Author:

• Tran Phuong Nam – Lawyer
• Vo Nguyen Truc Linh – Legal Department

The entry into force of the Law on Investment 2025 on March 1, 2026, marks a significant turning point in the state management of Foreign Direct Investment (FDI) in Vietnam. For a long period under the framework of the Law on Investment 2020, the process for foreign investors to establish a commercial presence in Vietnam operated under a “parent-subsidiary” licensing mechanism. This required investors to first obtain an Investment Registration Certificate (IRC) for project approval before proceeding with the Enterprise Registration Certificate (ERC). While this mechanism ensured strict state control during the pre-licensing stage, it also created time lag for foreign capital entering the market. To address this bottleneck, the new legal framework under the Law on Investment 2025 and its draft guiding Decree have introduced a significant shift: allowing foreign investors to establish an economic organization first, and subsequently complete the legal investment procedures for the project. By reversing the sequence established by the 2020 Law, these new regulations are expected to resolve the hurdles of the previous process, facilitate FDI inflows, and bring Vietnam’s legal framework closer to international best practices.

1. The Nature of Establishing Economic Organizations under the New Model

Under the draft Decree guiding the Law on Investment 2025, the sequence for establishing an economic organization by foreign investors has been fundamentally restructured. Specifically, when investing through the establishment of an economic organization, foreign investors are entitled to incorporate under the Law on Enterprises or relevant specialized laws. The core change at this stage lies in the authority to control market entry conditions: the business registration authority (or the competent authority corresponding to the type of economic organization) will directly undertake the assessment and review of market access conditions for restricted sectors applicable to foreign investors. The standardization of dossiers, sequences, and procedures at this step will strictly comply with the Law on Enterprises, ensuring consistency and reducing the processing time for initial administrative procedures.

Only after the economic organization has been legally established and granted legal entity status may it proceed with the investment procedures for the project in accordance with investment laws. However, to prevent the creation of shell companies or the circumvention of investment regulations, the draft Decree establishes a strict time-bound barrier. Accordingly, within a maximum period of six months from the date of incorporation, the economic organization is required to complete the procedures for obtaining the Investment Registration Certificate (IRC) to implement the project in line with its registered business lines. This is a resolutory condition, should the investor fail to secure the Investment Registration Certificate within the aforementioned six-month period, the applicable sanction will be the mandatory dissolution of the economic organization under the regulations on enterprise registration.

2. The Separation of Charter Capital and Investment Capital

The flexibility of the new legal framework extends beyond licensing sequences to the capital management mechanism. Departing from the traditional approach of strictly linking or equating charter capital with total investment capital, the new regulations affirm that the charter capital of an economic organization established by foreign investors is not necessarily have to equal the investment capital of the project. This separation provides investors with an efficient capital structuring tool, allowing them to design flexible financial frameworks based on actual disbursement schedules and access to various fundraising channels. Consequently, the economic organization is held strictly accountable for complying with the capital contribution schedule and mobilizing other funding sources to execute the project, as recorded in the Investment Registration Certificate.

3. Impact Assessment and Compliance Recommendations

From a practical legal perspective, the transition to the “ERC-first, IRC-after” model is a significant highlight, enabling investors to quickly establish legal entity status and execute essential transactions (such as signing land lease agreements, recruiting key personnel, and opening bank accounts—at an earlier stage). However, the six-month window imposes substantial compliance pressure. For complex investment projects involving technology explanations, environmental impact assessments, or land-use planning hurdles, any delay in obtaining the Investment Registration Certificate beyond the deadline puts the enterprise at risk of mandatory dissolution.

Consequently, foreign investors must conduct comprehensive legal due diligence and feasibility assessments well before filing for the Enterprise Registration Certificate (ERC). Preparing both sets of dossiers (corporate and investment) in parallel is the optimal strategy to ensure a seamless transition from the incorporation stage to the project approval stage, thereby avoiding unnecessary financial and legal losses resulting from statutory deadline violations.

Time of writing: 13/03/2026

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