FDI Entry Structures in Vietnam: FIE, Joint Venture, RO, Branch & BCC Compared

For most investors intending to establish and operate a business in Vietnam, incorporating a foreign-invested enterprise (FIE) is the principal entry structure. An FIE is generally established in the form of either a Limited Liability Company (LLC) or a Joint Stock Company (JSC). Both are separate legal entities and may, subject to applicable market access conditions, be a wholly foreign-owned company.

Under Vietnam's investment regime, the distinction between an FIE with 50% or less foreign ownership and one with more than 50% foreign ownership is particularly important for subsequent investment activities. An economic organization with more than 50% foreign ownership may be subject to market access conditions and investment procedures applicable to foreign investors when making further investments or conducting certain M&A transactions.

Limited Liability Company (LLC)

The LLC is one of the most common corporate structures for foreign investors in Vietnam. Key features include:

• Can generally be 100% foreign-owned in sectors open to full foreign ownership
• Provides relatively flexible internal governance and management arrangements
• Has a separate legal personality and limited liability for its members
• Does not issue shares and therefore is not designed for public share offerings
• Can be structured as a single-member LLC or a multi-member LLC

An LLC is particularly suitable for investors establishing a controlled operating subsidiary for activities such as manufacturing, trading, services, technology, consulting and other business operations. For investors who do not anticipate raising capital through the issuance of shares or having a large number of shareholders, an LLC is often the more straightforward corporate vehicle.

Joint Stock Company (JSC)

A JSC is another common vehicle for foreign investment in Vietnam and can also be 100% foreign-owned, provided that the relevant sector permits full foreign ownership. A JSC may be preferable where the investor intends to:

• Have a larger number of shareholders
• Raise capital through the issuance or transfer of shares
• Establish a more sophisticated shareholder structure
• Potentially pursue a public offering or stock market listing in the future

Compared with an LLC, a JSC has a more formal corporate governance structure involving shareholders and corporate management bodies, together with additional reporting and governance requirements.

A Joint Venture (JV) is a structure in which foreign and Vietnamese investors jointly establish and own an economic organization, typically in the form of an LLC or JSC. Importantly, a joint venture is not a separate type of legal entity under Vietnamese corporate law — rather, it describes the ownership and investment arrangement of an FIE.

A JV may be appropriate where:

• Vietnamese law imposes a foreign ownership cap or requires a Vietnamese investor or partner
• The relevant sector is subject to specific foreign market access conditions
• The foreign investor wishes to leverage a Vietnamese partner's local market knowledge, business relationships, distribution network or operational capabilities
• The Vietnamese partner can contribute assets, business licenses, land-use rights or other strategic resources permitted by law

Foreign ownership restrictions

The ownership ratio in a JV must comply with the applicable foreign market access conditions for foreign investors. Depending on the sector, Vietnamese law may regulate maximum foreign ownership, permitted forms of investment, permitted business activities, conditions relating to the capacity of the foreign investor, and other sector-specific requirements. For this reason, the proposed ownership structure should be reviewed against the applicable market access regulations before the parties finalize the transaction.

JV governance and shareholders' agreement

A JV also requires careful consideration of the relationship between the foreign and Vietnamese investors. In addition to the company's charter, investors should consider entering into a comprehensive Shareholders' Agreement or Members' Agreement covering matters such as:

• Management and decision-making authority
• Reserved matters and voting thresholds
• Appointment and removal of directors or managers
• Capital contribution obligations and additional funding / capital calls
• Deadlock resolution
• Transfer restrictions, right of first refusal (ROFR), tag-along and drag-along rights
• Exit mechanisms
• Non-compete, confidentiality and other investor protections

Historically, joint ventures played a much more prominent role in Vietnam's FDI market. Today, wholly foreign-owned structures are widely used in sectors where full foreign ownership is permitted. Nevertheless, JVs remain highly relevant in restricted sectors and strategic partnerships where a Vietnamese partner provides material commercial or regulatory advantages.

A Representative Office (RO) is a relatively simple market-entry structure for foreign traders that wish to establish a presence in Vietnam without directly conducting revenue-generating business activities. An RO is a dependent unit of the foreign parent company and does not have separate legal personality.

Its permitted activities generally include:

• Acting as a liaison office
• Conducting market research
• Promoting cooperation opportunities
• Monitoring and supporting the activities of the foreign parent in Vietnam
• Facilitating communication between the foreign parent and Vietnamese partners

An RO is not permitted to conduct independent revenue-generating business activities in Vietnam. In particular, an RO generally cannot:

• Directly conduct commercial business for profit
• Issue VAT invoices or collect revenue in Vietnam
• Enter into commercial contracts in its own name

However, the foreign parent may authorize the RO or its representative to perform certain acts on behalf of the parent where permitted by law. Such authorization does not transform the RO into an independent commercial entity.

When is an RO appropriate?

An RO can be useful where the foreign company wants to:

• Test the Vietnamese market
• Develop relationships with potential customers or business partners
• Conduct market research
• Coordinate activities with its Vietnamese counterparties
• Establish a relatively low-cost initial presence before committing to a full operating entity

However, if the investor's objective is to generate revenue and conduct commercial operations directly in Vietnam, an FIE is generally a more appropriate structure.

A Branch of a foreign trader is another form of presence available to foreign businesses in Vietnam, but its availability is significantly more restricted than that of an RO or FIE. A branch is a dependent unit of the foreign trader and does not constitute a separate legal entity — accordingly, the foreign parent remains ultimately responsible for the branch's obligations.

Unlike an RO, a branch may be permitted to conduct certain commercial activities within the scope of its establishment license. However, the establishment of a branch is only permitted in sectors and circumstances specifically allowed under Vietnamese law and applicable international commitments. Depending on the sector, examples may include certain:

• Trading and distribution activities
• Logistics services
• Banking activities through branches of foreign banks
• Legal services through branches of foreign law firms

The establishment and operation of a branch may also require approval or licensing from the relevant sector-specific regulatory authority, in addition to registration requirements. Therefore, a branch should not be viewed as a general alternative to establishing an FIE — its feasibility must be assessed on a sector-by-sector basis.

A Business Cooperation Contract (BCC) is a contractual investment structure under which investors cooperate in conducting business and sharing profits, products or other economic benefits without establishing a new economic organization. Under Vietnam's investment legislation, a BCC is a contract entered into between investors for business cooperation and profit or product sharing without establishing an economic organization.

A BCC may therefore provide foreign investors with a way to participate in a Vietnamese business project without establishing a separate subsidiary. BCCs may be particularly relevant to projects in areas such as:

• Infrastructure
• Energy
• Oil and gas
• Telecommunications
• Other large-scale or project-based investments

Key characteristics of a BCC

Unlike an FIE or JV:

• No new legal entity is established solely as a result of the BCC
• The parties' rights and obligations are primarily determined by the contractual arrangement
• Profit, revenue, products, costs and responsibilities are allocated according to the BCC
• The parties may establish a coordination committee or similar mechanism to manage and coordinate the implementation of the project

Where a BCC involves a foreign investor, the applicable investment registration procedures must be considered, including the requirement to obtain an Investment Registration Certificate (IRC) where prescribed by the Investment Law.

A BCC can therefore be attractive where the parties want to combine their resources and expertise for a specific project while avoiding the establishment of a new corporate vehicle. However, because the parties rely heavily on the contractual framework, the BCC should be carefully drafted to address governance, funding, profit allocation, liability, decision-making, deadlock, termination and exit arrangements.

Key consideration	Structure(s) to consider
Full control over a Vietnamese operating business	100% foreign-owned LLC / JSC
Simple and flexible corporate governance	LLC
Multiple shareholders or future share-based fundraising	JSC
Foreign ownership restrictions or need for a Vietnamese partner	Joint Venture
Market research and business development without revenue generation	Representative Office
Specific sectors where branch establishment is permitted	Branch of a Foreign Trader
Project-based cooperation without establishing a new entity	BCC

The investment structure options should ultimately be selected after reviewing the investor's business activities, applicable foreign market access conditions, proposed ownership ratio, investment capital, licensing requirements, governance objectives and long-term exit strategy.

For foreign investors, choosing the correct entry structure at the beginning can significantly reduce regulatory friction and avoid unnecessary restructuring when the business expands, raises capital or undertakes future M&A transactions.