LEGAL POSITION, COMPANY REGISTRATION AND LOCAL SUBSIDIARY
Vietnam joined the WTO in 2007, according to which and thanks to open policies from the government, more and more FDI enterprises are registered and operating in accordance with the Law on Investment and the Law on Enterprise.
According to Vietnam’s regulations, an enterprise must be an organization that is legally established, has its own name, has assets, and has the right to participate in transactions on its own behalf. FDI enterprises are economic organizations with foreign investment capital and are economic organizations with foreign investors as members or shareholders. Foreign investor means an individual with foreign nationality or an organization established under foreign laws that conducts business investment activities in Vietnam.
FDI enterprises are entitled that do business equally with domestic enterprises under a single system of business laws and regulations. However, according to international commitments, foreign investors and FDI enterprises must also comply with provisions from the WTO, specific procedures on conditions for market entry, procedures for investment project registration, capital contribution, capital withdrawal, independent audit, and profit withdrawal.
If an FDI enterprise has been established in Vietnam (F0) and there are more new investment projects, procedures for implementation of that investment project will not be necessary to establish a new FDI enterprise. However, FDI enterprises must meet the conditions and carry out investment procedures as prescribed for foreign investors when investing to establish other enterprises in Vietnam (subsidiaries); investment to contribute capital, purchase shares, purchase capital contributions of enterprise in Vietnam; investment in the form of BCC contract if such enterprises fall into one of the following cases:
- Foreign investors directly holding more than 50% of charter capital (F1, this is first-generation FDI, joint-venture company, owned by foreign investors and local investors);
- There are first-generation FDI (F1) companies in addition to holding more than 50% of charter capital (F2, this is second-generation FDI company, 50% owned by F1);
- Foreign investors and first-generation FDI (F1) companies hold more than 50% of charter capital.
VIETNAM GOVERNMENT‘S ASSURANCE ABOUT ENTERPRISES AND OWNERS OF ENTERPRISES
- The State recognizes the continued existence and development of types of business entities defined in the Enterprise Law; ensures the legal equality of enterprises regardless of their forms and economic sectors; and acknowledges the legitimate profitability of business.
- The State recognizes and protects the ownership of assets, capital, income, other lawful rights and interests of enterprises and owners of enterprises.
- Legitimate assets and capital of enterprises and enterprise owners shall not be nationalized and shall not be administratively confiscated.
- The State shall purchase or requisition enterprises’ assets for reasons of National defense and security, national interests, state of emergency, natural disaster response, and pay enterprises according to market prices at such times. The payment or compensation must ensure enterprises’ interests without discrimination between types of business entities.
- The investors are allowed to withdraw annual profit based on financial statements and withdraw the investment capital if no longer invest in Vietnam.
This assurance shall be very stable in long term thanks to expansion of relations and reform policies and Vietnam has been completely joining and developing strongly after joining the World Trade Organization (WTO) more than 10 years. Vietnam has already signed 12 bilateral and multilateral free trade agreements (FTA) and concluded negotiations on the EU-Vietnam Free Trade Agreement (EUFTA) and the Vietnam-Korea Free Trade Agreement (VKFTA), including new-generation pacts with high commitments such as the Trans-Pacific Partnership (TPP) Agreement. Vietnam is also forging ahead with negotiations on four other FTAs, including the Regional Comprehensive Economic Partnership (RCEP), which is expected to become a century FTA stipulating all trade activities of the whole ASEAN region. Such agreements are opening up opportunities for Vietnam to develop stronger and have free trade relations with 55 global partners, including those in G7 and 15 out of the G20 members.
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