Article 170 of the Law on Enterprises 2005 (LoE), being amended by Article 3 of the Law Amending and Supplementing a Number of Articles of the Laws Concerning Capital Construction Investment 2009 (Article 170) governs the status of Foreign Investment Enterprises (FDIEs) established before the enforcement of the LoE on 01 July, 2006, under which such enterprises shall choose (i) to re-register their businesses under the new law before 01 July 2011, or (ii) not to re-register.
Enterprises that elect to re-register their business shall be treated with the full rights and obligations of FDIEs under the current LoE. FDIEs that choose not to re-register their business shall be limited from extending their line of business, project time and will be permitted to operate only within the permitted duration on their current Investment Certificate (IC).
The purpose of Article 170 was to provide a framework for existing FDIEs in response to the enforcement of the new LoE, urging FDIEs to re-register for better governance of the State, as well as for better assurance of their rights and obligations. However, as of December 2012, only 3,000 FDIEs (of total 6,000) had applied for re-registration. The remaining 3,000 FDIEs risk dissolution once the permitted operation period on their existing IC expires, and without the right to apply for an extention.
It is noted that although the choice to re-register is left up to the FDIEs, the decision to not re-register not only affects the FDIEs themselves, but also impacts upon foreign investment and therefore the national economy. Consequently, in order to safeguard FDIEs that have not yet re-registered, as well as to encourage continued foreign investment activities, the Government has provided amendments to Article 170.
By Law No. 37/2013/QH13, the National Assembly recently amended Article 170 (Amended LoE).
Under the Amended LoE, Article 170 still gives FDIEs the choice whether or not to re-register. Furthermore, the rights and obligations of FDIEs under these two options are more open and practical compared to the previous options. Under the option of re-registration, the time period for registering the application has been omitted, leaving FDIEs to decide upon a suitable time to register their enterprise for compliance with the current LoE. However, with respect to FDIEs whose time limit has expired but the dissolution process has not been completed and they want to continue their operations, such FDIEs must be registered before 01 February, 2014 under specific condition regulated by the Government. The option to not re-register has also been optimized by allowing FDIEs to continue their business operations under their existing Investment Certificate and company charter; while other activities falling outside of the current Investment Certificate will be executed under the regulations of the LoE. This means that application for amendments to their IC are still possible, provided that FDIEs are allowed to adjust ad add new business lines on the condition that these adjustments do not affect the existing duration of such FDIEs. If these adjustments impact on the existing duration of the FDIEs of FDIEs want to alter their duration, such FIDEs must be re-registered.
In general, the Amended LoE should provide an opportunity for FDIEs that have not re-registered aafter 01 July 2006 to decide how their enterprise will operate following the enforcement of the LoE coming into effect.
Please kindly reach Law No. 37/2013/QH13 for more details
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