In the context of globalisation, businesses are increasingly expanding their scope of operations overseas. However, not every investment project achieves the expected success. At that time, the termination of an overseas investment project becomes a necessary and important decision to protect the interests of enterprises. The article “Guidelines On Terminating Overseas Investment Projects” will provide managers and business owners with the necessary knowledge about the process of terminating an overseas investment project. Thereby, minimising risks and losses, and at the same time ensuring the interests of enterprises in the process of withdrawing from foreign markets.
What is an overseas investment project?
An overseas investment project is a project in which a domestic investor conducts investment activities abroad in accordance with the laws of that country and the laws of Vietnam. This means that an overseas investment project is carried out by domestic investors (Vietnamese investors) in accordance with the regulations and laws of both the host country and Vietnam.
Termination of an overseas investment project is the process of terminating and resolving all activities related to an investment project that the enterprise has implemented in another country. The goal of the termination of the investment project is to ensure that the withdrawal from the foreign market is legal, organised, and optimises the benefits for the enterprise while minimising the risks and losses that may arise during this process.
Before carrying out the procedures for termination of the Overseas Investment Registration Certificate, investors should also pay attention to the obligation to liquidate the investment project and transfer the funds to Vietnam. Under Article 8 of Decree 31/2021/ND-CP, immediately after the end of investment activities for the reason of termination of the investment project, the investor shall (i) liquidate the investment project in accordance with the provisions of the law of the country or territory receiving the investment; and be responsible for (ii) transfer to Vietnam all revenues from the liquidation of the project investment within 06 months from the date of issuance of the tax finalisation report or a document of equivalent legal validity in accordance with the law of the country or territory receiving the investment related to the completion of the liquidation of the investment project.
Then, within 60 days from the date of completion of the liquidation of the overseas investment project and remittance of all revenues from the liquidation of the investment project (if any), the investor shall carry out the procedures for invalidation of the Overseas Investment Registration Certificate as analyzed below.
Procedures to terminate an overseas investment project
The investor has the right to decide to terminate the operation of the investment project when the project falls into the following situations as stated in Clause 1, Article 64 of the Law on Investment 2020:
- The investor decides to terminate the operation of the investment project: the investor may decide to terminate the operation of the investment project based on factors such as unsatisfactory profits, changes in business strategy or other reasons;
- Upon the expiration of the operation period of an investment project as prescribed by the law of the country receiving the investment: each investment project usually has a certain period of operation prescribed by the law of the country receiving the investment. Upon the expiration of this period, the project will automatically terminate its operation;
- According to the conditions for termination of operation specified in the contract and the company’s charter;
- The investor transfers the entire overseas investment capital to another foreign investor;
- After 24 months or more since the date of issuance of the overseas investment registration certificate the investor has not implemented or is unable to implement the investment project in accordance with the progress registered with the state management authority and has not carried out procedures to adjust the project implementation progress: if the investor does not implement the project within 24 months from the date of issuance of the certificate or does not adjust the project schedule, the granted certificate will be invalid;
- The overseas economic organisation is dissolved or bankrupt in accordance with the law of the country receiving the investment; or
- According to the Court’s judgment or decision, the arbitral award.
The investor shall carry out the procedures for termination of the operation of the overseas investment project in accordance with the law of the country receiving the investment and carry out the procedures for termination of the overseas investment registration certificate.
The dossier of termination of an overseas investment project shall comply with Clause 1, Article 87 of Decree 31/2021/ND-CP detailing and guiding the implementation of a number of articles of the Law on Investment 2020, the investor needs to submit 02 sets of the dossier of request for invalidation of the overseas investment registration certificate (including 01 original set), including the following documents:
- An official dispatch for termination of the validity of the overseas investment registration certificate;
- The originals of the granted overseas investment registration certificates;
- Decision on termination of overseas investment project;
- Documents proving that the investor has completed the termination and liquidation of the project and remitted all money, assets and revenues from the termination and liquidation of the project to the country; and
- Documents on the legal status of the investor.
Steps to terminate an overseas investment project
- Step 1: Submit 01 set of dossier requesting the termination of the overseas investment registration certificate in accordance with the form attached to Circular 03/2021/TT-BKHDT amended by Circular 25/2023/TT-BKHDT regulating the form of documents and reports related to investment activities in Vietnam, overseas investment and investment promotion for the Ministry of Planning and Investment.
- Step 2: The Ministry of Planning and Investment checks the validity of the dossier. In case the dossier is invalid or has contents that need to be clarified, the Ministry of Planning and Investment shall notify the investor in writing to complete the dossier. After that, the Ministry of Planning and Investment sends a dossier to the State Bank of Vietnam for comments on the situation of foreign exchange transactions of investors; the compliance of investors with the provisions of the law on foreign exchange and violations and handling of violations under their competence (if any).
- Step 3: Within 15 days from the date of receipt of a valid dossier, the Ministry of Planning and Investment shall issue a decision to terminate the validity and revoke the overseas investment registration certificate and send it to the investor, and at the same time send a copy to the State Bank of Vietnam, the Ministry of Finance, the Ministry of Foreign Affairs, the Ministry of Labour, Invalids and Social Affairs, the line ministries, the People’s Committees of the provinces and centrally-run cities where the investors are headquartered or registered for permanent residence, the tax authorities where the fulfilment of the investor’s tax payment obligations are certified, the investor’s representative agency (if any).
In case of termination of an overseas investment project due to the transfer of the entire overseas investment capital by the investor to the foreign investor, the investor must notify the State Bank of Vietnam before transferring the entire investment capital to the foreign investor and terminating the project.
Terminating an overseas investment project is a complex process and requires strict compliance with the laws of Vietnam and the laws of the host country. In order to protect the interests of investors as well as ensure the transparency and legality of this process, investors need to master the relevant regulations and strictly follow the required process so that the termination of the operation of the offshore investment project proceeds smoothly and legally.
The above is an overview of Guidelines On Terminating Overseas Investment Projects. If you have difficulties in finding a Law Firm to advise and support in the relevant legal field, please contact us. Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specialising in business law in Vietnam that has leading practice areas in the legal market such as Labor and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing clients with optimal and effective service.
