By Lawyer Luu Thi Hue – UniLaw LLC

FDI Companies in Vietnam: Opportunities and Legal Landscape

Vietnam has emerged as one of the most dynamic investment destinations in Southeast Asia. For foreign investors, navigating the complex regulatory environment requires a deep understanding of the vietnam corporate law and the vietnam enterprise law. At Unilaw, we provide professional legal service in vietnam to help FDI Companies in Vietnam: Opportunities and Legal Landscape become a reality for global enterprises. To begin our analysis, let us look at a landmark real-world case that highlights the intricacies of international arbitration and the application of local laws.

Lessons from a Multi-Million Dollar Arbitration Recognition Dispute

The legal landscape for FDI companies is not just about registration; it is about how disputes are handled when things go wrong. A significant case handled by the High People’s Court in Ho Chi Minh City involves a dispute between Global Payment Service (GPS) and UTC Investment (the Plaintiffs) against VMG Media Joint Stock Company (the Defendant). The dispute arose from a “Modified and Restated Share Purchase Agreement” signed in July 2017. Under this agreement, the foreign investors purchased a substantial number of shares in a Vietnamese company named EPAY.

The parties had agreed in their contract that any disputes would be resolved through final and binding arbitration at the Singapore International Arbitration Centre (SIAC) according to SIAC Rules. Furthermore, they stipulated that the contract would be governed and interpreted in all aspects by the laws of Singapore. When a dispute arose regarding alleged misrepresentations during the sale, the foreign investors initiated arbitration. The SIAC Arbitral Tribunal issued an award (Award No. 186 of 2019) requiring VMG to pay significant damages and costs, totaling nearly 2 million USD.

The foreign investors subsequently petitioned the Vietnamese courts to recognize and enforce this SIAC award in Vietnam. However, the High People’s Court in Ho Chi Minh City, in Case No. 28/2023/KDTM-PT, made a definitive ruling. The court noted that while the parties agreed to Singaporean law, the dispute fundamentally concerned rights and obligations related to shares in a Vietnamese company operating within Vietnam. The Vietnamese court found that the Arbitral Tribunal failed to apply the relevant provisions of the vietnam corporate law (specifically the Civil Code 2015 and the Law on Commerce 2005) to a contract executed and performed in Vietnam.

Crucially, the court held that enforcing an award that disregarded the mandatory application of Vietnamese law for transactions involving domestic corporate rights would violate the fundamental principles of Vietnamese law under Article 459 of the Code of Civil Procedure. Consequently, the court refused to recognize and enforce the SIAC award. This case serves as a vital warning: even with a vietnam corporate lawyer and international arbitration clauses, the choice of law must be carefully aligned with the mandatory provisions of the vietnam enterprise law to ensure enforceability.

Understanding the Legal Foundation for Foreign Investors

The primary legislative framework governing FDI is the Law on Investment. As a vietnam corporate lawyer, it is essential to guide clients through the definitions and scope of this law. The latest updates, including the anticipated 2025 amendments, continue to refine how foreign capital enters the market.

Article 3, Clause 18 of the Law on Investment 2020 defines an investment project as follows:

“18. Investment project means a set of proposals to spend medium-term or long-term capital to carry out business investment activities in a specific area and for a determined period of time.”

In simple terms, this means that any investment you make must be clearly defined by its location, its purpose, and how long you plan to operate it. It is not just a general intention to do business; it must be a specific “project” registered with the state.

Furthermore, Article 3, Clause 33 defines the “Foreign Investor”:

“33. Foreign investor means an individual with foreign nationality or an organization established under foreign law that carries out business investment activities in Vietnam.”

This definition is the gateway to the entire FDI legal regime. If you fall into this category, you are entitled to specific protections but must also follow stricter procedures compared to domestic investors.

Market Access and Restricted Sectors for FDI Companies

The vietnam enterprise law and investment law provide a “Negative List” approach to market access. This means foreign investors can invest in any sector that is not explicitly prohibited.

Article 9, Clause 1 of the Law on Investment 2020 states:

“1. Foreign investors shall be applied market access conditions as prescribed for domestic investors, except for the cases specified in Clause 2 of this Article.”

This clause establishes the principle of “National Treatment,” meaning foreign investors should generally be treated the same as locals. However, Clause 2 introduces the “List of industries and trades with restricted market access for foreign investors”. This list includes sectors where foreign ownership is capped (e.g., 49% or 51%) or where investment is entirely prohibited for foreigners.

For example, in the telecommunications sector, the WTO commitments specify that for services with network infrastructure, foreign capital contribution in a joint venture shall not exceed 49%. For non-facilities-based services, the cap is 65%. Similarly, in the advertising sector, as of January 1, 2009, there is no longer a specific cap on foreign capital, but the investment must be in the form of a joint venture or business cooperation contract with a Vietnamese partner authorized to provide such services.

As a vietnam corporate lawyer, our legal service in vietnam involves checking your specific business activity against these lists. For instance, in the distribution sector, while most goods are open, certain items like tobacco, rice, and sugar remain restricted or subject to the “Economic Needs Test” (ENT) for the establishment of retail outlets beyond the first one.

Choosing the Right Corporate Form under Vietnam Company Law

When establishing an FDI company, the vietnam company law provides several options. The most common are the Limited Liability Company (LLC) and the Joint Stock Company (JSC).

Article 111 of the Law on Enterprise 2020 defines a Joint Stock Company:

“1. A joint-stock company is an enterprise in which: a) The charter capital is divided into equal parts called shares; b) Shareholders can be organizations or individuals; the minimum number of shareholders is 03 and there is no maximum limit; c) Shareholders are only responsible for the debts and other property obligations of the enterprise within the scope of the amount of capital contributed to the enterprise…”

A JSC is ideal for large-scale projects or companies planning to go public. However, many FDI investors prefer a 100% foreign-owned LLC because it offers simpler management structures. Article 22 of the Law on Investment 2020 governs the establishment of these economic organizations:

“1. Investors establish economic organizations according to the following regulations: … b) Foreign investors establishing economic organizations must meet market access conditions for foreign investors specified in Article 9 of this Law; c) Before establishing an economic organization, foreign investors must have an investment project and perform procedures for issuance and adjustment of the Investment Registration Certificate…”

This means that unlike a local person who can just register a business (ERC), you as a foreign investor must get an “Investment Registration Certificate” (IRC) first. This document proves the government has checked and approved your specific project plan.

Statutory Procedures: From IRC to ERC

Navigating the legal service in vietnam often starts with the dual licensing process. First, the investor obtains the IRC from the Investment Registration Authority (usually the Department of Planning and Investment – DPI or the Board of Management of Industrial Zones). Second, the investor applies for the Enterprise Registration Certificate (ERC).

Article 6 of Decree 31/2021/NĐ-CP emphasizes the investor’s responsibility during this process:

“a) Investors are responsible before the law for the legality, accuracy, and truthfulness of the contents of the dossiers and documents sent to competent state agencies.”

If you provide fake information or misleading documents to get your license, you are legally responsible for all damages. The government expects full transparency regarding your financial capacity and your business history.

A frequent challenge for investors is the valuation of assets used for capital contribution. Article 36 of the Law on Enterprise 2020 provides strict rules:

“2. Assets contributed as capital upon establishment of the enterprise must be valued by members and founding shareholders according to the principle of consensus or by a valuation organization… If the contributed capital assets are valued higher than their actual value at the time of contribution, the members and founding shareholders shall jointly contribute more…”

If you tell the government your machinery is worth 1 million USD to meet your capital requirement, but it is actually only worth 500,000 USD, you and your partners must pay the difference out of your own pockets. You can’t just “invent” value to satisfy the paperwork.

Foreign Ownership and Capital Transfers

The vietnam corporate law regulates how capital can be moved. For many FDI companies, internal restructuring involves transferring capital between parent companies. We see this in the case of Nidec Nissin Vietnam (a 100% Japanese-invested EPE), which transferred 60% of its charter capital from one Japanese entity to another.

Article 26, Clause 2 of the Law on Investment 2020 requires foreign investors to perform registration procedures for capital contribution or share purchase in specific cases:

“a) The capital contribution, share purchase, or purchase of contributed capital increases the ownership ratio of foreign investors in economic organizations business in industries and trades with conditional market access for foreign investors; b) The capital contribution… leads to foreign investors… holding more than 50% of the charter capital…”

Simply put: if your purchase makes a foreign group the “majority owner” (over 50%) or if the business is in a sensitive industry, you must get a special “M&A Approval” before you can officially change the names on the business license. It is not an automatic right; it is a permission-based process.

Disputes often arise when one member transfers capital without the consent of others. In Case No. 05/2023/KDTM-PT, a dispute involving Vi Nam Construction Trading Service Co., Ltd, the court found that a director had improperly used the company seal to acknowledge a personal debt as a company debt. The court emphasized that according to the company’s Charter, decisions must be approved by members representing at least 60% of the capital. This underscores the importance of having a clear Charter and a vietnam corporate lawyer to monitor compliance.

Land Use Rights for FDI Companies

A unique feature of the vietnam enterprise law landscape is that there is no private ownership of land; land belongs to the entire people and is managed by the State. However, FDI companies can have “Land Use Rights” (LURs).

Article 184 of the Land Law (cited in source materials) specifies the rights of foreign-invested economic organizations:

“228. Foreign-invested economic organizations that are leased land by the State with a one-time payment for the entire lease period… have the following rights and obligations: … b) To transfer land use rights and assets owned by them attached to the land during the land use term; c) To lease and sub-lease land use rights…”

This means if you pay the full lease amount for 50 years upfront, you have very strong rights—you can even sell those rights to someone else. But if you pay rent annually, your rights are much more limited, and you generally cannot sell the land rights, only the buildings you built on the land.

In our practice, we assisted a large FDI manufacturing client, a major Hong Kong investor in the Haiphong Economic Zone. They leased over 50,000 m2 of land to build a 60 million USD manufacturing facility. The legal service in vietnam provided by Unilaw included negotiating land lease agreements with the zone developer and ensuring the land rights were properly reflected in the IRC and the “Red Book” (LUR Certificate).

Investment Guarantees and Protection

To attract FDI, Vietnam offers robust guarantees. Article 10 of the Law on Investment 2020 is the gold standard for protection:

“1. Lawful assets of investors shall not be nationalized or confiscated by administrative measures. 2. In case the State compulsory purchases or requisitions assets for reasons of national defense, security… the investor shall be paid and compensated…”

The government is promising you: “We will not just take your factory away.” If they absolutely must take it for a road or a military base, they are legally required to pay you a fair price for it.

Another crucial guarantee for FDI companies is the right to transfer assets abroad. Article 12 of the Law on Investment 2020 states:

“After performing fully financial obligations to the State of Vietnam… foreign investors may transfer abroad the following assets: 1. Investment capital and investment liquidations; 2. Income from business investment activities; 3. Money and other assets under the lawful ownership of the investor.”

This means as long as you have paid your taxes, you are free to send your profits and your original capital back to your home country. You are not “trapped” in Vietnam.

Operational Compliance: Reporting and Auditing

Once an FDI company is operational, it enters a phase of “Post-Licensing Compliance.” Many investors underestimate the reporting burden under the vietnam company law.

Article 72 of the Law on Investment 2020 requires periodic reporting. For example, organizations must report quarterly and annually on the implementation of their investment projects. Failure to do so can result in penalties. In the case of Cleopatra Foods, Unilaw assisted with quarterly reports on the national investment information system and monthly reports to the State Bank of Vietnam regarding foreign loans.

Article 83 of Decree 31/2021/NĐ-CP outlines the consequences of non-compliance:

“349. Handling measures for cases where investors do not perform the reporting regime: a) The Ministry of Planning and Investment shall have a written reminder for the first violation; b) Administrative sanctions… c) Publicize violations on the National Investment Information System…”

If you ignore the reports, the government will first send you a warning letter. If you keep ignoring them, they will fine you and put your company’s name on a public “naughty list” website, which could hurt your reputation with banks and partners.

The Role of International Treaties and the WTO

Vietnam’s corporate law is significantly shaped by its international commitments. When local law and a treaty conflict, the treaty generally prevails.

Article 4, Clause 4 of the Law on Investment 2020 confirms this:

“4. For contracts in which at least one party is a foreign investor… the parties may agree in the contract on the application of foreign law or international investment customs if that agreement is not contrary to the provisions of Vietnamese law.”

As we saw in the opening case (Case 28/2023/KDTM-PT), the “not contrary to Vietnamese law” part is critical. You can use foreign law for technical commercial details, but you cannot use foreign law to bypass Vietnamese rules on how companies are governed or how shares are registered.

For Japanese investors, the Vietnam-Japan Economic Partnership Agreement (VJEPA) provides even more favorable conditions than the standard WTO rules. For instance, Unilaw advised a Japanese-invested distribution client and Text Year Vietnam on how VJEPA allows for a smoother path in the distribution and chemical sectors compared to the general regime.

Dispute Resolution: Litigation vs. Arbitration

The vietnam corporate law landscape provides several avenues for dispute resolution. Article 14 of the Law on Investment 2020 clarifies the options:

“1. Disputes related to business investment activities in Vietnam shall be resolved through negotiation and mediation. In case of failure to negotiate or mediate, the dispute shall be resolved at Arbitration or Court…”

For disputes involving at least one foreign party, the law allows for international arbitration. This is why many FDI companies choose the Singapore International Arbitration Centre (SIAC) or the Vietnam International Arbitration Centre (VIAC). However, as Case 28/2023/KDTM-PT proved, the vietnam corporate lawyer must ensure that the arbitral tribunal correctly applies Vietnamese mandatory laws to avoid a situation where the final award is unenforceable in Vietnam.

In another case, Case No. 01/2022/QĐST-KDTM, the Binh Duong court recognized and enforced an award from the International Cotton Association (ICA) in the UK because the procedural requirements and notification to the Vietnamese party were found to be legally sound. This shows that Vietnamese courts will enforce foreign awards if the proper legal procedures (such as legitimate service of process) are followed.

Conclusion: Seizing the Opportunities

FDI companies in Vietnam face a landscape of immense opportunity tempered by rigorous legal requirements. The transition toward the 2025 amendments to the vietnam enterprise law and investment law indicates a move toward higher transparency and responsibility for legal representatives.

To succeed, investors need more than just a business plan; they need a comprehensive legal service in vietnam. Whether it is navigating the 100% foreign ownership rules in manufacturing, setting up a representative office for market research, or handling complex M&A share purchases, the support of a seasoned vietnam corporate lawyer is indispensable.

At Unilaw, we are committed to helping you understand the vietnam company law and build a sustainable, compliant, and profitable presence in this thriving market. The legal landscape is evolving, but with the right guidance, the opportunities for FDI in Vietnam are limitless.

More on this subject is collected under Vietnam legal analysis.