Corporate inversion—where a Vietnamese company restructures to establish an offshore holding entity for the purpose of listing on a foreign stock exchange—has become an increasingly strategic move for accessing global capital. However, this process is subject to a complex regulatory framework in Vietnam, particularly under the Law on Investment and its implementing regulations. Below are the key legal and procedural issues that investors must navigate:
1. Offshore Investment Registration Certificate (OIRC)
Any direct offshore investment requires an OIRC issued by the Ministry of Planning and Investment (MPI). In practice, the application process can be lengthy and unpredictable, especially when the investment capital reaches or exceeds VND 20 billion, triggering the need for the State Bank of Vietnam (SBV)’s opinion and potentially In-Principle Approval (IPA) from higher authorities.
2. In-Principle Approval (IPA) Requirements
Certain offshore investment projects must obtain IPA from either the National Assembly or the Prime Minister, depending on their nature and scale:
The IPA process involves multiple layers of ministerial review and can significantly delay transaction timelines while introducing regulatory uncertainty.
3. OIRC Amendments Triggered by Share Transfers
Any change in offshore investment capital—including share transfers in the offshore holding company (HoldCo)—requires an amendment to the OIRC. This applies regardless of whether the offshore entity is listed or unlisted. Consequently, post-listing share transactions may still be subject to Vietnamese regulatory oversight, complicating the expected flexibility of offshore equity dealings.
4. Restrictions on Foreign-Invested Enterprises (FIEs)
FIEs (entities with over 50% foreign ownership) face stricter capital sourcing rules. Unlike local enterprises, FIEs must fund offshore investments solely from their equity capital, excluding amounts already allocated for domestic operations. Retained earnings from offshore projects cannot be reinvested directly but must first be repatriated to Vietnam, limiting reinvestment flexibility.
5. Share Swaps and Offshore Structuring
Vietnamese investors may use domestic shares, capital contributions, or investment projects to acquire equity in offshore entities. While this principle is generally accepted, using such assets to establish a new offshore company remains legally ambiguous and uncommon. The OIRC process for share swap structures is more complex and may raise additional legal and procedural hurdles.
6. Frequent OIRC Amendment Triggers
Under current regulations, even minor changes—such as project location, reinvestment of retained earnings, or adjustments to investment capital—can trigger the need to amend the OIRC. For projects requiring IPA, this may involve renewed approval from the National Assembly or Prime Minister. For others, MPI approval is required, often with input from SBV and other authorities, adding to the administrative burden.
7. Ongoing Reporting and Compliance Obligations
Investors must comply with extensive post-licensing requirements, including:
8. Profit Repatriation Requirements
Profits from offshore investments must be repatriated to Vietnam within six months of the host country’s tax finalization report, unless retained for reinvestment. Any delay must be pre-approved by MPI and SBV and must not exceed 18 months. Reinvestment of profits requires either an OIRC amendment or a new OIRC if applied to a new project.
Conclusion
While corporate inversion offers strategic advantages for overseas listing, Vietnamese investors must carefully assess the regulatory landscape. From OIRC procedures and IPA thresholds to capital sourcing and post-investment obligations, each step involves legal complexity and potential delays. Early planning and proactive legal structuring are essential to mitigate risks and ensure compliance.
