Foreign-invested company means an enterprise established in accordance with the laws of Vietnam. It is established by investors who are foreign individuals or organizations or contributed capital to carry out business activities in Vietnam. Nowadays, the Vietnamese economy and government maintain a very open regime to attract foreign investors. However, they might not have a full understanding of the foreign-invested company. So, in this article, LSX legal firm provides: “Company involving foreign elements in Vietnam”
Legal grounds
- Law on Investment 2020
- Law on Enterprise 2020
Foreign investors and investment activities in Vietnam
The investment law of Vietnam defines the following terms:
“foreign investor” means an individual holding a foreign nationality or an organization established under foreign laws and carrying out business investment activities in Vietnam.
“business entity” means an entity established and operating in accordance with Vietnam’s laws. Business entities include enterprises, cooperatives, cooperative unions, and other entities that carry out business investment activities.
“foreign-invested business entity” means an entity whose members or shareholders are foreign investors.
At present, there are 4 main types of investing activities in Vietnam:
1. Investment in the establishment of a business entity.
2. Investment in the form of capital contribution or purchase of shares or stakes.
3. Execution of an investment project.
4. Investment in the form of a business cooperation contract.
A company involving foreign elements may appears from the investment in the establishment of a business entity or the investment in the form of capital contribution or purchase of shares or stakes.
Investment in establishment of a business entity
Every foreign investor has the right to establish a business entity in accordance with the following regulations:
- A foreign investor that establishes a business entity shall satisfy market access conditions applied to foreign investors specified in Article 9 of the Law on Investment 2020.
- Before establishing a business entity, the foreign investor must have an investment project and follow the procedures for issuance or adjustment of an investment registration certificate, except for the establishment of a small and medium-sized start-up enterprise and a startup investment fund in accordance with the regulations of the Law on Small and Medium-sized Enterprises.
From the date on which the enterprise registration certificate or an equivalent document is issued, the business entity established by a foreign investor shall be the investor that executes the investment project set out in the investment registration certificate.
The rights to establish, contribute capital, buy shares/stakes and manage enterprises
Article 17 of the Law on Enterprises provides for cases not eligible to open and manage a business in Vietnam:
Article 17. The rights to establish, contribute capital, buy shares/stakes and manage enterprises
2. The following organizations and individuals do not have the right to establish and manage enterprises in Vietnam:
a) State authorities, People’s armed forces using state-owned assets to establish enterprises to serve their own interests;
b) Officials and public employees defined by the Law on Officials and the Law on Public Employees;
c) Commissioned officers, non-commissioned officers, career military personnel, military workers and public employees in agencies and units of Vietnam People’s Army; commissioned officers, non-commissioned officers and police workers in police authorities and units, except for those designated and authorized representatives to manage state-owned stakes in enterprises or to manage state-owned enterprises;
d) Executive officers and managers of state-owned enterprises prescribed in Point a Clause 1 Article 88 of this Law, except those who are designated as authorized representatives to manage state-owned stakes in other enterprises;
dd) Minors; people with limited legal capacity; incapacitated people; people having difficulties controlling their behaviors; organizations that are not juridical persons;
e) People who are facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated, is not able to control his/her own behaviors, is banned by the court from holding certain positions or doing certain works; other cases prescribed by the Law on Bankruptcy and the Anti-corruption Law.
If requested by the business registration authority, the applicant shall submit the judicial records;
g) Juridical persons that are banned from business operation or banned from certain fields as prescribed by the Criminal Code.
Investment activities of foreign-invested businesses
Article 23 of the Law on Investment 2020 regulates the investment activities of foreign-invested businesses as follows:
Article 23. Conduct of investment activities by foreign-invested business entities
When establishing a business entity, when making an investment by contributing capital, purchasing shares or purchasing stakes of a business entity, or when making an investment under a business cooperation contract in one of the following cases, the foreign investor must satisfy the conditions and follow investment procedures applied to foreign investors:
a) Over 50% of its charter capital or more is held by a foreign investor(s) or the majority of the general partners are foreigners if the business entity is a partnership;
b) Over 50% of its charter capital or more is held by a business entity(ies) mentioned in Point a of this Clause;
c) Over 50% of its charter capital or more is held by a foreign investor(s) and a business entity(ies) mentioned in Point a of this Clause.
Business entities other than those mentioned in Points a, b, and c Clause 1 of this Article shall satisfy conditions and follow investment procedures applied to domestic investors when establishing a business entity, when making an investment by contributing capital, purchasing shares, or purchasing stakes of a business entity or when making investment under a business cooperation contract.
If a foreign-invested business entity that is established in Vietnam has a new investment project, procedures for executing such investment project shall be followed without having to establish a new business entity.
The Government shall elaborate procedures for establishing business entities and conduct of investment activities by foreign investors and foreign-invested business entities.
Thus, if the investor falls into Clause 1 of this Article, the investor must carry out the procedures for the issuance of an Investment Registration Certificate.
Contributing capital, purchasing shares or purchasing capital contributions
Contributing capital, purchasing shares, or purchasing capital contributions
Investors have the right to contribute capital, purchase shares, or purchase stakes of business entities.
Foreign investors making investment by contributing capital, purchasing shares and purchasing stakes of business entities must:
- Firstly, satisfy market access conditions applied to foreign investors as prescribed in Article 9 of the Law on Investment 2020.
- Secondly, ensure national defense and security in accordance with the Law on Investment.
- Thirdly, comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes.
Forms of capital contribution or purchase of shares
Article 25. Forms of capital contribution or purchase of shares or stakes
A foreign investor may contribute capital to a business entity in the following forms:
a) Purchase of shares of joint-stock companies through the initial public or additional issuance;
b) Contribution of capital to limited liability companies and partnerships;
c) Contribution of capital to other business entities not mentioned in Point a and Point b of this Clause.
A foreign investor may purchase shares or stakes of a business entity in the following forms:
a) Purchase of shares in a joint-stock company from such company or its shareholders;
b) Purchase of stakes of members of a limited liability company to become a member of such limited liability company;
c) Purchase of stakes of a capital contributing member of a partnership to become a capital contributing member of such partnership;
d) Purchase of stakes of members of other economic entities not mentioned in Points a, b, and c of this Clause.
Legal service of LSX Legal Firm
LSX legal firm provides legal services to clients in various legal areas. To make your case convenient, LSX will perform:
- Legal advice related to new regulations;
- Representing in drafting and editing documents;
- We commit the papers to be valid, and legal for use in all cases;
- Represent to submit documents, receive results, and hand them over to customers.
With a team of experienced, reputable, and professional consultants. The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself. We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.
Contact LSX
The above content details information regarding “Company involving foreign elements in Vietnam”. LSX Legal Firm has provided effective legal guidance to businesses and individuals with reasonable prices as well as efficient outcomes in recent years. Following legal principles, we always update and keep our operations and services on track with the law. If you need any further information from the firm’s solicitors, please contact LSX Law firm: +84846175333 or Email: [email protected]
See more
Regulations of Vietnam law in case of winning bid against regulations
Procedure to open a foreign company in Vietnam
How long does it take to start a foreign-invested company in Vietnam?
Frequently asked questions
Within 03 working days from the receipt of the satisfactory application., the Business Registration Office shall issue the enterprise registration certificate and certificate of changes to enterprise registration information and update enterprise registration information on the National Enterprise Registration Database.
It takes 15 days if the application for investment registration satisfies the law’s conditions and does not need to amendment or modification.
The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business entity conducting business in the business lines allowed in the market with conditions applied to foreign investors.
Conclusion: So the above is Company involving foreign elements in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
