Termination of foreign investment in Vietnam

The flow from foreign investment projects in Vietnam plays a very important role in the development of the economy. However, besides successful projects, there are still several cases where investors are forced to terminate foreign investment projects due to many different reasons. In this article, Viet An Law Firm will analyze the procedure of termination of foreign investment in Vietnam which foreign investors need to pay attention to under current law.

Legal basis

• Law on Investment 2020.
• Decree 31/2021/ND-CP details and guides the implementation of several articles of the Investment Law.

Reasons for terminating foreign investment project activities in Vietnam

In case the investor terminates the operation of a foreign investment project

Pursuant to Clause 1, Article 48 of the Investment Law 2020, investors terminate investment activities in investment projects in the following cases:

• The investor decides to terminate the operation of the investment project;
• According to the conditions for termination of operations specified in the contract and charter of the enterprise;
• Expiration of the investment project’s operating term.

In addition, in the third case, Article 44 of the Investment Law 2020 also stipulates that the operating term of investment projects in economic zones is not more than 70 years, and the term outside economic zones is not more than 50 years. With investment projects implemented in areas with difficult socio-economic conditions or with large investment capital but poor capital recovery, the term can be longer but must not exceed 70 years. When this term expires, the investor must conduct procedures to terminate the investment project.

Regarding termination of foreign investment in Vietnam by the investment registration agency

According to Clause 2, Article 48 of the Investment Law 2020, the investment registration agency terminates or partially terminates the operation of an investment project in the following cases:

Terminate foreign investment projects according to decisions of state agencies

The first is an investment project in one of the following cases where the state management agency in charge of investment decides to stop or partially stop the operation of the investment project but the investor is unable to overcome the shutdown conditions:

• To protect relics, relics, antiques, and national treasures according to the provisions of the Cultural Heritage Law.
• To remedy violations of the law on environmental protection at the request of state environmental management agencies.
• To implement measures to ensure labor safety at the request of state labor management agencies.
• According to court judgments, decisions, and arbitration awards.
• The investor did not comply with the investment policy approval and Investment Registration Certificate and was sanctioned for administrative violations but continued violations.
• The Prime Minister decides to terminate or partially terminate the operation of an investment project in case the implementation of the investment project causes harm or has the risk of harming national defense and security at the request of the Ministry of Planning and Investment.

Termination of foreign investment projects because the investor does not operate at registered location

The investor is not allowed to continue using the investment location and does not adjust the registered investment location within 06 months from the date of discontinuation of the investment location, except in the case of investment projects subject to land recovery due to failure to put the land into use or delay in putting the land into use according to the provisions of land law.

Termination of foreign investment projects due to investors ceasing operations

The investment project has stopped operating and after 12 months from the date of shutdown, the investment registration agency cannot contact the investor or the investor’s legal representative.

Termination of foreign investment project due to investor’s land being recovered

The investment project is subject to land recovery due to failure to put land into use or delay in putting land into use according to the provisions of land law.

Termination of foreign investment projects due to investors not depositing

Investors do not deposit or do not have a guarantee for deposit obligations according to the provisions of law for investment projects subject to investment project implementation guarantees.

Termination of foreign investment projects due to investors engaging in fake civil transactions

Investors carry out investment activities based on fake civil transactions according to the provisions of civil law.

Terminate foreign investment projects according to court judgments and decisions or arbitration awards

Finally, it is according to the judgment, decision of the Court, or arbitration award.

Legal consequences of termination of foreign investment in Vietnam

Investors need to liquidate the investment project themselves according to the provisions of the law on asset liquidation when the investment project terminates operations, except for the following cases:

• The handling of land use rights and assets attached to land upon termination of foreign investment in Vietnam shall comply with the provisions of land law and other relevant laws.
• The investment registration agency decides to revoke the Investment Registration Certificate in case the investment project terminates operations in the case mentioned in Clause 2, Article 48 of the Investment Law 2020 as described above, except for the case termination a part of the investment project.

Procedures for terminating foreign investment in Vietnam

Termination of investment projects in general

• In case of self-decision to terminate the operation of an investment project according to the provisions of Point a, Clause 1, Article 48 of the Investment Law 2020, the investor sends the decision to terminate the operation of the investment project to the Investment Registration Authority within 15 days from the date of the decision, accompanied by the Investment Registration Certificate (if any);
• In case of termination of operation of an investment project according to the conditions specified in the contract or charter of the enterprise or the expiration of the operating term of the investment project as prescribed in Points b and c, Clause 1, Article 48 of the Investment Law 2020, the investor shall notify and return the Investment Registration Certificate (if any) to the Investment Registration Authority within 15 days from the date of termination of the investment project, accompanied by a copy of documents recording the termination of investment project activities.
• In case of terminating the operation of an investment project according to the provisions of Clause 2, Article 48 of the Law on Investment 2020, the investment registration agency shall decide to terminate the operation of the investment project and at the same time revoke the Investment Registration Certificate (if any). The investment registration certificate ceases to be effective from the effective date of the decision to terminate the operation of the investment project.

The investment registration agency notifies relevant agencies of the termination of operations of the investment project;

Regarding the liquidation of the implemented investment project

• Investors themselves liquidate investment projects according to the provisions of the law on asset liquidation;
• For investment projects that are allocated land, leased land, or allowed to change land use purposes by the State, the handling of land use rights and assets attached to land is carried out by the provisions of land law and relevant laws;
• During the liquidation of an investment project, if the investor is an economic organization that is dissolved or falls into bankruptcy, the liquidation of the investment project shall comply with the provisions of the law on dissolution and bankruptcy.

Investment legal consulting services of Viet An Law

• Consulting on conditions and procedures for terminating foreign investment projects in Vietnam;
• Drafting documents to terminate foreign investment project activities;
• Representing customers to carry out investment termination procedures.

Customers who need advice on regulations on termination of foreign investment projects in Vietnam, foreign investment law, civil law, and corporate law, please contact the Viet An Law for the best support.