LEGAL FOUNDATION IN FOREIGN INVESTMENT IN VIET NAM
According to many of today’s business consultants and experts, Vietnam has great potential for foreign investment in the coming years. For foreign investors looking to begin investment activities in Vietnam, they can start their business through various ways, such as establishing an economic organization; investing through capital contribution, purchasing of capital contribution or shares in an existing companies; conducting investment on business contract basis; or implementing an investment project.
- Investment through establishing a company
According to the Law of Enterprises (“LoE”), foreign investors are free to choose one of the following forms for a company to be set up in Vietnam:
- Single member Limited LiabilityCompany (“LLC”);
- Multi-member LLC;
- Shareholding company (or Joint Stock Company– “JSC”);
- Partnership; or
- Private enterprise.
Amongst the forms of enterprise above, the most common forms of enterprise that
foreign investors select are LLCs (with one member or with two member and more) and shareholding companies.
- Investing by acquiring capital contribution or purchasing shares in an existing company
A foreign investor may contribute capital or acquire shares/capital contribution in an existing Vietnamese incorporated company by:
- Purchasing shares in a shareholding company from its shareholders or purchasing of shares on the initial public offering or of additional shares issued by shareholding companies;
- Acquiring capital contribution or contributing capital into a limited liability company to thereby become a member of the company; or
- Purchasing shares/capital in other ways.
- Investing through business contracts
Foreign investors may invest in Vietnam by signing one of the following contracts:
- Public–private par tnership contract (“PPP contract”)
Foreign investors or project enterprises shall sign a PPP contract with a competent State agency for implementation of an investment project for new construction works, or the renovation, upgrade, expansion, management or operation of infrastructure facilities or the provision of public services.
- Businesscooperation contract (“BCC contract”)
Is a contract between investors for business cooperation and distribution of profits, products without establishment of a new business organization. The parties to a BCC contract shall establish a coordinating board to perform the BCC contract. The functions, duties and powers of the coordinating board shall be agreed by the parties.
To further support foreign investors in investing in Vietnam, the National Assembly just amended some significant legislation related to investment, including the new Law on Investment (“LoI”) and the Law on Enterprises (“LoE”). The LoI sets out the legal framework for investment activities in Vietnam, whilst the LoE defines the establishment and operation of enterprises in Vietnam, including foreign invested enterprises. Accordingly, to invest in Vietnam, foreign investors shall first apply for an Investment Registration Certificate (“IRC”) under the LoI. In case he/she wishes to set up an enterprise, he/she then will conduct legal procedures for obtainment of an Enterprise Registration Certificate (“ERC”) for the enterprise to be set up under the LoE.
Together with the LoI and the LoE, investment in Vietnam shall also be governed by the following key legal documents:
International treaties to which Vietnam is a party, especially Vietnam’s commitments to the World Trade Organisation (“WTO”) and the incoming Trans-Pacific Partnership Agreement (“TPP”); and Specialized laws relating to the business scope of the investment project i.e. Law on Real Estate Business, Law on Medical Examination and Treatment, the Law on Education, Law on Vocational Training, Law on Chemicals, etc.