What are the conditions and rules for conducting investment activities by contributing capital of FDI enterprises in Vietnam?
What is FDI?
According to the provisions of Clause 22, Article 3 of the 2020 Law on Investment of Vietnam, the definition of FDI enterprises is as follows:
“foreign-invested business organization” means an organization whose members or shareholders are foreign investors.
FDI stands for Foreign Direct Investment.
What are the regulations on investment activities of FDI enterprises in Vietnam?
Currently, investment activities of FDI enterprises are regulated in Article 23 of the 2020 Law on Investment of Vietnam as follows:
- When establishing a new business organization, making investment by contributing capital, purchasing shares or stakes of a business organization, or making investment under a BCC contract, a business organization must satisfy the same conditions and follow the same investment procedures as foreign investors if:
+ Over 50% of its charter capital is held by a foreign investor(s) or, in case of a partnership, the majority of its general partners are foreigners;
+ Over 50% of its charter capital is held by a business organization(s) mentioned in Point a of this Clause;
+ Over 50% of its charter capital is held by a foreign investor(s) and a business organization(s) mentioned in Point a Clause 1 Article 23 of the 2020 Law on Investment of Vietnam.
- Business organizations other than those mentioned in Points a, b and c Clause 1 Article 23 of the 2020 Law on Investment of Vietnam shall satisfy conditions and follow investment procedures applied to domestic investors when establishing a business organization, when making investment by contributing capital, purchasing shares or purchasing stakes of a business organization or when making investment under a business cooperation contract.
- If a foreign-invested business organization 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 organization.
What are the conditions and rules for conducting investment activities by contributing capital of FDI enterprises in Vietnam?
Based on what regulations are FDI enterprises established?
Pursuant to Article 63 of Decree No. 31/2021/ND-CP stipulating the establishment of FDI organizations as follows:
- Except for the case in Article 67 of Decree No. 31/2021/ND-CP, the foreign investor shall establish a business organization and execute an investment project as follows:
+ In the case of execution of a new investment project, the foreign investor shall follow procedures for approval of investment guidelines and issuance of the investment registration certificate to the new investment project, and procedures for establishing a business organization in accordance with regulations of law corresponding to each type of business organization;
+ In the case of receipt of an investment project and establishment of a business organization, the foreign investor shall follow procedures for issuance of the investment registration certificate (if such project is not issued with the investment registration certificate) or adjustment of the investment registration certificate (if such project has been issued with the investment registration certificate) and procedures for business organization establishment in accordance with regulations of law corresponding to each type of business organization.
- Documentation and procedures for establishment of the business organization shall comply with regulations of law on enterprises or other law corresponding to each type of business organization.
- Charter capital of a business organization established by a foreign investor for execution of an investment project is not necessarily equal to the investment capital of the investment project.
The business organization established by the foreign investor shall contribute capital and raise capital from other sources to execute the investment project according to the schedule on the investment registration certificate.
What are the conditions and rules for conducting investment activities by contributing capital of FDI enterprises in Vietnam?
Pursuant to Article 65 of Decree No. 31/2021/ND-CP stipulating the conditions and rules for conducting investment activities by contributing capital, purchasing shares or purchasing stakes of FDI enterprises as follows:
- Any domestic investor that invests in contributing capital, purchasing shares or purchasing stakes in a business organization established in Vietnam shall comply with the conditions and procedures specified in the Law on Enterprises and other law applicable to each type of business organization.
- The contribution of capital, purchase of shares or stakes on the securities market shall comply with regulations of law on securities.
- Wholly state-owned enterprises and representatives of state capital invested in enterprises shall comply with the conditions and procedures prescribed by regulations of law on management and use of state capital invested in manufacturing and business activities of enterprises; law on management and use of public property and other relevant law upon conducting investment activities by contributing capital, purchasing shares or purchasing stakes in business organizations or transferring the stakes or shares to other organizations and individuals.
- A foreign investor contributing capital or purchasing shares or stakes in a business organization established in Vietnam shall satisfy the conditions set out in Clause 2 Article 24 of the 2020 Law on Investment of Vietnam, including:
+ Market access conditions applied to foreign investors upon capital contribution, and purchase of shares and stakes in business organizations established in Vietnam as prescribed in Clause 3 Article 9 of the 2020 Law on Investment of Vietnam and Articles 15, 16 and 17 of Decree No. 31/2021/ND-CP;
+ Conditions concerning assurance of national defense and security and conditions for land use applied to a business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors in case such business organization has the certificate of rights to use land on the island, in border commune, ward or town and coastal commune, ward or town;
Other areas that affect defense and security, except for the business organization executing the investment project in an industrial park, export-processing zone, hi-tech zone or economic zone established under the Government’s regulations.
- Any foreign organization or individual that receives shares or stakes in a business organization established in Vietnam by a gift or exchange or another contract of transfer of ownership rights as prescribed by law or through inheritance shall satisfy the conditions set out in Clause 4 Article 65 of Decree No. 31/2021/ND-CP and follow procedures in accordance with regulations applicable to foreign investors making investment in the form of capital contribution, purchase of shares or stakes.
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