When the Law on Enterprises and Law on Investment took effect in July 2006, they stipulated that foreign-invested enterprises formed under the earlier Law on Foreign Investment had until June 30, 2008, to either re-register under the new laws, or continue operating in accordance with existing charter and investment licence.
Although un-reregistered enterprises would not be able to expand their lines of business or extend the duration of their operations under the investment licences, a large number of foreign-invested enterprises chose this option.
But, as the global economic downturn has slowed the pace of new foreign investment into Viet Nam, attention has been re-focused on existing foreign-invested enterprises as an avenue for attracting new investment. This gave rise to calls to extend the 2008 deadline for firms to re-register, allowing existing firms to expand their business lines in the meantime.
In response, the National Assembly has passed an amendment to the Law on Investment allowing foreign-invested enterprises until June 2011 to re-register.
But, until a firm re-registers, it is still not permitted to (i) expand its existing scope of business; (ii) extend its duration of operation; (iii) divide, consolidate or merge with another enterprise; or (iv) convert into a joint stock company to mobilize capital from securities markets.
Meanwhile, State administrative agencies, dispute resolution bodies, and the business community will all find themselves continuing to refer to a dual legal regime. Re-registration would help reduce confusion over legal standing of an enterprise and simplify dealings with authorities.
The disadvantages of operating under the old legal regime have already been manifested, so firms should take advantage of this new opportunity to take out a new lease on life by re-registering. Procedures for re-registration have become more familiar and streamlined, so time and cost involved in re-registering should be minimised. Meanwhile, Viet Nam’s WTO commitments make 2009 a milestone year in which many business sectors are opened up to foreign competition, giving existing foreign enterprises opportunities to expand their business lines. — VNS