What Foreign Investors Should Consider in Making Investment in Conditional Areas?

In the context of integration and globalization, the number of foreign investors whom wish to make investment and establish business in Vietnam has increased due to the attractiveness of the growing middle class population, availability of skilled resources, and Vietnam openness policies. To register a business in Vietnam, however, foreign investors must meet the requirements of Vietnam and international treaties to which Vietnam is a party.

Firstly, the field in which foreign investors wish to conduct business must not be on the list of industries that have been denied entry to the market for foreign investors or are prohibited from doing so under the Law on Investment.

Secondly, foreign investors may be restricted to the percentage of charter capital ownership in some economic organizations. For example, foreign investors ownership could only be up to 30% of charter capital of a commercial bank in Vietnam. Limiting the amount of charter capital is indirectly restricting the management and control rights of investors. Instead of freely making policies or decisions, foreign investors have to depend on other members of the company, namely domestic investors. The investors are suggested to consult with corporate lawyers in Vietnam or banking and finance lawyers in Vietnam for specific details in the specialized area like banking or finance.

Thirdly, foreign investors must consider the type of firm they want to register. A foreign insurance enterprise, for example, may operate in Vietnam as an insurance limited liability company or as a branch of a foreign non-life insurance enterprise. If the investor registers the establishment of an enterprise that is not under Vietnam law and the international treaties that Vietnam has signed, the application for registration is considered invalid. In addition, each type will also have certain limitations. For example, setting up a joint stock company might not be suitable for all investors. In the governance of a joint stock company, the decision-making process is complicated and time-consuming with different sequences and procedures.

Finally, the Vietnam law also have requirements on the legal status, financial status, and competence of investors in certain professions. To establish a company in Vietnam, foreign investors must meet all the prescribed conditions.

In conclusion, the foreign investors would need to undertake the legal research into the business it wish to register in Vietnam, and make strategic decision considering the legal and business requirements to maximize the benefits Vietnam would bring.

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