Common mistakes when establishing a foreign-invested enterprise (FDI)

Currently, Vietnam continues to affirm its position as a leading strategic destination for foreign direct investment (FDI) in Southeast Asia, owing to its advantages of a stable political environment and deep economic integration policies. Along with this, the entry into force of the new investment and enterprise legal system—such as the Law on Investment No. 143/2025/QH15, Decree No. 96/2026/ND-CP, and Decree No. 296/2026/ND-CP—has introduced numerous favorable mechanisms within the legal framework for foreign investors, while simultaneously tightening compliance standards.

However, practical legal consulting experience at BKC Law reveals that many foreign investors still approach the business establishment procedure with a mindset of simply completing the administrative paperwork, rather than establishing comprehensive, long-term legal risk management for their projects. Errors originating from the pre-check stage can lead to severe consequences, ranging from stalled applications and delayed projects to the risk of administrative penalties, invalidation of transactions, or revocation of licenses.

To assist investors in proactively preventing risks and optimizing their investment structures, BKC Law synthesizes and analyzes the 5 most common mistakes when establishing a foreign-invested company in Vietnam in the article below:

MISTAKES IN SELECTING BUSINESS LINES AND MARKET ACCESS CONDITIONS

Foreign investors often select business lines purely based on commercial needs or self-research the Vietnam Standard Industrial Classification (VSIC) codes without accurately assessing their market access status. Many investors presume that all sectors in Vietnam permit the establishment of 100% foreign-owned companies.

Meanwhile, according to Article 8 of the Law on Investment No. 143/2025/QH15 and Article 15 of Appendix I of Decree No. 96/2026/ND-CP, Vietnam manages foreign investment via an opt-out approach, meaning investors are free to engage in any activity except those explicitly prohibited by law. The list of market access restrictions is clearly divided into two categories:

• Sectors and trades with no market access: Foreign investors are strictly prohibited from investing (Section A, Appendix I).

• Sectors and trades with conditional market access: Investors must satisfy conditions regarding the charter capital ownership ratio, investment form (e.g., mandatory joint venture with a Vietnamese partner), scope of operations, investor capacity, and participating partners (Section B, Appendix I).

Therefore, when falling into the two aforementioned groups, foreign investors are not automatically permitted to establish a company, and may even be outright prohibited from investing in certain banned sectors. If this mistake is made, the application for an Investment Registration Certificate (IRC) will be rejected or subject to amendment and supplementation requests, delaying the process by 1 to 3 months. In cases where the licensing authority makes an appraisal error, the enterprise still faces the subsequent risk of business suspension or license revocation upon inspection discovering violations of WTO commitments or international treaties.

Consequently, investors must thoroughly review and update relevant specialized legal regulations—such as the list in Appendix I of Decree 96/2026/ND-CP, Vietnam’s WTO commitments schedule, and Free Trade Agreements (FTAs) to which Vietnam is a member—before finalizing the list of business lines in the IRC and Enterprise Registration Certificate (ERC) application dossiers. On this basis, an appropriate capital ownership structure should be designed from the outset.

 MISTAKES OF IGNORING SPECIALIZED SUB-LICENSES AND SELECTING INCORRECT PROJECT IMPLEMENTATION LOCATIONS

In many instances, investors mistakenly believe that upon receiving the Investment Registration Certificate and the Enterprise Registration Certificate, they can immediately commence business operations. As a result, they often hastily sign lease agreements for locations such as apartment buildings, residential houses, or improperly zoned land to serve as headquarters, factories, or business locations, while overlooking other requisite sub-licenses for project implementation. These sub-licenses may include Business Licenses, Certificates of Eligibility, Fire Safety and Prevention approvals, Environmental Impact Assessments, etc., as stipulated in the Law on Investment No. 143/2025/QH15.

Upon making this mistake, businesses easily fall into operational paralysis; despite being registered, they cannot launch products or provide services. Registering a headquarters at an improper location leads to administrative fines, refusal of sub-licenses, forced cancellation of lease contracts, and severe financial damages regarding deposits, premises costs, and idle personnel waiting for work.

Hence, before implementing a project, FDI enterprises must clearly identify essential procedures and licenses. To ensure this process occurs safely and efficiently, businesses should conduct thorough legal due diligence. Regarding this matter, BKC Law’s team of experts and lawyers is always ready to accompany, provide in-depth consulting, and offer optimal solutions for Your Enterprise.

MISTAKES IN DECLARING CAPITAL LEVELS AND VIOLATING REGULATIONS ON DIRECT INVESTMENT CAPITAL ACCOUNTS (DICA)

Investors often determine an inappropriate registered capital level during the investment licensing application process, either declaring it too low compared to the project scale-leading to rejection for failing to prove sufficient financial capacity—or declaring it excessively high based on intuition without the ability to fully contribute the amount.

Notably, a highly common mistake is transferring capital contributions through regular payment accounts, using personal accounts for substitution, or failing to open a Direct Investment Capital Account (DICA). According to foreign exchange management regulations under Circular No. 06/2019/TT-NHNN and current investment laws, FDI enterprises are mandatorily required to open a Direct Investment Capital Account (DICA) at a permitted commercial bank in Vietnam. All transactions regarding capital contribution transfers, foreign loan transfers, and the repatriation of lawful profits abroad must be executed exclusively through this DICA. The Law on Enterprises mandates that owners or members must fully contribute the charter capital within 90 days from the date the ERC is issued.

If the 90-day deadline passes without full capital contribution, the enterprise must carry out procedures to amend the IRC, extend the capital contribution period, and face administrative penalties. If the funds are transferred to the wrong account, the cash flow will not be recognized by the State Bank and Tax Authorities as legitimate contributed capital. The enterprise then faces the risk of being unable to repatriate profits in the future and must undergo highly complex tracing and refund procedures.

Therefore, businesses must construct a feasible financial plan, balancing charter capital appropriately with the minimum actual operating costs in the first 1-2 years. Immediately after receiving the ERC, the first step is to activate a DICA at a bank; investors must transfer the correct capital contribution amount to the DICA within the exact 90-day time limit.

MISTAKES IN PREPARING FOREIGN LEGAL DOSSIERS AND CHOOSING NOMINEE STRUCTURES

Regarding legal dossier preparation, investors directly submit foreign-issued legal documents such as passports, the parent company’s Business Registration Certificate, and financial statements without having them consular legalized.

More seriously, to evade complex FDI appraisal procedures or bypass sector restrictions, many foreign investors opt for the solution of using Vietnamese individuals or organizations as nominees to establish the company. This is an ever-present issue with immense potential legal risks for both parties when choosing this loophole. BKC has also analyzed these legal risks in related articles.

• Decree No. 96/2026/ND-CP and Decree No. 296/2026/ND-CP stipulate that documents issued by foreign competent authorities must be consular legalized and subject to notarized translation and authentication of the translator’s signature following strict standards to be legally valid in Vietnam.
• Decree No. 296/2026/ND-CP (Article 1, Clause 1 amended) explicitly states: “Owners, shareholders, and members of the company must strictly comply with regulations on contributed assets… and shall not act as nominees for others to contribute capital to an enterprise.”
• Simultaneously, Articles 17 & 18 of Decree No. 296/2026/ND-CP introduce a mandatory mechanism for declaring Beneficial Owners. The business registration authority will review each ownership tier to identify the individual holding ultimate practical control.

When a dossier lacks consular legalization, it will be immediately rejected, wasting 2-4 weeks for reprocessing. As for nominee structures, the transaction will be deemed a sham civil transaction. When a dispute arises or upon specialized inspection, the Court will declare the nominee contract invalid, and the foreign investor will completely lose control and their investment assets.

Therefore, when preparing dossiers, investors must standardize foreign documents from the very first step and say no to nominee structures. Invest transparently through direct FDI company establishment procedures or M&A to purchase capital contributions in accordance with lawful legal procedures.

MISTAKES OF NEGLECTING POST-ESTABLISHMENT LEGAL OBLIGATIONS AND REPORTING REGIMES

Once the company officially obtains all required licenses, investors often solely focus on business operations while completely neglecting periodic post-establishment legal obligations. Article 47 of the Law on Investment No. 143/2025/QH15 and Article 94 of Decree No. 96/2026/ND-CP stipulate that economic organizations implementing investment projects are obliged to fulfill periodic reporting regimes via online submission on the national investment information system, including:

• Quarterly reports: To be submitted before the 10th day of the first month of the quarter following the reporting quarter (regarding implemented capital, revenue, import-export, labor, taxes).
• Annual reports: To be submitted before March 31st of the following year (supplementing indicators on profit, labor income, R&D expenses, environment, technology).

Enterprises failing to submit reports will face administrative penalties and be blacklisted as high-risk enterprises on the management system. When the enterprise wishes to adjust the project (increase capital, expand business lines), the investment registration authority will refuse to process the dossier until the violation is resolved. Furthermore, this violation directly impacts the application for Work Permits and Temporary Residence Cards for foreign experts.

FDI enterprises need to establish a compliance monitoring schedule from the very first day of operation. It is advisable to utilize regular legal advisory services from professional law firms to ensure that investment reporting, tax declaration, labor, and social insurance obligations are always executed accurately and on time. Regarding this matter, BKC Law’s team of experts and lawyers is always ready to accompany, provide in-depth consulting, and offer optimal solutions for Your Enterprise.

With an experienced team of Lawyers and Investment Consultants, for in-depth advice and timely support on legal issues, you can contact BKC LAW via the following information:

• Phone: 0909 073 692

• Email: info@bkclaw.vn

• District 1 Office: 9th Floor, Diamond Plaza Building, 34 Le Duan Street, Sai Gon Ward, Ho Chi Minh City

• Binh Tan Office: 41 Ten Lua Street, An Lac Ward, Ho Chi Minh City