnam

Business conditions

As prescribed, enterprises are entitled to do business in industries and trades that are not prohibited by law.

In case of establishment of a foreign-invested enterprise through the implementation of an investment project, when conducting the procedures for applying for an Investment Registration Certificate, it is necessary to pay attention to the conditions prescribed by the Law on Investment on industries, specifically: Not invest in business lines prohibited by law as prescribed in Article 6 of the Law on Investment 2020. For conditional business investment lines, when conducting business investment activities in such industries, enterprises must satisfy necessary conditions for reasons of national defense, security, social and safety, social morality and health of the community and ensure publicity, transparency, objectivity, saving time and costs of investors.

In addition to the Law on Investment 2020 and its implementation guiding documents, based on Vietnam’s commitments in trade agreements, there are still some limitations in business lines, such as: Real estate; Other business services; Professional services; Tourism and related services; Entertainmental, cultural and sports services; Computer and audiovisual services; Research and development services; Information services; Rental or leasing services with or without operators; Transportation services; Construction services; Health and social services; Education, training – vocational training and related services….or in some sectors in the schedule of commitments also stipulate restrictions on the percentage of owner contributed capital of foreign investors in case investors contribute capital or purchase shares in economic organizations in Vietnam.

Nationality requirements:

To establish a foreign-invested enterprise, the nationality of the investor is an individual with foreign nationality, an organization established under foreign law and the nationality of the foreign investor must be a person with nationality affiliated to countries in the WTO.

Conditions for individual investors

• The individual is a legal citizen, has all documents proving valid personal status, certified by the consulate. However, it should be noted that investors using a passport printed with a cow’s tongue will not be able to establish a company in Vietnam because the use of a passport printed with a cow’s tongue is an act that constitutes a violation of sovereignty as prescribed in Article 8 of the 2015 Penal Code.
• Individuals must have financial capacity to implement the project: foreigners opening a company in Vietnam must prove through the preparation: Confirmation of bank account balance, passbook has the investor’s name with the corresponding amount when opening a company in Vietnam.
• Foreigners must ensure that they have a location to implement the project in accordance with regulations: have a lease contract or rent an office in Vietnam to register their head office when establishing a company. When renting a high-rise building with commercial business function, it is necessary to provide a lease contract for a location with commercial business function.

Conditions for investors being economic organizations

• Enterprise Registration Certificate of the foreign enterprise (notarized copy with consular legalization);
• Documents proving the financial capacity of the investor: The investor prepares one of the following documents: Financial statements of foreign companies audited, profitable and consular legalized, notarized translation into Vietnamese. In case the financial statements are not yet profitable, additional preparation is required: Confirmation of bank account balance, offshore company account;
• Documents proving the location of the project and company headquarters: house or office lease in Vietnam to register the company headquarters. Note that when renting a high building with commercial business function, it is necessary to provide a lease contract for a location with commercial business function.

Capital conditions

Except for industries requiring legal capital, currently Vietnamese law does not stipulate the minimum investment capital of foreigners when establishing a company in Vietnam. However, foreigners establishing a company in Vietnam need to prepare an appropriate investment capital to operate the project in Vietnam.

The registered capital for implementation of an investment project shall be determined on the basis of:

• Capital contributed by investors in money, machinery, equipment, value of intellectual property rights, technology, technical know-how, value of land use rights and other assets according to civil law and international treaties on investment;
• Capital mobilized for the implementation of investment projects;
• Profits left by investors for reinvestment (if any).

If you want to establish a foreign-invested company, please contact Viet An Law Firm for detailed support!