Foreign investors may incorporate a company first and apply for an investment project later from 01 March 2026?

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Foreign Direct Investment (FDI) inflows consistently serve as one of the core drivers promoting Vietnam’s economic growth. As of cumulative figures recorded on March 31, 2026, the country has 46,198 valid foreign investment projects with a total registered capital of over 542 billion USD. The cumulative realized capital of foreign investment projects reached 355.652 billion USD[1] . Aiming for the strategic goal of making Vietnam a high-middle-income country by 2030 and a high-income country by 2045, the Government is decisively pushing institutional reform programs to create a transparent and competitive business environment that approaches international practices.

The enactment of the Law on Investment No. 143/2025/QH15 on December 11, 2025, effective from 01 March 2026, (Law on Investment 2025) is considered a turning point for the investment environment in Vietnam. This is not merely a refinement of administrative procedures, but also represents a shift in the principles of state management of investment: moving from a "pre-check" to "post-check" with regard to licensing procedures for FDIs.

The highlight attracting interest from the international investors and legal experts is the mechanism whereby “foreign investors may establish economic organizations to implement investment projects before performing procedures for the issuance or adjustment of the Investment Registration Certificate” as stipulated in Clause 2, Article 19 of the Law on Investment 2025. Accordingly, current investment law allows foreign investors to be issued with an Enterprise Registration Certificate (ERC) before an Investment Registration Certificate (IRC), provided that they satisfy the market access conditions applicable to foreign investors.

This mechanism is a complete reversal of the previous process (which required having an IRC before applying for an ERC), which had been rooted in the investment legal system for  decades under the Laws on Investment of 2005, 2014, and 2020. Allowing the incorporation of a business entity first helps foreign investors quickly secure a commercial presence in Vietnam, thereby thoroughly resolving practical barriers in the pre-investment stage, such as signing lease contracts for the investment premises, recruiting key personnel, or opening bank accounts under the name of the new legal entity instead of using the name of the overseas parent company.

However, any flexibility in the legal framework also come with certain challenges and compliance risks for both regulatory authorities and the foreign investors.

This article aim to comprehensively analyze the nature of the "ERC first - IRC later" mechanism under the lens of the Law on Investment 2025 and its guiding documents. Accordingly the article assesses the two-way impacts on foreign investors, identifies bottlenecks and potential legal conflict gaps, and provides strategic recommendations.

A. THE “ERC FIRST - IRC LATER” MECHANISM

1. From traditional licensing to autonomy

Traditionally, from the Law on Investment 2005, 2014 to the Law on Investment 2020, the licensing procedure has been consistent with the "IRC first – ERC later" principle for foreign investors wishing to establish a commercial presence in Vietnam. According to this traditional model, before establishing an economic organization, foreign investors were mandatory required to have an investment project and complete the procedures to apply for an IRC. This mechanism bears “pre-check” nature, whereby state management agencies shall comprehensively appraise aspects of the potential investment project (from objectives, scale, location, and technology to financial capacity) before allowing the investor to give birth to a legal entity in Vietnam.

However, with the enactment of Law on Investment 2025, the philosophy of state management with regard to FDI inflows has shifted from process control to efficiency promotion. This highlight is recorded in Clause 2, Article 19 of the Law on Investment 2025: “Foreign investors may establish economic organizations to implement investment projects before performing procedures for the issuance or adjustment of an Investment Registration Certificate and must satisfy market access conditions for foreign investors as prescribed in Article 8 of this Law when performing procedures to establish the economic organization”.

This change grants investors the right of self-determination, allowing them to freely choose between following the traditional roadmap (IRC first – ERC later) or the new roadmap (ERC first – IRC later) depending on the business strategy and nature of the project. By allowing the ERC application first, investors can quickly set up a legal entity with an enterprise code, making a company seal to officially perform essential transactions to prepare for the upcoming investment project, thereby bringing Vietnam's investment environment closer to international practices on capital flow liberalization.

2. Conditions and limitations under Decree 96/2026/NĐ-CP

 Although permitting an unprecedented flexible space, the “ERC first – IRC later” mechanism does not mean a relaxation of national security and economic order standards. Decree No. 96/2026/ND-CP of the Government providing guidelines for implementation of certain articles of the law on investment (Decree 96) has established a strict legal framework to control and limit risks through the following mechanisms:

(i) Commitment on market access conditions at the ERC application step

According to Clause 3, Article 72 of Decree 96, when performing procedures to establish an economic organization before applying for an IRC, the investor's application for the ERC must include a commitment to satisfy market access conditions for foreign investors according to the provisions of law. Instead of having to present the entire project dossier in detail, the investor at this stage only needs to submit a commitment, covering responsibilities to review market access conditions (such as charter capital ownership ratio, investment form, investment scope, investor capacity, and partners participating in investment activities). However, it should be specially noted that according to the instructions in Official Letter 5427/BTC-DNTN dated 29 April 2026, of the Ministry of Finance, the Business Registration Authority is not responsible for verifying this commitment at the time of dossier submission; the investor must take full legal responsibility for the legality, truthfulness, and accuracy of this commitment.

(ii) Dissolution-related time limit

To prevent the abuse of policies to establish “shell” companies without actually implementing the investment projects, Clause 4, Article 72 of Decree 96 sets a strict time barrier. Specifically, the economic organization is mandatory required to complete procedures to be issued with an IRC for the implementation of an investment project consistent with its business lines within “12 months” from the date of establishment. This is a condition that determines the existence of the legal entity, because if the 12-month period is exceeded without obtaining an IRC ( due to causes such as planning, environment, or site clearance obstructions ), the investor may face serious financial losses and legal risks, including the risk of the legal entity being forced into dissolution.

(iii) Limits on the scope of activities and business lines of the new legal entity

Although holding the ERC and a business entity, the newly established economic organization essentially only serves as a “special purpose vehicle” (SPV)” to prepare for the upcoming investment project. This economic organization is only officially allowed to implement the investment project after completing the IRC issuance procedures. Additionally, to ensure consistency with the project dossier being submitted, the new legal entity is only permitted to adjust enterprise registration contents to add other investment business lines after the IRC has been issued.

B. IMPACT ASSESSMENT ON INVESTORS AND THE MARKET

The change in the licensing process under the Law on Investment 2025 is not just a pure adjustment of administrative procedures but also brings a new lens to the market entry strategy of FDI inflows. A clear analysis of the benefits as well as risks from the “ERC first - IRC later” mechanism will help investors make the most accurate decisions.

1. Advantages and opportunities

Foreign investors may accelerate the speed of establishing commercial presence and legitimizing costs under this new mechanism. By choosing the ERC-first method, foreign investors can immediately establish an independent legal status, own a tax code, and a company seal in Vietnam. This legal entity acts as an SPV to officially perform essential civil and commercial transactions for the investment project preparation stage: signing land and factory lease contracts, recruiting key personnel, and especially opening a direct investment capital account at a bank. This thoroughly overcomes the previous situation where investors had to conduct these activities under individual names or "borrow" the name of the overseas parent company, thereby helping to transparentize and legitimize investment preparation costs according to accounting and tax laws.

2. Risks and challenges

(i) Risks from the 12-month time limit

Policy flexibility always comes with strict compliance pressure. According to Decree 96, the newly established economic organization is placed under a rigorous time barrier: it must complete IRC issuance procedures for project implementation consistent with its business lines within 12 months from the date the ERC is issued. If this period is exceeded and the project is still not approved (due to problems in technology appraisal, planning, or environmental impact assessment reports, etc), this legal entity will face substantial legal risks, including the risk of being forced into dissolution according to the provisions of enterprise law.

(ii) Risk of financial loss and operational limits

It should be specially noted that holding an ERC is merely a preparation tool for the investment project; This legal entity is absolutely not allowed to officially deploy investment and business activities of the project until the IRC issuance procedures are completed.

Any act of conducting construction, importing equipment, or performing commercial commitments of the project before having an IRC can be considered a violation of the law. Therefore, all expenses disbursed for leasing premises, purchasing equipment, or paying expert salaries during the stage of waiting for the IRC contain the risk of becoming sunk costs that it can not be recovered if the IRC application is rejected by the authority.

The fact that an investor is not issued with an IRC, or is issued with an IRC but does not include the expected investment guarantees from the Government, meaning the investor must fully bear the financial losses incurred. Furthermore, to strictly control initial objectives, the investor is only allowed to adjust the ERC for the economic organization to add other investment business lines after the project has officially been issued with an IRC.

C. LEGAL CONFLICTS AND GAPS TO BE RESOLVED

Besides the advantages for investors, the “ERC first – IRC later” mechanism in practical application may reveal deep legal conflicts between laws on investment, enterprises, and foreign exchange management, while creating gaps that require synchronous intervention and guidance from state management authorities.

1. Conflict between the Law on Investment and the Law on Enterprises regarding the capital contribution term and the DICA account opening

One of the complex bottlenecks for investors when choosing the ERC-first roadmap is the inadequacy between the deadline for completing capital contribution obligations and the conditions for opening a bank account. According to the provisions of enterprise law, from the time the ERC is issued, members or shareholders must complete the obligation to contribute the full registered charter capital within a strict period of 90 days. At the same time, foreign exchange management law sets a mandatory principle: foreign investors must perform the transfer of contribution capital through a Direct Investment Capital Account (DICA) opened at a commercial bank operating legally in Vietnam.

However, a practical barrier arises when most commercial banks currently require investors to present an IRC as a prerequisite and indispensable condition to approve the opening of a DICA account. This overlapping regulation has inadvertently created a dead-end loop for investors: the enterprise has an ERC but cannot yet have an IRC (as the project appraisal process may last many months, as long as it is within the 12-month statutory limit), leading to the bank refusing to open a DICA for the foreign investors in question.

The legal consequence is that foreign investors have no legal payment channel to transfer funds into Vietnam, leading to a violation of the 90-day capital contribution term prescribed in the Law on Enterprises. The consequence is that the enterprise will face risks of administrative violation penalties or be forced to conduct procedures to reduce charter capital against its wishes. Without timely inter-ministerial guiding circulars from the State Bank and the Ministry of Finance to resolve the account opening stage, the flexibility of the Law on Investment 2025 risks becoming a compliance "trap" for foreign investors.

2. Pressure on the management capacity of the Business Registration Authority and the gap in market access conditions

The “ERC first – IRC later” mechanism creates a shift in jurisdiction by transferring the responsibility of receiving and initially assessing market access conditions to the Business Registration Authority. Previously, under the traditional mechanism, this authority mainly focused on the function of verifying the formal validity of dossiers, performing administrative procedures within the framework of enterprise law. However, currently, this authority requires appraisal capacity when it must also assume the function of identifying sectors with restricted market access right from the stage of establishing the legal entity. Thus, business registration officers face a great challenge when they must play the role of assessing and comparing the investor's commitment with an extremely complex legal matrix. This matrix includes a system of international treaties, Free Trade Agreements (such as WTO, CPTPP, EVFTA), specialized laws, and the CPC system, to accurately determine whether an investor from a specific country is allowed to own a certain percentage of capital in a specific field.

To reduce this pressure, Official Letter No. 5427/BTC-DNTN dated 29 April 2026 of the Ministry of Finance provided guidance clarifying that the Business Registration Authority is not responsible for considering or appraising the content of the investor's commitment to satisfy market access conditions at the time of registration of establishment; instead, the person establishing the enterprise must take full responsibility before the law for the legality and truthfulness of this commitment.

Although the regulations aim for openness at the pre-check stage, in professional practice, the lack of a coordination mechanism between the Business Registration Authority and the Investment Registration Authority still leads to circumstances where government officers handling investment application dossiers fear the possibility of misconduct; therefore may continuously request investors to explain or provide more evidence, significantly prolonging ERC processing time.

Also, this relaxation of initial control poses a risk to the investment environment if investors abuse the submission of commitments to establish businesses in sectors with strict conditions but cannot obtain an IRC after 12 months, causing a waste of social resources and creating an additional burden for the State's inspection and post-check work.

D. CONCLUSION AND LEGAL RECOMMENDATIONS

Given the landmark changes that also contain many technical challenges of the “ ERC first – IRC later ” mechanism, planning a methodical market entry strategy is a vital factor for FDI inflows. From a practical perspective, Minh Thien Law proposes the following strategic legal recommendations to help foreign investors optimize benefits and control risks.

1. Regarding project classification strategy and choosing an investment roadmap

Faced with legal gaps and compliance risks, investors should not mechanically apply the “ERC first” roadmap for all cases. The choice of licensing process needs to be individualized based on the characteristics of each project:

(i) Prioritize applying the “ERC first – IRC later” roadmap

This roadmap is the optimal choice for projects operating in the fields of services, software technology, trade, or consulting. These are projects less affected by infrastructure planning and need to quickly have legal status to sign contracts, establish a commercial presence, and capture market opportunities.

(ii) Reserve the “IRC first – ERC later” roadmap

For projects requiring large land funds, energy projects, mineral exploitation, or sensitive industries with a large impact on the environment, the traditional roadmap is still the safest "compass". Applying for an IRC first helps investors ensure that the project has been approved in principle, policy, and location by the State before officially disbursing large capital sources to establish a business.

2. Regarding risk prevention mechanisms in civil and commercial transactions

During the 12-month period waiting for the IRC, the newly established economic organization will inevitably have to participate in essential transactions to prepare for the project. However, to prevent the risk of financial loss if the IRC application is rejected by the state authority, businesses need to design contracts (such as office and factory lease contracts, equipment procurement) with strict protection clauses.

Specifically, contracts signed during this stage must include conditions precedent and exit clauses to prevent the risk that the investor will not obtain an IRC. For example, it is necessary to clearly stipulate that the contract will automatically terminate and the business will not bear responsibility for compensation for damages if, within 12 months from the date of signing, the business is not granted an Investment Registration Certificate due to objective reasons from the competent state authority.

3. Regarding contribution of investment capital

To solve the conflict between the 90-day capital contribution term according to the Law on Enterprises and the conditions for opening a Direct Investment Capital Account (DICA), investors should proactively work early with commercial banks that have professional FDI consulting departments. Establishing a relationship and having a companion bank right from when having the ERC will help resolve bottlenecks in capital flows, while preventing risks related to the transfer of legal profits home in the future.

4. Conclusion

The issuance of the Law on Investment 2025, along with the flexibility in the “ERC first – IRC later” licensing mechanism, has opened a new chapter for foreign direct investment activities in Vietnam. This is vivid evidence of the Government's efforts in creating a transparent and friendly investment environment for foreign investors.

Nevertheless, the transition from a pre-check to a post-check nature with regard to licensing procedures creates certain flexibilities as well as challenges for foreign investors before implementing an investment project in Vietnam. Considering that the legal framework on investment is still in a transitional and improving stage, the companionship of a professional legal consultant with deep practical understanding right from the project structuring stage will be a solid launching pad. Planning the right strategy not only helps foreign investors overcome technical barriers safely but also optimizes resources for sustainable development in the Vietnamese market.

In such regards, Minh Thien Law is confident to assist investors in accessing and navigating the legal landscape of Vietnam with professional and satisfying legal services.

[1] National Investment Information System. (2026/04/10). Flash Report on Foreign Investment Attraction in Vietnam and Vietnam's Outward Investment for the First 03 Months of 2026. Accessed on 12/05/2026 at: https://fdi.mof.gov.vn/pages/chitiettin.aspx?idTin=1204&idcm=9

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This article

• reflects the author's subjective viewpoint on the main topic mentioned in this article, providing the best reference value at the time of publishing;

• is not considered the viewpoint or opinion of any state agency in any case; and

• does not constitute legal advice from Minh Thien Law and should not be applied to resolve any specific legal situation.

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