4 February 2016
Vietnam overhauled its corporate and foreign investment legislation in 2015 as the new Enterprise Law and Investment Law became effective on 1 July 2015. These laws replaced the 2005 Enterprise Law and Investment Law. One of the key changes introduced by the new legislation is to separate foreign investment licenses, now called investment registration certificates (IRCs), from business registration certificates, now called enterprise registration certificates (ERCs). Projects undertaken by enterprises that are majority foreign owned (FIEs), or by foreign investors (who have not set up any legal presence in Vietnam), will require that the FIEs or the foreign investors obtain an IRC. The enterprise set up by foreign investors will also be issued an ERC, just like a domestic Vietnamese enterprise.
Under the 2005 laws, FIEs would have been issued an investment certificate that concurrently served as the business registration certificate. The logic for the change ushered in by the new laws is to separate basic corporate matters – recording corporate names, legal representatives, and basic registration details – from matters related to foreign investment – level of foreign ownership, investment capital, and the identity of the foreign investors. Going forward, all enterprises, whether entirely domestic or those with foreign investment, would be subject to the same procedures related to corporate law matters. To the extent that the information recorded in an IRC or ERC is changed, the relevant certificates need to be amended by the licensing authority.
Though this ties together for newly formed enterprises under the 2015 laws, one key question on which the new laws did not provide guidance is how an enterprise that has been issued an investment certificate under the 2005 laws should proceed to register changes to the investment certificate under the new laws?
Since July 2015, we have seen several situations in which FIEs operating under investment certificates under the 2005 laws would like to change the contents of those certificates –whether it be a change in shareholding, a change in name, opening new branches or representative offices, or changing the legal representative of the company. The current practice of the Ho Chi Minh City Department of Planning and Investment, as well as those of the neighbouring provinces of Dong Nai and Binh Duong, has been to require FIEs operating under investment certificates issued under the 2005 law to first obtain an ERC, before registering any corporate changes that under the new laws require amending the ERC or IRC. Once an ERC is issued, the ERC can then be amended as required under the new laws and the FIE can either retain the IC or obtain an IRC with the amended information. There is a certain logic to the regulators weaning FIEs off of their current investment certificates by requiring them to obtain ERCs when a previously registered item needs amendment.
While the practice of the licensing authorities will continue to evolve and become clearer over time under the new laws, the practical implications for enterprises operating under investment certificates issued under the 2005 laws is that they should consider applying for ERCs now as this may save time when they need to update the contents of the investment certificate or ERC down the road.