Viet Nam is ahead of the integration of economic growth and market expansion. In that trend, a growing number of 100% foreign-invested companies are being established. In addition, the process of establishing a 100% foreign-invested company in Vietnam requires a thorough understanding of legal procedures and administrative procedures. In this paper, Luat va Ke toan Viet My will go into the process of Establish a 100% foreign invested company so that investors have an overview of Vietnam’s legal environment, thereby optimizing its strategy for brand building and organizing 100% foreign capital in this promising land of Southeast Asia.

1. What is understood as an enterprise with 100% foreign investment?

A 100% foreign-invested enterprise is a type of enterprise in which foreign investors who are members or shareholders hold 100% of the charter capital. A company with 100% foreign investment capital is an economic organization established and operating in accordance with the provisions of the Investment Law, Enterprise Law and guiding documents under Vietnamese state law; At the same time, it is governed by international treaties of which Vietnam is a member country.

2. In some business fields, foreign investors can establish 100% foreign-invested companies

3. General characteristics of 100% foreign invested companies

– An investor is an individual, an organization, or several individuals or organizations that work together and share capital together to establish a company and do business in Vietnam.

– Investors shall have legal status and enjoy obligatory rights in accordance with Vietnamese law.

– Companies will be established in the form of limited liability companies.

– All assets of the enterprise will be wholly owned by the investor.

– Enterprises will be managed by foreign individuals and organizations and will be responsible for their business results.

– The State of Viet Nam only administers the procedures for issuing investment certificates and monitors and checks whether that enterprise conducts business in accordance with the law.

4. Conditions for establishing a 100% foreign invested company

4.1. Conditions for Established/Invested Nationality

Vietnamese law allows foreign individuals, organizations and companies to register their trade presence in Viet Nam only when foreign business entities with nationality are WTO member countries in the following forms:

• Business cooperation contracts with a Vietnamese organization and company.
• Established a 100% foreign capital company in Vietnam.
• Establishment of joint-venture company in Vietnam.
• Establishment of a representative/corporate branch office in Vietnam.

4.2. Conditions on project implementation location and company headquarters location

Foreigners will not be able to register the company for: outsourced production if the project’s implementation site is located in office buildings or small residential houses; and export processing company when renting the company headquarters, renting the project’s implementation site outside the industrial park.

Therefore, foreign investors need to select a location carefully to implement the project in accordance with their intended business objectives. This is an important point to make a difference in the procedures for establishing a company between Vietnamese and foreigners.

4.3. Conditions on financial capacity of investors

A foreign investor shall make a declaration of information on the investment capital of an investment project, the charter capital of a foreign capital company corresponding to its financial capacity. Three issues that foreign investors should pay particular attention to when establishing a company in Vietnam, are:

• Provisions on the presentation of documents proving financial competence for the expected capital contribution to the project (Normally, capital contribution will be equal to company charter capital if the company only registers to carry out a single investment project). Proof documents may be the confirmation of the balance of accounts, guarantees of foreign banks or some other related documents.
• Provisions on the total investment capital of a registered project at most relative to the amount of capital contributed by the investor. Or the provisions on the amount of capital invested and the minimum amount of capital contributed by the investor must be registered in the project.
• Provisions on the time limit for contributing sufficient amount of investment capital.

4.4. Conditions on investor experience

This is a new point in the investment registration process. According to the investment registration request form issued with Circular 03/2021/TT-BPI, this document contains additional explanations of investor experience with the objectives intended for investment. The investor’s business experience can help the Vietnamese state to “trust” some of the projects it will implement in Vietnam.

The Law on Investment No. 61/2020/QH14 and the portfolio of investment sectors detailed the conditions of each specific objective in each business case to foreign investors. The content of this section is quite long, so we can’t share it all in this section of the post.

5. Procedures for establishing a 100% foreign invested company

Step 1: Prepare the dossier of establishing a 100% foreign-owned company

After obtaining the Investor Registration Certificate, it is necessary to prepare a dossier to establish a company with 100% foreign capital, including:

+ Request for business registration.

+ 100% foreign capital company charter.

+ List of members/ List of founding shareholders and foreign investors.

+ Copy: Citizen’s identification card or ID card or passport of members who are individuals; Organization’s Decision of Establishment, Certificate of Enterprise Registration and document of authorization; legal personal identification certificate of the authorized representative of the member who is the organization.

+ Certificate of enterprise registration or equivalent documents shall be legalized consular to the members of the organization.

+ Investment registration certificate for foreign investors

+ Note: Documents issued or confirmed by the competent foreign agency must be legalized and notarized in accordance with Vietnamese law. In addition, some other necessary documents must be provided depending on the circumstances.

Step 2: Submit your application to the Department of Planning and Investment (Business Registration Division)

Working hours: 05-07 working days from the date of receipt of a valid application.

Step 3: Publish the contents of the company’s registration

After completing the procedures for company establishment registration at the Department of Planning and Investment, the next step in the process of establishing a 100% foreign-owned company is to publish the contents of the company’s registration.

Information on enterprise registration must be made public on the National Portal within 30 days from the date of issuance of the Certificate of Enterprise Registration.

Implementing Agency: The declaration department of the business registrar.

Working hours: within 30 days

Step 4: Company seal

This is the final step in the process of establishing a 100% foreign-owned company. This step was followed by a Certificate of Enterprise Registration and a declaration of establishment of the enterprise was made.

The company implements stamp carving and notification on the National Portal for business registration. The company has the right to decide on stamp patterns and the number of seals.

Receiving agency: Business registration department – Department of Planning and Investment where the enterprise is located.

Working hours: about 5-8 working days

6. Advantages and disadvantages of a 100% foreign invested company

With favorable conditions from nature, the social economy, and investment preferential policies, especially after Vietnam’s accession to the World Trade Organization (WTO), many foreign investors have chosen the Vietnamese market as their ideal investment destination. Vietnamese law also allows foreign investors to establish, manage, and operate companies with 100% foreign capital.

However, many foreign investors still question whether to choose this type of investment. In addition to the advantages, this type of enterprise is also accompanied by its own disadvantages.

6.1. Advantages of 100% foreign capital company

Foreign capital companies are under the management and management of foreign investors, which often provides a more efficient way of managing, creating higher economic performance than domestic enterprises.

A foreign capital company is established and developed by foreign investors, which provides technological and capital advantages, and is capable of attracting many human resources both at home and abroad.

The establishment of a foreign capital company is in line with the current trend of international integration, allowing foreign investors to make the most of their broad international relations.

6.2. Disadvantages of 100% foreign-owned companies

Foreign-invested companies often experience differences in business culture when entering Vietnam, which can affect access to the Vietnamese market. In addition, differences in business culture can cause internal disagreement among investors. Vietnamese law has expanded opportunities for foreign investors but still exists within a limited framework to protect domestic investors. This is reflected in limitations such as limited capital contribution rates in certain special industries and complicated investment registration procedures.

In this article, Luat va Ke toan Viet My provided full and detailed information about the procedures for Establish a 100% foreign invested company. Hopefully, it will make it as easy for you to start your business as possible. If you feel the procedures are difficult, please refer to our Viet My Business Start-up Service.

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