1. What is direct investment?

The term direct Investment, also commonly known as foreign direct investment, refers to when an investment is made by a foreign business with the purpose of gaining a controlling interest in a company. The controlling interest is instead acquired by investing capital in a company and receiving equity in that company in exchange.

The purpose for making a direct investment may be for a foreign company to set up in another country such as Vietnam or to take control of pre-existing company’s assets.

2. Types of Company that may be created through direct investment.

A foreign person who makes a direct investment in Vietnam may start a company of a number of different kinds. These include a limited liability company, a joint-stock company, a partnership, a business cooperation contract, public-private partnership, Branch or Representative office.

The two most common are limited liability companies and joint-stock companies.

3. Requirements for the Company

A company created as a result of foreign direct investment must follow Vietnam’s regulations with regard to company name, headquarters, legal representatives, investment business sectors and capital requirements for companies. These regulations are found in the Vietnamese Law on Enterprises.

• Name

In Vietnam, a foreign company must follow the regulations set out in Article 37 of the Law on Enterprises. The Article states that a company must have a Vietnamese name, foreign name, and an abbreviated name.

The Vietnamese name is made up of two parts. The first is the type of business entity of the company for example a limited liability company or a Joint-stock company. The second part is the intended name of the business, written in the Vietnamese alphabet, letters F, J, Z, W, numbers, and symbols.

Company names cannot be the same name as another business and must be submitted to the Vietnamese trade registry, in order to reserve them. They must also be displayed at the companies’ headquarters, branches, offices, business locations, and on all published documents of the business.

• Headquarters

According to Article 42 of the Law on Enterprises, companies’ headquarters must be located in Vietnamese territory, be the mailing address for the company and be the address of the company that is reachable by phone, fax, and email if the company has these, if any.

• The Legal Representative

As stated in the Law on Enterprises, the legal representative of a company is the person that acts on behalf of the company, performs its obligations, exercises its rights, and appears before a court with the relevant interests and duties to the company. Article 13 lists the responsibilities of a company’s legal representative.

Limited liability or Joint-stock companies may have more than one legal representative subject to the charter of the company. Every company however must have one representative who resides in Vietnam.

A legal representative of a company must assign the performance of these rights and obligations to another person in writing when they leave Vietnam. When this happens, the authorising person remains responsible for the assigned person’s performance of the representatives’ rights and obligations.

If the authorizing person has not returned to Vietnam at the time indicated on the written letter of authorization, the authorized person continues to perform the obligations/rights of the legal representative. If the company is a limited liability company the person will continue to perform the rights and obligations of the representative, until the that either the person returns to Vietnam, or the Board of Directors appoints another legal representative.

• Business Sectors

In Vietnam not every business sector is permitted for direct investment or entrance by foreigners. Negative lists are used, in which case it is presumed, and stated at Article 17 of the law on Investment that foreigners may invest in all sectors not listed in the various appendices below, or elsewhere in other laws, resolutions or other legal documents of Vietnam (according to Article 15).

Article 17(2) of the Law on Investment states that market areas listed in appendix 1A are totally prohibited markets for foreign investors. These sectors include Trade in goods currently under state monopoly, news medic, the harvesting of marine life, garbage collection and many others.

It is also stated in Article 17(3) that the list of sectors in Appendix 1B have restricted market access. As in Article 17, investors must fulfil the market conditions stipulated in Article 18 to be permitted to invest in these sectors. These market areas include manufacture of media products, tv broadcasting, advertising, printing, and publishing, fisheries, casinos, and many others.

Furthermore, Article 10 provides a list of sectors that are prohibited for all investors. These include Narcotic substances, banned chemicals and samples of banned plants.

• Capital Requirements

In Vietnam there are no general capital requirements for investors, it depends on the specific business sector. For example, to set up a travel and tour company in Vietnam, foreign investor should have a minimum capital is 250,000,000 VND. There is also a requirement in Article 33 for investors to submit the financial statements or have a guarantee from a branch of a foreign bank. This is in order to guarantee the execution of the investors project.

4. Direct Investment Procedures

Procedures related to direct investment detailed in the Law on Investment include the process for the approval and selection of investors found at Article 30, and the process for the establishment of business organizations by foreign investors and conduct thereof, found at Section 3 Chapter IV.

Chapter V of the Law on Investment contains details such as how foreign investors apply for an Investment Registration Certificate (at Article 37,38,39), how foreign investors amend the investment project (at Article 41), and how foreigner execute their investment projects (in Section 4 Chapter IV ).

5. Required documents for foreign Investors

Article 5 of the Law on Investment requires that all Investment documents be in Vietnamese with documents in foreign languages being enclosed with a Vietnamese translation. Documents which are required for foreign investors include an investment registration certificate (IRC) and the Enterprise Registration Certificate (ERC) for when foreign investors start a business in Vietnam.

• Investment Registration Certificate

According to Article 39 of the Law on Investment If the investment project does not require approval of its guidelines, the investor may apply for registration in writing either by physical application or applying online through the National Investment Information System. The online document will have the same validity as a physical format application.

• Enterprise Registration Certificate

The criteria for the issuance of enterprise registration certificates is outlined at Article 27 of the Law on Enterprise. A certificate while be issued if the sector is not banned for the registered business, the name of the enterprise is valid under the Law on Investment. Also, if the registration application is valid and providing that registration fees have been paid.

6. Visa for Foreign Employees or Investors

The regulations concerning visas for foreign Employees and Investors is found in Chapter 2 of the Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam.

As explained in Article 8 of the statute, foreign employees who enter Vietnam must apply for an LD visa, which is issued to people who come to work in Vietnam. The LD Visa lasts a maximum duration of 2 years, after which an application to renew may be made. (Article 9).

Foreigners who enter Vietnam for purposes associated with foreign investment are issued DT visas when they enter the country. The maximum duration of the DT visa is listed in Article 9 as 5 years, after which an application to renew may be made.

Article 10 covers the general conditions for visa issuance. These include that the applicant must have passport. The applicant must have applied for the visa through an overseas visa-issuing authority as detailed in Article 17. If not, they must be invited or sponsored to enter by an organisation or individual already in Vietnam.

The person must also not be suspended from entry due to factor listed in Article 21 for example providing forged or false documents in order to obtain an entry permit. Also made clear in Article 10, is that a foreigner who comes to Vietnam for the purpose of making an investment must have papers which prove that the investment follows the law of Investment in Vietnam.

7. Work Permits

According to Article 10 of the of the Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam, all foreigners who comes to work in Vietnam must have the relevant work permit, as permitted by the Vietnamese labour code.

8. Temporary Residence Cards

As defined in the Interpretation section of the Act in Article 3 a temporary residence card is a document distributed by an immigration or competent authority which permits a foreigner to reside in Vietnam for a set period of time. Also important is that a temporary residence card has the same validity as a visa, however Article 12 recognizes it as visa-free entry to Vietnam.

The process for obtaining a temporary residence card is listed at Article 37. An application requires a written request from the entity that has invited the person, a declaration bearing the persons picture and their passport.

Time of writing: 22/02/2024

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer  at  info@cdlaf.vn

You can refer for more information:

• Are Processes and Regulations really necessary for Enterprises?

• Q&A on Issues Concerning Tax and Accounting for Foreign Enterprises

• Conditions for Establishing a Travel Company in Vietnam for Foreign Investors
• Contracts for Ocean freight in Vietnam. The basic features of contracts for the Carriage of goods by sea in Vietnam, featuring the relevant sections of Vietnamese law.