FDI in Vietnam: Establishing a New Company or Contributing Capital to an Existing Enterprise?

When investing in Vietnam, foreign investors typically face two core options: establishing a new Foreign Direct Investment (FDI) company or contributing capital, purchasing shares/capital contributions in an existing Vietnamese enterprise. Each investment form possesses distinct advantages regarding time, costs, degree of control, and legal procedures under the 2025 Law on Investment and its guiding documents. Each investment method brings specific benefits in terms of time, costs, level of control, and legal risks. The following article by BKC LAW will comprehensively analyze these two alternatives from an in-depth legal perspective and the practical implementation of the latest legal regulations.

Establishing a New FDI Company

Establishing a new economic organization is a form of direct investment stipulated in Article 18 and Article 19 of the 2025 Law on Investment. To bring a new FDI company into operation, foreign investors must undergo the following legal process:

• Procedures for applying for an Investment Registration Certificate (IRC): Applicable to investment projects of foreign investors as prescribed in Article 26 of the 2025 Law on Investment.

• Procedures for enterprise registration (ERC): Obtaining the Enterprise Registration Certificate under the 2020 Law on Enterprises and Decree No. 168/2025/ND-CP (amended by Decree No. 296/2026/ND-CP).

Note: Pursuant to Clause 2, Article 19 of the 2025 Law on Investment and Clauses 1 and 4, Article 72 of Decree No. 96/2026/ND-CP, foreign investors are permitted to register for enterprise establishment prior to carrying out the procedures for IRC issuance. However, within 12 months from the date of establishment, the enterprise must complete the procedures for IRC issuance and is only allowed to implement the investment project after the IRC issuance is fully completed.

Advantages and Disadvantages of Establishing a New FDI Company

Advantages:

• Absolute Autonomy and Control: Foreign investors can own up to 100% of the charter capital (for business lines without foreign ownership limits) and have full authority to decide on the corporate governance structure, corporate culture, and business orientation.

• Safe Legal History: A newly established enterprise is completely clean financially, unburdened by hidden debts, outstanding tax obligations, or past contractual disputes.

• Direct Entitlement to Investment Incentives: It is straightforward to carry out registration procedures to enjoy tax incentives and land rental exemptions/reductions based on the investment project.

Disadvantages:

• Prolonged Preparation and Licensing Time: The total actual time typically ranges from 25 to 45 working days due to multiple appraisal steps regarding location, capital scale, and environmental impact.

• Complex Administrative Procedures: Investors must provide explanations regarding their financial capacity, project implementation location, and meet specialized technical criteria.

Regarding the option of establishing a new FDI company, BKC LAW considers this the most suitable strategic choice when investors aim to deploy large-scale manufacturing projects, develop high technology, or plan to inject capital directly into industrial parks and economic zones. This is an optimal launching pad for investors aiming for 100% charter capital ownership to establish full autonomy and absolute control over all business management operations. Furthermore, the newly established form effectively meets strict standards for the protection of intellectual property and trade secrets, while creating a solid legal basis for the enterprise to directly stand in its name and fully enjoy investment incentive policies from the Government.

Contributing Capital, Purchasing Shares, or Purchasing Capital Contributions in an Existing Enterprise

This form allows foreign investors to participate in the ownership structure of an already established Vietnamese enterprise. This is stipulated in Article 21 of the 2025 Law on Investment and detailed in Articles 75 and 76 of Decree No. 96/2026/ND-CP.

Accordingly, pursuant to Clause 3, Article 21 of the 2025 Law on Investment, foreign investors must carry out the procedures for Registering capital contributions, share purchases, or capital contribution purchases (commonly known as M&A procedures) prior to changing members/shareholders if they fall into one of the following cases:

• Increasing the ownership ratio of foreign investors in an economic organization engaged in business lines subject to conditional market access for foreign investors;

• Increasing the foreign investors’ charter capital ownership ratio from less than or equal to 50% to over 50%, or continuing to increase it when they already own over 50%;

• The target enterprise holds a Certificate of Land Use Rights on islands, border communes/wards/special zones, coastal areas, or areas affecting national defense and security.

Upon receiving a written approval from the Investment Registration Authority, the enterprise shall proceed with the procedures for changing members/shareholders at the Business Registration Authority.

Advantages and Disadvantages of Indirect Investment

Advantages:

• Rapid Market Entry: M&A registration procedures typically take only 15 to 25 working days and do not require the issuance or adjustment of the Investment Registration Certificate (IRC).

• Immediate Utilization of Existing Systems: Instant exploitation of the personnel apparatus, infrastructure, business premises, customer base, and especially the sub-licenses/specialized licenses already possessed by the target enterprise.

• Solution for Sectors with Foreign Capital Limits: For business lines that are uncommitted or subject to foreign ownership limits (such as international travel, logistics, advertising services, etc.), this is the optimal alternative enabling foreign investors to legally form joint ventures with Vietnamese partners.

Disadvantages:

• Risks of Hidden Debts and Past Financial Obligations: If a thorough legal Due Diligence is not conducted, foreign investors can easily inherit tax debts, social insurance arrears, or old contractual disputes.

• Conflicts in Corporate Governance: The risk of operational disagreements between the foreign shareholder/member group and the Vietnamese founding shareholder group.

Thus, according to BKC LAW, the option of Contributing capital or Purchasing shares in an existing enterprise is the optimal strategy when foreign investors want to significantly shorten market entry time to rapidly seize business opportunities. Particularly for conditional business sectors subject to foreign ownership limits—such as travel tourism, logistics, transport infrastructure, or advertising services—where applying to establish a 100% FDI legal entity is extremely difficult or nearly impossible, M&A is considered the most feasible approach. Furthermore, this option will maximize advantages if the target enterprise in Vietnam has already established an infrastructure foundation, factories, land funds, and possesses a complete system of sub-licenses, enabling the new investor to immediately put the project into operational orbit without having to spend time and resources rebuilding from scratch.

Important Legal Notes on Sanctions

Regardless of the chosen form, foreign investors must pay special attention to the following mandatory legal regulations to avoid emerging risks:

• Complying with the obligation to contribute capital on time: Pursuant to Clause 2, Article 47 of the 2020 Law on Enterprises, the time limit for contributing in full the charter capital is 90 days from the date of ERC issuance. If the capital is not fully contributed on time and procedures for downward adjustment of capital are not carried out, the enterprise may be subject to administrative fines ranging from VND 30,000,000 to VND 50,000,000 under Point a, Clause 3, Article 46 of Decree No. 122/2021/ND-CP.

• Regulations on transferring capital contribution via specialized accounts: All transactions of capital contribution, share purchases, and outward remittance of profits must strictly be executed through a capital account opened at a licensed bank in Vietnam. Contributing capital in improper forms (such as using standard personal accounts or cash) will lead to the risk of the capital contribution not being recognized and being penalized under Decree No. 122/2021/ND-CP.

• Cross-ownership: Attention must be paid to the provisions of Clause 2, Article 195 of the 2020 Law on Enterprises: A subsidiary company is not permitted to invest in purchasing shares or contributing capital to its parent company; subsidiaries of the same parent company are not allowed to simultaneously cross-own capital in one another.

With a team of Lawyers and Legal Experts highly experienced in the fields of Investment Registration & M&A, BKC LAW Firm provides comprehensive solutions for Foreign Investors. For in-depth consultancy on the optimal investment plan for your project, please contact BKC LAW via the firm’s official Hotline or Email.

• Phone: 0909 073 692

• Email: info@bkclaw.vn

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