Vehicles for Foreign Investment in Vietnam: 100% FOEs & JVs
Sept. 11 – There are two main types of vehicles for foreign investment in Vietnam: 100 percent foreign-owned enterprises (100% FOEs) and joint ventures (JVs). In this article we will provide an introduction to these two types of vehicles for investment within Vietnam.
100 percent Foreign-owned Enterprises
A 100 percent foreign-owned enterprise is an independent legal entity owned and established by a foreign investor under the Laws on Enterprise and Laws on Investment of Vietnam. 100% FOEs can be established with 100 percent ownership by one or more foreign investors, under the form of either a limited liability company (LLC), joint-stock company (JSC) or a partnership.
An existing 100% FOE in Vietnam may cooperate with another 100% FOE and/or with foreign investor(s) to establish another new 100% FOE. A 100% FOE allows an investor to maintain independence and have management control over business operations, yet they assume full responsibility for its debt and liabilities.
A joint venture is an enterprise established in Vietnam on the basis of a joint venture contract signed by two or more parties for the purpose of conducting investment and business in Vietnam. One or more of the parties can be foreign entities.
A JV can be formed in a variety of combinations, though in all cases it is understood as an enterprise with foreign capital investment comprising less than 100 percent of the total investment capital. A joint venture contract may be entered into between:
- Vietnamese and a foreign party;
- Vietnamese party and a 100% FOE;
- JV and a foreign party;
- JV and a 100% FOE;
- Two or more JVs; or
- JV and a Vietnamese party.
As is also the case with a 100% FOE, a JV may be setup as a limited liability company, a joint stock company or a partnership. In a JV, profits and risks are distributed and shared between the parties in proportion to their respective capital contribution to the JV unless otherwise agreed to in the joint venture contract.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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