Comprehensive legal solution for foreign invested capital companies

Comprehensive legal solutions for foreign invested capital companies may face licensing delays, tax arrears, or loss of control if their investment structure, capital, land, and contracts are not assessed comprehensively. Legally, a “foreign-invested economic organization” is an economic organization with foreign investors as members or shareholders, according to Clause 22, Article 3 of the 2025 Law on Investment. Therefore, businesses need to manage risks ranging from market access conditions to trade disputes. The protection strategy must be designed as an inter-sectoral compliance system Long Phan Consulting Company.

Reviewing market access and licensing conditions for foreign-owned companies in Vietnam

The first risk for foreign-owned companies in Vietnam lies not in their documentation, but in their ability to gain market entry. If the industry, ownership structure, or investment model is unsuitable, the investor may be denied a license or required to restructure the transaction.

Before signing any contract for capital contribution, share purchase, or establishment of a legal entity, investors need to simultaneously review the following mandatory conditions:

• Restricted market access sectors: it is necessary to examine prohibited sectors, conditional sectors, and permitted business scopes; these conditions include the percentage of charter capital ownership, investment forms, scope of operation, and capacity of participating partners, as stipulated in Clause 3, Article 8 of the 2025 Investment Law.
• Project operation conditions: economic organizations with foreign investment capital must comply with the conditions regarding land use, labor, and natural resources when implementing projects in Vietnam, according to Clause 3, Article 15 of Decree No. 96/2026/ND-CP.
• Authority and licensing stages: large-scale projects, those impacting national security and defense, or those involving specific land use may require prior investment approval before implementation, according to Article 24 of the 2025 Investment Law.

This review helps management identify legal bottlenecks early on, avoiding investment in structures that cannot operate or scale after licensing.

Identify industry-specific barriers and maximum ownership ratios

Foreign investors can own 100% of the capital in a limited liability company in Vietnam if the business sector is not restricted and meets the market access requirements. Otherwise, the business must design an appropriate ownership ratio, Vietnamese partner, or scope of operation before submitting the application.

To minimize the risk of transactions being blocked after signing, the due diligence process should be carried out in the following order:

1. Identify the actual business activities of the target company or planned project, rather than relying solely on the general industry code.
2. Compare the market access conditions for foreign investors, including equity ownership ratio, investment form, scope of operation, and partner capacity, as stipulated in Clause 3, Article 8 of the 2025 Investment Law.
3. Checking the control threshold above 50% of charter capital. Economic organizations with foreign investment holding more than 50% of charter capital must follow the same investment procedures as foreign investors when contributing capital or establishing new projects, according to Clause 1, Article 20 of the 2025 Investment Law.
4. Assessing transitional provisions for existing transactions. Capital contribution or share purchase transactions conducted before the new law came into effect are not subject to retroactive market access conditions, according to Clause 1, Article 104 of Decree No. 96/2026/ND-CP.

When businesses adjust projects, add new business lines, or conduct new M&A activities, existing conditions must be reviewed. This is a crucial control point to protect the legality of foreign capital flows.

Management of Investment Registration Certificates (IRCs) and Specialized Business Licenses

IRC, ERC, and specialized licenses are not the same type of document. Risks arise when FDI companies expand their business activities, change locations, or implement project objectives that were not recorded in the licensing documents.

Businesses operating under an Investment License or Investment Certificate that also serves as a Business Registration Certificate may continue to operate according to the content already granted. This regulation ensures legal continuity, as stipulated in Clause 1, Article 119 of Decree No. 168/2025/ND-CP.

However, when adjusting projects, changing business lines, or expanding operations, businesses need to update their corresponding certification systems. Falsified declarations can lead to the risk of having their Business Registration Certificate revoked, according to Clause 1, Article 212 of the 2020 Enterprise Law.

Designing Robust Legal Structures and Internal Governance Mechanisms

The legal structure of a Foreign-Invested Enterprise in Vietnam directly dictates capital control, veto rights, and the ability to protect investors during internal conflicts. Risk management must extend beyond simple ownership percentages to include the strategic allocation of power within the Charter, Shareholders’ Agreements (SHA), and governance regulations.

The Shareholders’ Agreement and Corporate Charter must address the following core control groups:

• Voting and Veto Mechanisms: Foreign investors should secure “lock-in” provisions for critical decisions, including capital increases, intra-group loans, major asset disposals, or shifts in business sectors.
• Appointment Rights: Parent companies or strategic shareholders should maintain control over key positions, such as the General Director, Chief Financial Officer, or Legal Representative, proportionate to their investment.
• Related Party Transactions: Corporate groups must establish independent approval mechanisms to mitigate conflicts of interest and prevent the unauthorized diversion of assets.
• Cross-Investment Restrictions: Within specific corporate groups, subsidiaries with the same parent company where the state owns at least 65% of the capital are prohibited from jointly contributing capital to or purchasing shares of other enterprises, pursuant to Clause 3, Article 195 of the 2020 Law on Enterprises.

Failure to design these structures during the initial capital contribution phase can result in foreign shareholders holding significant capital while losing operational control. This risk frequently manifests in joint ventures, post-M&A target companies, and distribution structures within Vietnam.

Selecting Economic Organization Types and Allocating Voting Rights

Limited Liability Companies (LLCs) are generally suited for tight control structures with a limited number of members and internal restrictions on capital transfers. Conversely, Joint Stock Companies (JSCs) offer greater flexibility for fundraising, share transfers, and the design of diverse shareholder classes.

From an investor protection perspective, the choice of entity should not be based solely on incorporation costs. Enterprises must evaluate the capacity for voting control, personnel appointments, capital transfers, and exit mechanisms.

A secure structure must link economic rights with governance rights. Profits may only be distributed after the enterprise has fulfilled all tax and financial obligations and ensures the ability to pay all due debts, as stipulated in Article 69 of the 2020 Law on Enterprises. Therefore, profit distribution clauses should be coupled with rigorous approval processes for financial statements, auditing, tax compliance, and reserve thresholds. This approach prevents the risk of accounting profits failing to translate into legally repatriated cash flows.

Capital Contribution Obligations and Notification of Foreign Shareholder Changes

Capital contribution is the primary control point following the incorporation of a Foreign-Invested Enterprise in Vietnam. Failure to meet payment deadlines can jeopardize the ownership structure, voting rights, and the enterprise’s regulatory standing.

The protocol for managing contribution obligations and updating foreign shareholder data should be executed as follows:

1. Establish the Contribution Timeline: Members of a Limited Liability Company must fully pay their committed capital within 90 days from the date the Enterprise Registration Certificate is issued, pursuant to Clause 2, Article 47 of the 2020 Law on Enterprises.
2. Execute Payments via Valid Accounts: The payment for purchasing, selling, or transferring shares and capital contributions, as well as the repatriation of profits, must be conducted through authorized bank accounts, except in cases of payment by assets or other non-cash forms, according to Clause 5, Article 35 of the 2020 Law on Enterprises.
3. Update Foreign Shareholder Records: The enterprise must notify the relevant authorities of changes to foreign shareholders registered in the shareholder register within 10 days of the change, as stipulated in Clause 3, Article 31 of the 2020 Law on Enterprises.
4. Synchronize Business Registration Data: Enterprises are required to notify the business registration authority regarding changes in foreign shareholders to ensure the National Business Registration Database is updated, pursuant to Clause 1, Article 51 of Decree No. 168/2025/ND-CP.

Monitoring capital contributions is more than a mere administrative formality; it serves as the legal foundation for proving ownership, the right to receive dividends, and the authority of foreign investors to manage the enterprise.

Managing Tax Risks, Transfer Pricing, and Related Party Obligations

Tax risks for a Foreign-Invested Enterprise in Vietnam frequently stem from intra-group cash flows. Inter-company loans, management fees, royalties, or internal service charges may be subject to adjustment by authorities if they do not reflect the arm’s length principle.

The legal focus must be placed on related party transactions, beyond the mere threat of transfer pricing allegations. Pursuant to Clause 18, Article 4 of the 2025 Law on Tax Administration, “Related party transactions” refer to transactions arising between parties that maintain a related relationship.

Enterprises engaging in transactions with a parent company or affiliated parties must determine tax obligations based on the arm’s length principle. This mechanism is designed to prevent the shifting of profits out of Vietnam through inappropriate pricing, fees, or interest rates, according to Clause 1, Article 3 of Decree No. 132/2020/ND-CP.

Establishing Internal Pricing Policies and Controlling Foreign Loan Interest Expenses

Internal pricing policies must demonstrate the commercial justification for every intra-group fee. If internal service contracts lack evidence of performance, the associated costs may be disqualified for tax deduction purposes.

Enterprises must simultaneously control interest expenses and the specific purposes of foreign loans. The deductible interest expense in related party transactions is capped for Corporate Income Tax (CIT) purposes, as stipulated in Point a, Clause 3, Article 16 of Decree No. 132/2020/ND-CP.

Regarding foreign loans, a Foreign-Invested Enterprise in Vietnam may only utilize capital to implement investment projects, production and business plans, or debt restructuring, pursuant to Clause 2, Article 17 of Circular No. 08/2023/TT-NHNN. The total outstanding medium and long-term debt serving the project must not exceed the difference between the total investment capital and the contributed capital recorded on the licenses, according to Point b, Clause 1, Article 18 of Circular No. 08/2023/TT-NHNN.

Transfer Pricing Documentation Standards and Penalties

Transfer pricing documentation should not be prepared only after a tax audit decision has been issued. To protect the reasonableness of internal prices, fees, and interest rates, a Foreign-Invested Enterprise in Vietnam must establish its documentation prior to any tax inspection cycle.

The documentation must be organized according to the following three-tier structure:

• Local File: Detailed disclosure of business operations in Vietnam, including functions, assets, risks, and the selected transfer pricing methodology.
• Master File: A comprehensive description of the global group structure, value chain, intangible assets, financial policies, and profit allocation.
• Country-by-Country Report (CBCR): Data regarding the allocation of revenue, profit, taxes, and economic activities across the different jurisdictions where the group operates.

Enterprises are required to prepare and maintain these files to provide them upon request by the tax authorities, pursuant to Clause 4, Article 18 of Decree No. 132/2020/ND-CP. The submission deadline is no more than 30 working days, with a one-time extension of up to 15 working days granted for justifiable reasons, as per Clause 7, Article 18 of Decree No. 132/2020/ND-CP.

Enterprises may be exempt from preparing this documentation if their annual revenue is below 200 billion VND and they achieve a minimum net profit margin of 5% for distribution, 10% for manufacturing, or 15% for toll manufacturing. These conditions are specified in Point c, Clause 2, Article 19 of Decree No. 132/2020/ND-CP.

Failure to maintain compliant records from the outset may lead to tax reassessments, the disqualification of deductible expenses, and prolonged disputes with tax authorities – posing a direct financial risk to profits intended for repatriation to the parent company.

Protecting Assets, Land, and International Commercial Contracts

The production assets of a Foreign-Invested Enterprise in Vietnam typically reside within three risk layers: land-use rights, manufacturing facilities, and supply chain contracts. A legal failure in any single layer can disrupt operational plans, financing, and export capabilities.

A comprehensive protection strategy must commence prior to signing land leases, factory rentals, or OEM and logistics agreements. Investors must maintain control over property rights, project timelines, environmental obligations, fire safety (PCCC), and contract breach resolution mechanisms.

Due Diligence of Industrial Park Land Leases and Project Progress

For manufacturing projects, a sub-lease agreement for land or a factory within an industrial park is more than a simple property transaction; it is the legal basis for installing production lines, obtaining operational permits, securing assets, and maintaining a business location.

Foreign-invested economic organizations that lease land from the State with a one-time lump-sum payment for the entire lease term have the right to transfer land-use rights, sub-lease the land, and mortgage assets attached to the land at credit institutions authorized to operate in Vietnam, pursuant to Clause 3, Article 41 of the 2024 Law on Land. Furthermore, when operating within industrial parks or clusters, enterprises may sub-lease land with existing infrastructure from the developer to construct factories, a right recognized under Clause 2, Article 43 of the 2024 Law on Land.

The most significant risk is the progress of land use. The State may recover land if a project fails to put the land into use for 12 consecutive months or is 24 months behind the land-use schedule specified in the investment project, according to Clause 8, Article 81 of the 2024 Law on Land.

For existing projects, land-use rights must be reviewed under transitional provisions. Foreign-invested economic organizations that were allocated land with land-use fees prior to the effective date of the new law may continue to use the land for the remainder of the term, pursuant to Clause 2, Article 255 of the 2024 Law on Land. For transactions involving the transfer of real estate projects with incomplete land procedures, state agencies will continue procedures to allocate or lease land to the transferee, as regulated in Clause 16, Article 255 of the 2024 Law on Land.

Supply Chain Risk Management and Dispute Resolution Mechanisms

Supply, distribution, agency, OEM, and logistics contracts should be designed as operational risk control tools. Provisions regarding payment, quality, confidentiality, intellectual property, force majeure, and compensation must be sufficiently clear for enforcement.

Enterprises must also avoid clauses that could be construed as anti-competitive. Agreements to fix prices, share customers, or abuse a dominant market position to impose unfavorable conditions are strictly controlled, pursuant to Articles 11 and 27 of the 2018 Law on Competition. In M&A transactions or supply chain restructures, enterprises must evaluate economic concentration notification obligations. Transactions reaching thresholds in assets, revenue, transaction value, or combined market share must be notified to the National Competition Commission before execution, according to Clause 1, Article 33 of the 2018 Law on Competition and Clause 1, Article 13 of Decree No. 35/2020/ND-CP.

The maximum fine for anti-competitive agreements or abuse of a dominant position can reach 10% of the total revenue in the relevant market for the preceding financial year, pursuant to Clause 1, Article 111 of the 2018 Law on Competition.

When entering contracts with foreign elements, enterprises should select a dispute resolution mechanism within the contract terms. For contracts where at least one party is a foreign investor or a Foreign-Invested Enterprise in Vietnam, the parties may agree to apply foreign law or international investment practices if they do not contravene Vietnamese law, as per Clause 6, Article 4 of the 2025 Law on Investment.

Commercial arbitration is often preferred for its confidentiality, expertise, and the clarity of award enforcement. Selection criteria should be based on:

• Confidentiality: Essential for OEM contracts, technology transfers, customer data, and intellectual property.
• Need for Rapid Commercial Evidence Processing: The Provincial People’s Court where the Arbitration Council issues a decision or where evidence is located has the authority to support arbitration-related matters, pursuant to Clause 3, Article 7 of the 2010 Law on Commercial Arbitration.
• Enforceability of Awards: The provincial civil judgment enforcement agency where the Arbitration Council renders an award has the authority to enforce it, according to Clause 1, Article 8 of the 2010 Law on Commercial Arbitration.
• Record Management: Arbitration dossiers must be archived for 05 years from the date the award or decision to terminate the dispute is issued, pursuant to Clause 2, Article 64 of the 2010 Law on Commercial Arbitration.

For investment-related disputes with Vietnamese state agencies, foreign investors may choose Vietnamese Arbitration or Vietnamese Courts under Clause 4, Article 13 of the 2025 Law on Investment. Dispute resolution clauses must therefore be designed proactively before any breach occurs.

Legal risk management and structuring consulting services at Long Phan Consulting Company

Foreign direct investment (FDI) companies need a comprehensive legal system that operates in a coordinated manner, not just handling individual licenses. Long Phan Consulting focuses its services on protecting capital, controlling compliance, and preventing disputes for foreign investors in Vietnam.

• Pre-investment legal due diligence: reviewing the target company’s market access conditions, equity ownership ratios, existing licenses, assets, contracts, labor, and tax obligations.
• Designing transaction structures: advising on options for establishing new companies, contributing capital, acquiring shares, forming joint ventures, or restructuring FDI companies according to the investor’s control objectives.
• Managing IRC, ERC, and specialized licenses: preparing applications for new licenses, project adjustments, changes in business lines, capital increases, changes in location, and updating foreign investor information.
• Establish internal governance mechanisms: draft the Articles of Association, Shareholder Agreement, voting regulations, veto mechanism, authority to appoint managers, and control of transactions with related parties.
• Tax and related-party transaction control: review of intercompany loan agreements, royalties, management fees, internal pricing policies, and related-party transaction pricing documentation.
• Contract and dispute protection: assessing OEM contracts, logistics, distribution, land leases, and factory leases; representing clients in negotiations, debt collection, and dispute resolution in court or commercial arbitration.

Clients can submit project files, contracts, or documents via email:info@longphanpmt.com Or contact us via Zalo: 0906.735.386 for a preliminary legal assessment.

Frequently Asked Questions about Comprehensive Legal Strategy Guidance for Protecting Foreign-Owned Companies in Vietnam:

Compliance management for foreign-owned companies in Vietnam requires management to closely monitor risks arising during actual operations. A lack of synchronization between ownership structure, related-party transactions, and land use regulations can lead to serious consequences such as license revocation or penalties for commercial violations. Thoroughly resolving complex legal situations will help investors protect their capital and maintain project continuity.

Conclusion

Foreign-invested companies in Vietnam are only sustainably protected when “economic organizations with foreign investment” are simultaneously controlled at multiple levels: market access conditions, capital structure, IRC/ERC, taxation, related party transactions, land, contracts, and disputes. A deviation in any control point can lead to licensing delays, tax arrears, loss of management rights, or reduced capital recovery. To establish a secure legal structure before investing, M&A, or expanding operations in Vietnam, your company should contact our Hotline 1900636389 To receive strategic support from  Long Phan Consulting Company.