Investment forms of economic organizations with foreign invested capital

See now: What is a foreign-invested economic organization? Investment forms and investment conditions of foreign-invested economic organizations in Vietnam.

What is a foreign invested economic organization?

In Vietnam, companies, enterprises, cooperative unions, cooperatives and other business organizations are collectively referred to as economic organizations. So what is a foreign-invested economic organization?

Pursuant to Article 3 of the Investment Law 2020: an economic organization with foreign investment capital is an economic organization operating in Vietnam, whose members or shareholders are foreign investors. A foreign investor can be a foreign individual or an organization established under foreign law conducting business investment activities in the Vietnamese market.

Currently, the most common foreign-invested economic organizations are companies and enterprises with foreign investment capital, also known as FDI enterprises (FDI companies).

Investment forms of economic organizations with foreign invested capital

According to Article 21 of the Investment Law 2020, economic organizations with foreign investment capital are allowed to conduct 1 of the following 5 forms of investment in Vietnam:

• Establishment of new economic organizations: Establishment of foreign-invested enterprises;
• Capital contribution, share repurchase, capital contribution repurchase;
• Receive investment project transfer from other organizations and enterprises;
• Investment under BCC contract;
• Other forms of investment and types of economic organizations as prescribed by law.

>> See more: Investment forms under the Investment Law 2020 – Detailed regulations.

1. Investment in the form of establishing new economic organizations

Foreign-invested economic organizations establish new economic organizations in Vietnam according to the following provisions:

• When establishing a company or enterprise in Vietnam, an economic organization with foreign investment capital must satisfy the conditions on market access for foreign investors as prescribed;
• Must have an investment project, carry out procedures to apply for/adjust investment registration certificate before establishing a company or enterprise;
• An economic organization with foreign investment capital established in Vietnam that has been granted a business license, if it has a new investment project, can carry out procedures to implement that investment project without being required to establish a new economic organization.

>> See more: Documents and procedures for establishing a company with foreign investment capital.

2. Investment in the form of capital contribution, share repurchase, capital contribution repurchase

Foreign-invested economic organizations are allowed to contribute capital to other companies and enterprises in Vietnam in the following forms:

• Purchase of first-issued shares/additional shares issued by a joint stock company;
• Contribute capital to a limited liability company with 2 or more members, a partnership;
• Contributing capital to other economic organizations that do not fall into one of the two cases above.

Foreign-invested economic organizations are allowed to buy back shares and capital contributions of companies and enterprises in Vietnam in the following forms:

• Direct purchase of shares of a joint stock company or from shareholders;
• Repurchase part or all of the capital contribution of a member of a limited liability company with 2 or more members;
• Repurchase part or all of the capital contribution of a member contributing capital to a partnership;
• Repurchasing capital contributions of members of other economic organizations that do not fall into one of the three cases above.

>> See more: Procedures for transferring shares and capital contributions to foreigners.

3. Investment in the form of BCC contract

• BCC contracts signed between foreign investors or between Vietnamese investors and foreign investors carry out procedures to apply for investment certificates according to the provisions of Article 38 of the Investment Law;
• The parties to the BCC contract establish a coordination board and an executive office to implement the investment project.

Investment conditions of economic organizations with foreign invested capital

1. Conditions on charter capital ownership ratio

An economic organization with foreign invested capital is allowed to make investment in the form of establishing a new economic organization, investing under a BCC contract or investing in the form of contributing capital, buying back shares or capital contributions of another economic organization in Vietnam if it falls into one of the following three cases:

• Case 1: There is a foreign investor holding more than 50% of the charter capital or the majority of the general partners are foreign individuals for the economic organization being a general partnership;
• Case 2: There is an economic organization in case 1 holding more than 50% of charter capital;
• Case 3: There are foreign investors and economic organizations in case 1 holding more than 50% of charter capital.

In addition, depending on each industry, the foreign investor’s capital ownership ratio will also be regulated in legal documents related to those industries. For example, there is no limit on the foreign investor’s capital ownership ratio in the insurance sector, but for entertainment services, it is only allowed up to 49%. 

>> Learn more: Foreign investor ownership ratio.

2. Industry conditions, market access conditions

Investors that are economic organizations with foreign investment capital are subject to the same market access conditions as those for organizations and enterprises with 100% Vietnamese capital, except in cases of business registration in industries that have not yet had market access or industries with conditional market access.

Market access conditions for investors who are economic organizations with foreign investment capital are specified in the List of industries and occupations with restricted market access, including:

• Ratio of charter capital ownership of foreign investors in economic organizations;
• Investment form;
• Scope of operation;
• Investor capacity;
• Investment partners.
• Other conditions as prescribed by Vietnamese law and international treaties to which Vietnam is a member.

>> See details: List of industries and occupations with restricted market access for foreign investors.

3. Conditions on national defense and security and land use conditions

• Ensure national defense and security;
• Comply with the provisions of Vietnamese law on land use conditions in islands, communes, wards, towns in border areas, coastal towns; other areas affecting security and national defense, except for economic organizations approved to implement investment projects in economic zones, industrial parks, high-tech zones, and export processing zones established and operating in accordance with Government regulations.

Services for foreign invested organizations at fdiinvietnam.com

fdiinvietnam.com has over 16 years of experience providing legal consulting services and tax accounting services to Vietnamese enterprises and foreign-invested enterprises. With a team of experienced legal experts and a branch system covering the 3 regions of North – Central – South, fdiinvietnam.com is confident in providing investors with quality legal services at the most reasonable cost.

Legal services for foreign investors of fdiinvietnam.com include:

• Investment registration certificate application service;
• Services for establishing foreign invested companies;
• Service of establishing representative office of foreign invested company;
• Service of establishing a branch of a foreign-invested company 3,000,000 VND;
• Service of registering business location of foreign invested company;

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If you need advice on establishing a company, branch, representative office… for foreign investors in Vietnam, please contact fdiinvietnam.com via the hotline below for detailed advice.

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Some questions about economic organizations with foreign investment capital