Vietnam is facing a period of economic integration, growth and market expansion. In that trend, more and more 100% foreign-invested companies are being established. In addition, the process of establishing a 100% foreign-invested company in Vietnam requires a deep understanding of legal processes and administrative procedures. In this article, Viet My Law and Accounting will delve into the process of establishment of a 100% foreign invested company so that investors can have an overview of the legal environment in Vietnam, thereby optimizing strategies to build a brand and develop a 100% foreign-invested organization in this promising land of Southeast Asia.

1. What is a 100% foreign-invested enterprise?

A 100% foreign-invested enterprise is a type of enterprise in which foreign investors are members or shareholders holding 100% of the charter capital. A company with 100% foreign investment capital is an economic organization established and operating under the provisions of the Investment Law, the Enterprise Law and guiding documents for implementation under the laws of the State of Vietnam; at the same time, it is subject to the regulations of international treaties of which Vietnam is a member country.

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

3. General characteristics of 100% foreign invested companies

– An investor is an individual, an organization or many individuals, many organizations cooperate, pool capital together to establish a company and do business in Vietnam.

– Investors have legal status and enjoy rights and obligations under Vietnamese law.

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

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

– Enterprises will be self-managed by foreign individuals and organizations as well as responsible for business results.

– The Vietnamese State only manages the procedures for granting investment certificates and monitors and inspects whether the enterprise conducts business in accordance with the law.

4. Conditions for establishing a 100% foreign-invested company

4.1. Conditions on the nationality of the founder/investor

Vietnamese law only allows foreign individuals, organizations, and companies to register a commercial presence in Vietnam when the foreign trader has the nationality of a WTO member country in the following forms:

• Business cooperation contract with a Vietnamese organization or company.
• Establish a 100% foreign-invested company in Vietnam.
• Establish a joint venture company in Vietnam.
• Establish a representative office/branch of a company in Vietnam.

4.2. Conditions on project implementation location, company headquarters location

Foreigners will not be able to register a company for the purpose of: outsourcing production if the project implementation location is located in office buildings or small residential houses; and manufacturing companies when renting company headquarters, renting project implementation locations outside industrial parks.

Therefore, foreign investors need to carefully choose locations to implement projects that are suitable for their intended business goals. This is an important point to create a difference in company establishment procedures between Vietnamese and foreign subjects.

4.3. Conditions on financial capacity of investors

Foreign investors need to declare information on investment capital of investment projects, charter capital of foreign-invested companies corresponding to their financial capacity. Three issues that foreign investors need to pay special attention to when wanting to establish a company in Vietnam are:

• Regulations on foreign investors having to present documents proving financial capacity for the capital expected to contribute to the project (Usually, the contributed capital will be equal to the charter capital of the company if the company only registers to implement a single investment project). Proof of documents can be account balance confirmation, foreign bank guarantee or some other related documents.
• Regulations on the total registered investment capital of the project compared to the investor’s contributed capital. Or regulations on the investment capital, the minimum contributed capital that the investor must register in the project.
  Regulations on the time limit for fully contributing the investment capital.

4.4. Conditions on the investor’s experience

This is a new point in the investment registration procedure. According to the investment registration application form issued with Circular 03/2021/TT-BKHĐT, the content of this document has additional content explaining the investor’s experience with the intended investment goals. The investor’s business experience can help the Vietnamese government to some extent “trust” in the project that they will implement in Vietnam.

4.5. Conditions to be met when implementing project objectives in conditional investment sectors

The Investment Law No. 61/2020/QH14 and the list of investment sectors have detailed the conditions of each specific objective in each business case for foreign investors. The content of this section is quite long, so we cannot share it all in this post.

5. Procedures for establishment of a 100% foreign invested company

Step 1: Prepare documents to establish a 100% foreign-owned company

After receiving the Investment Registration Certificate, investors need to prepare documents to establish a 100% foreign-owned company, including:

+Application for business registration.

+Charter of a 100% foreign-owned company.

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

+Copies of: Citizen identification cards or Identity cards or Passports of individual members; Establishment decision, Business registration certificate of organizations and authorization documents; legal personal identification documents of authorized representatives of organizational members.

+Business registration certificates or equivalent documents must be consularized for organizational members.

+Investment registration certificate for foreign investors

+Note: Documents issued or certified by competent foreign agencies must be consularized, translated and notarized in accordance with Vietnamese law. In addition, depending on the case, some other necessary documents must be provided.

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

Working time: 05-07 working days from the date of receiving a complete and valid application.

Step 3: Announce the content of business registration

After completing the procedure for registering a company at the Department of Planning and Investment, the next step in the process of establishing a 100% foreign-owned company is to announce the content of business registration.

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

Implementing agency: Announcement posting department of the Business Registration Authority.

Working time: within 30 days

Step 4: Company seal

This is the final step in the process of establishing a 100% foreign-owned company. This step is carried out after obtaining the Business Registration Certificate and publishing the announcement of the establishment of the enterprise.

The company will engrave the seal and notify the use of the seal sample on the National Business Registration Information Portal. The company has the right to decide on the seal sample and the number of seals.

Receiving agency: Business Registration Office – Department of Planning and Investment where the enterprise is headquartered.

Working time: about 5-8 working days.

6. Advantages and disadvantages of 100% foreign-invested companies

With favorable conditions from nature, socio-economic conditions, and investment incentives, especially after Vietnam joined the World Trade Organization (WTO), many foreign investors have chosen the Vietnamese market as an ideal investment destination. Vietnamese law also allows foreign investors to establish, manage, and operate companies with 100% foreign capital.

However, many foreign investors still wonder whether they should choose this type of investment or not. Besides the advantages, this type of enterprise also comes with its own disadvantages.

6.1. Advantages of 100% foreign-invested companies

Foreign-invested companies are managed and operated by foreign investors, which often brings more effective management methods, creating higher economic efficiency than domestic enterprises.

Foreign-invested companies are established and developed by foreign investors, which brings advantages in technology and capital, and is capable of attracting many human resources both domestically and internationally.

The establishment of foreign-invested companies is in line with the current trend of international integration, allowing foreign investors to make the most of their extensive international relationships.

6.2. Disadvantages of 100% foreign-invested companies

Foreign-invested companies entering Vietnam often encounter differences in business culture, which can affect access to the Vietnamese market. In addition, differences in business culture can cause disagreements within investors.
Although Vietnamese law has expanded opportunities for foreign investors, it still exists within a certain limited framework, in order to protect domestic investors. This is reflected in restrictions such as limited capital contribution ratios in some special industries and complicated investment registration procedures.

In the above article, Viet My Law and Accounting has provided complete and detailed information on the procedures for establishing a 100% foreign-invested company. Hopefully, it will help your business to easily establish a business in the most convenient way. If your business finds the procedures difficult, you can refer to our Viet My business establishment service.