Vietnam has seen a surge in foreign investment over the past few years. The Vietnamese government has been actively encouraging foreign investment in the country through various means including offering tax breaks and streamlining the investment process. However, there have been cases where the Government of Vietnam has revoked Investment Registration Certificates granted to foreign investors.
What is IRC?
The revocation of IRCs granted to foreign investors in Vietnam has occurred for various reasons. The most common reasons for revocation include violation of investment conditions, lack of financial capacity, and failure to submit financial statements on time.
One major case of revocation of an IRC in Vietnam involved Singapore-based firm, Banyan Tree Holdings. In October 2020, the Vietnamese government revoked Banyan Tree’s IRC because the company had failed to meet the minimum requirement for investment capital. Banyan Tree had initially applied for an IRC with a capital investment of 4.4 million but had only invested 700,000 in the project. The DPI revoked its IRC and ordered the company to liquidate their investment in Vietnam.
An Investment Registration Certificate (IRC) is a document that is required for foreign investors who want to invest in Vietnam. The IRC is issued by the Department of Planning and Investment (DPI) in Vietnam and is required for foreign investors to operate legally in the country.
The revocation of IRCs granted to foreign investors in Vietnam sends a strong message that the Vietnamese government is serious about holding foreign investors accountable for their investments and ensuring that they meet their obligations. It also shows that the Vietnamese government values compliance with its regulations and is willing to take action against companies that fail to comply.
Common cases of revocation
We will revoke the investment registration certificate granted to foreign investors in Vietnam in the following circumstances:
– The state management authority in charge of investment/the Prime Minister suspends the investment project, and the investor cannot remedy the conditions of suspension.
– The investor is denied permission to continue using the investment location and fails to complete the procedures for changing the investment location within six months from the date of denial.
– After 12 months from the date of suspension of the project, the investment registration authority is unable to contact the investor or their legal representative.
The investment project fails to use the land or delays in using the land, resulting in land recovery as per the provisions of the law on land.
– The investor fails to pay the deposit or obtain a bank guarantee as required by law for project execution security.
– The investment activities conducted by the investor are based on false civil transactions following the provisions of civil law.
– The investor is subject to a court judgment, decision, or arbitral award.
The authorities who possess the capability to revoke the investment registration certificate
The authority responsible for investment registration, as outlined in Section I, comprises the following entities:
For investment projects located within industrial parks, export processing zones, hi-tech zones, or economic zones, the IRC will be rescinded by the relevant management board, unless the investment registration authority has jurisdiction and the investor is executing the project.
Investment projects outside of industrial parks, export processing zones, hi-tech zones, or economic zones, the IRC will be rescinded by the Department of Planning and Investment, unless the investment registration authority has jurisdiction and the investor is executing the project.
With investment projects that meet the following criteria, the investment registration authority will rescind the IRC if the investor implements the project, plans to establish an executive office to execute the project, or is located in the investment registration authority’s jurisdiction:
+ The projects implemented across at least two provinces.
+ Investment projects executed both within and outside of industrial parks, export processing zones, hi-tech zones, or economic zones.
+ The relevant authority does not manage investment projects in industrial parks, export processing zones, hi-tech zones or economic zones where the management board has not been established yet.
Thus, the Investment Registration Authority shall decide to terminate the operation of the investment project and at the same time revoke the Investment Registration Certificate for the investment project granted the Investment Registration Certificate. The investment registration certificate shall cease to be effective from the effective date of the decision to terminate the operation of the investment project.
Certain actions you need to take after the revoke of IRC
After revoking the IRC, the enterprise must initiate the liquidation process of the investment project in the following manner:
– The asset liquidation law will require the investors to independently perform the liquidation of the investment project.
– The law related to land administration requires investors of government-allocated or leased land investment projects or those allowed to change land use, to dispose of land use rights and land-attached assets in compliance with the regulations.
If an economic organization that is undergoing liquidation of an investment project has dissolved or gone bankrupt, then the law on liquidation/bankruptcy for economic organizations will govern the liquidation process.
Conclusion
In conclusion, foreign investors wishing to invest in Vietnam must comply with all legal requirements associated with obtaining an investment registration certificate. Failure to comply with these requirements will result in revocation of the certificate and termination of the investment project. It is crucial for foreign investors to seek legal advice and conduct extensive research regarding investment regulations in Vietnam to avoid any issues that may arise during the investment process.
HMLF is always available to offer assistance in understanding the procedures with authorities.
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn Email: miller@hmlf.vn
