Entering the Vietnamese Market: An Overview of Structures for Establishing a Local Company

01 - Direct Investment Structures
There are two forms: 100% foreign-owned investment and investment through a joint venture. An FIE (Foreign-Invested Economic Organization) is treated as a foreign-invested enterprise where, among other criteria, foreign investors hold 50% or more of its charter capital.
Advantages of a wholly-owned entity: full control, faster decision-making, and confidentiality of know-how. Disadvantages: the investor bears all risk alone, and a lack of local knowledge can drive up costs.
Advantages of a joint venture: it can help avoid restrictions on foreign ownership, leverages the partner's know-how and distribution networks, and spreads risk. Disadvantages: management decisions can become more difficult, and there is a risk of misconduct by the partner.

02 - Indirect Investment Structures
There are two types: a genuine M&A (acquiring equity/shares, or through corporate reorganization) and a “formal” M&A (a company is first established in the name of a Vietnamese individual, its equity is then acquired, and the company is subsequently converted from a domestically-invested company into a foreign-invested one). A direct investment typically takes around three months; a formal M&A takes about one week to establish the local company plus 1.5-2 months for the subsequent conversion procedures. Acquiring 50% or less of the equity does not require M&A approval procedures.