Establishment of a foreign-invested company

FAQs

Foreign Investors may establish a 100% foreign-invested capital in Vietnam to conduct business activities such as manufacturing, import-export, wholesale trade and retail of goods, business management consultancy services, etc. However, in cases where the Foreign Invested Company operates in business areas where the law requires a joint venture with a Vietnamese Investor, the Foreign Investor is limited in the rate of capital contribution in the Foreign Invested Company. This limit may change depending on the business lines. For instance, in terms of the business sector of advertising, the ownership limit is 99.99%, while in terms of that of waterway transport, the ownership limit is 49%. In case the Foreign Invested Company has many business lines, the lowest limit of the capital contribution ratio of one of all business lines will be applied to Foreign Investors.

Foreign Invested Company is allowed to operate in most business lines not banned from business investment in Vietnam. However, for business lines that Vietnam has not committed to opening markets or allowing Foreign Investors to invest in business such as machinery and equipment leasing services; labor subleasing service, etc., the licensing agency will consult the relevant Ministries to get approval for each specific case, if the Ministries approved, the licensing agency would issue a license/certificate of permission for the Foreign Invested Company to operate.

Unless the Foreign Investor contributes capital, purchases shares/stakes of an existing and operating Vietnamese Company, the Foreign Invested Company normally must have two basic licenses: Investment Registration Certificate and Enterprise Registration Certificate. Depending on the lines of the business investment sector, the Foreign Invested Company must apply for one or several other licenses as prescribed by Vietnamese law. For example, if the Foreign Invested Company operates an e-commerce trading floor, the Foreign Invested Company must apply for a Business License issued by the Department of Industry and Trade and register website/mobile app operating e-commerce trading floor at Ministry of Industry and Trade. Please note that many licenses/certificates only apply to Foreign Invested Company and do not apply to Vietnamese Companies (according to the example above, Vietnamese Companies do not need to apply for Business Licenses issue by the Department of Industry and Trade, instead of that, Vietnamese Company shall register on the website/app on e-commerce exchange).

Vietnamese Companies are registered to establishment according to their self-declaration information and self-responsibility, the licensing agency does not request to provide documents proving the right to use/own the address for the headquarters of the Vietnamese Company (except for the case that this address is an apartment building, or a place where business activities are not permitted). This is different from the Foreign Invested Company that they must prove the address is legally rented/owned and suitable lines of the business investment sector, the licensing agency may consult with some competent state agencies about the use of this place for establishment. For example, when a Foreign Invested Company invests in a restaurant, they will ask the District People’s Committee where the Foreign Invested Company is located to seek approval before granting the certificate.

Currently, there is no regulation on the minimum charter capital required by Foreign Investors to contribute to the establishment of the Foreign Invested Company, nor does it require a maximum charter capital, except for the business lines that must meet the legal capital requirements such as real estate business of 20 billion VND, multi-level sales of 10 billion VND, international travel of 500 million VND, … the minimum charter capital must be equal to the legal capital required.

However, in fact, depending on the field that Foreign Investors invest in Vietnam, the licensing authority will consider financial capacity conditions to approve Foreign Investors to do business. Besides, Foreign Investors depend on the business strategy, target customers and strategic partners to determine the amount of appropriate charter capital for the company’s operations after its establishment.

Under the Law on Enterprises, assets contributed as capital include the following assets:

  • Vietnamese Dong;
  • Freely convertible foreign currencies;
  • Gold;
  • The value of land use right, the value of intellectual property rights (include copyrights and relevant rights, industrial property rights, plant variety rights, and other intellectual property rights prescribed by regulations of law on intellectual property);
  • Technologies, technical know-how, and other assets which can be assessed in Vietnamese Dong.

Under Vietnamese law, Foreign Investors may choose to establish any type of enterprise such as a private enterprise, limited liability company, joint-stock company, partnership. However, due to the advantages of limited liability company and joint-stock company, Foreign Investors frequently choose between limited liability company and joint-stock company.

Foreign Invested Company do not need to have a Legal Representative or Director to be Vietnamese. However, it should be noted that the Foreign Invested Company must have at least one Legal Representative who is residing in Vietnam (could be a foreigner). If the Foreign Invested Company has only one legal representative, that person must reside in Vietnam and must authorize in writing another person to perform the legal representative’s rights and obligations upon exit from Vietnam.

In case of setting up a company doing business and investment activities in the field of market opening by Vietnam and the Foreign Investor meeting all the legal requirements, the lead time to set up an ordinary Foreign Invested Company is 18 working days (excluding weekends and holidays) from the date of submitting complete dossiers to licensing agencies. However, in case of establishment of a Foreign Invested Company doing business and investment activities in the field of market opening by Vietnam but the Foreign Investor does not meet the conditions or the business investment industry has not been market opening, the time to establish a Foreign Invested Company can be extended from 30 to 45 working days).

The company’s charter capital (shown on the Enterprise Registration Certificate – ERC) is understood as the total value of assets contributed or committed to contributing by members or shareholders in a certain period when the company is established, it is recorded in the company charter. And the maximum time for charter capital contribution is within ninety (90) days from the date of issuance of the Enterprise Registration Certificate under Law on Enterprises.

Project investment capital (shown on the Investment Registration Certificate – IRC) is understood as total capital contributed to an investment project to implement the project. Investment capital can include contributed capital, a loan, and mobilized capital …

So the question is whether the capital contribution to implementing the project is the company’s charter capital? 

For the first project, when Foreign Investors establish a Foreign Invested Company, the Foreign Investors’ capital contribution will be equal to the charter capital. Thus, it can be generally understood that the company’s charter capital is also the contributed capital to implement the project. However, for the second and separated project Foreign Investors can also increase its charter capital to implement the new project without increasing the Foreign Investors’ capital contribution to the project implemented before.

Depending on the type of enterprise that the Foreign Investors are expected to establish in Vietnam, the duration for charter capital contribution varies as follows:

  • For the type of limited liability company: Within 90 days from the date of issuance of Enterprise Registration Certificate (excluding the time of transporting or importing the property to be contributed as capital, performing administrative procedures to transfer the ownership of the property), the capital contributor in a limited liability company with two or more members or the owner in a single-member limited liability company must make a contribution of capital to the company in full and in the type of assets as undertaken.

After the members of a limited liability company with two or more members contribute their capital fully as committed, the Company must issue a Certificate of capital contribution corresponding to the contributed capital’s value

  • For Joint Stock Company: Shareholders must pay in full for the number of shares that have been registered for subscription within ninety (90) days from the date of issuance of the Enterprise Registration Certificate, except where the company’s charter or share subscription agreement stipulates a shorter time-limit. If shareholders contribute capital with assets, the time of transportation, import, implementation of administrative procedures to transfer ownership of that property is not included in this time limit of capital contribution. The Board of Management is responsible for supervising and monitoring to ensure that shares that have been registered for subscription shall be paid in full and on time by the shareholders.

Note: The term of capital contribution of Foreign Investors is usually recorded in the Investment Registration Certificate. For a newly established project, this period is ordinarily equal to the charter capital contribution period of 90 days to the date of the Enterprise Registration Certificate issue as mentioned above.

Foreign Investors contribute capital in Vietnamese Dong or freely convertible foreign currency to establishing the Foreign Invested Company in Vietnam, which must be performed through the investment capital account opened at an eligible bank in Viet Nam. Such a capital account could be a direct or indirect investment capital account because it depends on the Foreign Invested Company’s proportion of Foreign Investors’ charter capital. As follows: 

  • If the Foreign Invested Company opens the direct investment capital account: The contribution of charter capital through a direct capital account might be implemented in foreign currencies or Vietnamese Dong. And the ratio of charter capital to be contributed, and owned by the Foreign Investor shall be indicated in documents proving the invertor’s right to contribute capital such as Investment Registration Certificate; Enterprise Registration Certificate; Notice of applying the conditions for capital contribution, buy shares, repurchase stakes… For each type of currency to be contributed (Vietnamese Dong, foreign currencies), the Foreign Invested Company must open a direct investment capital account for the corresponding type of currency and can open only one direct investment capital account for a type of currency, except for the case the Foreign Investors joined many BCC Agreements or directly executed many PPP Agreements, such Investor has to open separate direct investment capital accounts for each BCC and PPP Agreement.

If the Foreign Invested Company opens to the indirect investment capital account: All the indirect investment activities of Foreign Investors in Viet Nam must be executed in Vietnamese Dong and through the indirect investment capital account. Transactions relating to foreign indirect investment activities in Viet Nam must be conducted through 01 (one) indirect investment capital account opened at authorized banks.