Procedures for Establishing a 100% Foreign-Owned Company in Vietnam

Procedure for Establishing a 100% Foreign-Owned Company in Vietnam requires foreign investors to comply with Vietnamese legal regulations. Vietnam is increasingly becoming an attractive destination, drawing numerous international investors to establish 100% foreign-owned companies due to its open-door policies and favorable business environment. However, establishing a 100% foreign-owned company in Vietnam necessitates adherence to specific legal procedures. This article provides step-by-step guidance on the entire incorporation process—from dossier preparation to completion of all required formalities. A thorough understanding of the requirements and regulations will help you save time, minimize risks, and ensure the success of your investment project.

Legal Basis

The establishment of a company in Vietnam by Chinese investors is governed by several key legal instruments that protect the rights of foreign investors while ensuring lawful business operations. The principal legal documents include:

• Investment Law 2020: This law sets out the principles and conditions applicable to foreign investors conducting investment activities in Vietnam. It also provides specific provisions on permitted business sectors, investment conditions, and procedures for granting investment licenses to foreign investors.
• Enterprise Law 2020: This law regulates the organization, establishment, and management of various types of enterprises in Vietnam, including the rights and obligations of foreign investors in enterprises.
• Decree 31/2021/ND-CP guiding the implementation of the Investment Law, providing detailed regulations on investment procedures, particularly for enterprises with foreign investment capital.
• Decree 01/2021/ND-CP on enterprise registration, which sets out the procedures for registration and management of enterprises in Vietnam, including those with foreign investment capital.

What is a 100% Foreign-Owned Enterprise?

A 100% foreign-owned enterprise is a company wholly owned by foreign investors who contribute capital to establish the enterprise in Vietnam, exercise full management control, and bear sole responsibility for business outcomes.

A 100% foreign-owned company is established and operates in accordance with the Investment Law, Enterprise Law, Vietnam’s WTO commitments, international treaties, and related legal instruments. Such a company is established in the form of a limited liability company or joint stock company, possesses legal personality under Vietnamese law, and is deemed established and operational from the date the investment registration certificate is issued.

Conditions for Establishing a 100% Foreign-Owned Company

Conditions Regarding Nationality of the Founder/Investor

Vietnamese law permits individuals, organizations, or companies of foreign nationality that are members of the WTO to establish a commercial presence in Vietnam in one of the following forms:

• Business Cooperation Contract with a Vietnamese organization or company.
• Establishment of a 100% foreign-owned company in Vietnam.
• Establishment of a joint venture company in Vietnam.
• Establishment of a representative office or branch in Vietnam.

Conditions Regarding Capital

Although the law does not prescribe a specific minimum capital requirement for non-conditional business sectors, in practice, certain provinces and cities consider the level of registered charter capital and investment capital when evaluating applications for the Investment Registration Certificate. Accordingly, to obtain a longer project implementation term, foreign-invested companies are advised to register the highest possible charter capital and investment capital.

Conditions Regarding Project Location and Company Head Office

Foreign investors cannot register a company for manufacturing or processing activities if the project site is located in office buildings or small residential houses. Export processing enterprises are also not permitted to lease office space or project sites outside industrial zones.

For trading and service companies, the project location and company head office may be at the same address. The head office is not permitted to be located in residential apartments or collective housing. In mixed-use buildings, the head office may be located in the commercial portion. Therefore, foreign investors must select a project location suitable for their intended business activities. This is a key distinction in incorporation procedures between Vietnamese and foreign investors.

Conditions Regarding the Legal Representative

The legal representative of the enterprise must be an individual with full civil act capacity. An enterprise may have multiple legal representatives, but at least one must reside in Vietnam. If only one legal representative remains residing in Vietnam, that person must, when departing Vietnam, grant written authorization to another individual residing in Vietnam to perform the rights and obligations of the legal representative.

Conditions Regarding Enterprise Type

Vietnamese law does not impose restrictions on enterprise types in general. However, for certain business sectors and specific investors, the law may limit the permissible forms. For example, foreign accounting service enterprises establishing economic organizations in Vietnam may be subject to such restrictions.

Dossier and Procedure for Establishing a 100% Foreign-Owned Company under the Latest Regulations

Step 1: Application for Investment Policy Approval (if applicable)

If the project falls under cases requiring investment policy approval (Articles 30, 31, 32 of the Investment Law 2020), the investor must prepare and submit the dossier to the competent authority. The specific dossier and procedures are regulated under Articles 33, 34, 35, and 36 of the Investment Law 2020.

If the project does not require investment policy approval, this step is omitted.

Step 2: Application for Investment Registration Certificate

In the following cases, the investor must apply for an Investment Registration Certificate (Article 37 of the Investment Law 2020):

– Investment projects of foreign investors;
– Investment projects of economic organizations as defined in Clause 1, Article 23 of the Investment Law 2020, specifically:
(1) Economic organizations in which foreign investors hold more than 50% of charter capital or the majority of general partners are foreign individuals (for partnership companies);
(2) Economic organizations as defined in (1) holding more than 50% charter capital;
(3) Economic organizations in which foreign investors and economic organizations as defined in (1) jointly hold more than 50% charter capital.

The dossier includes (as stipulated in Clause 1, Article 33 of the Investment Law 2020):

(1) Dossier proposed by the investor for investment policy approval, including:
– Written request to implement the investment project, including a commitment to bear all costs and risks if the project is not approved;
– Documents proving the legal status of the investor;
– Documents proving the investor’s financial capacity, including at least one of the following:
+ Financial statements for the two most recent years;
+ Commitment of financial support from the parent company;
+ Commitment of financial support from a financial institution;
+ Financial capacity guarantee for the investor;
+ Other documents proving the investor’s financial capacity;
– Investment project proposal, including key contents: investor or method of investor selection, investment objectives, scale, capital and financing plan, location, duration, implementation schedule, current land use status at the project site and proposed land use requirements (if any), labor requirements, proposed investment incentives, socio-economic impacts and efficiency of the project, preliminary environmental impact assessment (if any) as required by environmental protection law.
If construction law requires a pre-feasibility study report, the investor may submit such report in lieu of the investment project proposal;
– In cases where the project does not require land allocation, land lease, or land use purpose change by the State, a copy of land use rights documents or other materials confirming the right to use the project site;
– Explanation of technology used in the project for projects subject to technology appraisal or consultation under technology transfer law;
– Business Cooperation Contract (BCC) for projects implemented in the form of BCC;
– Other documents related to the investment project or specific conditions and capacity requirements of the investor as prescribed by law (if any).

(2) Dossier proposed by competent state authorities for investment policy approval, including:
– Proposal for investment policy approval;
– Investment project proposal, including key contents:
+ Investment objectives, scale, capital, location, duration, implementation schedule, socio-economic impacts and efficiency of the project;
+ Current land use status at the project site, land recovery conditions for projects subject to land recovery, and projected land use demand (if any);
+ Preliminary environmental impact assessment (if any) as required by environmental protection law;
+ Proposed method of investor selection and conditions for the investor (if any); special mechanisms and policies (if any).
If construction law requires a pre-feasibility study report, competent state authorities may use such report in lieu of the investment project proposal.

The dossier is submitted to the investment registration authority.

Step 3: Establishment of the Enterprise and Issuance of Enterprise Registration Certificate

After obtaining the Investment Registration Certificate, the investor prepares the dossier for enterprise establishment.

Step 4: Completion of Additional Procedures

– Public disclosure of enterprise registration contents (Article 32 of the Enterprise Law 2020)
– Engraving and registration of the company seal and seal specimen (Article 43 of the Enterprise Law 2020)
– Initial tax registration and declaration with the tax authority

With a team of seasoned lawyers possessing extensive experience, solid legal expertise, and strong bilingual capabilities, BKC LAW is confident in being one of the leading legal partners in the market for supporting company establishment services for 100% foreign-owned enterprises in Vietnam.

For free legal consultation at BKC Law, please contact our Lawyers using the following information:

Telephone: 0901 3333 41

Email: info@bkclaw.vn

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