1. Reasons for Termination of Foreign Investment Projects in Vietnam
Cases Where Investors Decide to Terminate Their Projects
According to Clause 1, Article 48 of the Law on Investment 2020, investors may terminate their investment projects in the following cases:
The investor decides to terminate the project.
The termination conditions specified in the contract or the company’s charter are met.
The duration of the investment project expires.
Additionally, Article 44 of the Law on Investment 2020 stipulates that the duration of investment projects within economic zones shall not exceed 70 years, while projects outside economic zones shall not exceed 50 years. For projects located in areas with difficult or especially difficult socio-economic conditions, or for projects with large capital and slow capital recovery, the investment duration may be extended but shall not exceed 70 years. Once these durations expire, the investor must follow procedures to terminate the project.
Cases Where the Investment Registration Authority Terminates Projects
According to Clause 2, Article 48 of the Law on Investment 2020, the investment registration authority may terminate or partially terminate an investment project in the following cases:
a) Termination by Decision of State Agencies
The investment project is terminated or partially terminated by a decision of the state investment management agency if the project falls into any of the following situations and the investor is unable to remedy the conditions for suspension:
To protect historical, cultural relics, artifacts, or national treasures as prescribed by the Law on Cultural Heritage.
To address violations of environmental protection laws as requested by the environmental management authority.
To ensure labor safety as requested by the labor management authority.
As per court rulings or arbitration awards.
The investor fails to comply with the investment policy approval, investment registration certificate, and continues to violate after administrative sanctions.
The Prime Minister decides to suspend or partially suspend the project if it threatens or harms national defense or security, based on the recommendation of the Ministry of Planning and Investment.
b) Termination Due to Non-Operation at the Registered Location
The investor no longer uses the investment site and fails to adjust the location within six months from the date of losing the right to use the investment site, except for projects where land is reclaimed due to non-use or delayed use under land laws.
c) Termination Due to Project Suspension
The project has been suspended for more than 12 months, and the investment registration authority cannot contact the investor or their legal representative.
d) Termination Due to Land Recovery
The project’s land is recovered because the investor failed to put the land into use or delayed its use under land law provisions.
e) Termination Due to Failure to Provide Deposit
The investor fails to provide the required deposit or guarantee for project implementation, as required by investment laws.
f) Termination Due to Sham Transactions
The investor engages in investment activities based on sham transactions under civil law.
g) Termination Based on Court Rulings or Arbitration Awards
The investment project is terminated according to court rulings or arbitration awards.
2. Legal Consequences of Project Termination
When an investment project is terminated, the investor must liquidate the project in accordance with asset liquidation laws unless the following applies:
Land use rights and attached assets shall be handled according to land laws and other relevant legal provisions.
The investment registration authority will revoke the Investment Registration Certificate if the project is terminated under Clause 2, Article 48 of the Law on Investment 2020, except for partial project termination.
3. Procedures for Termination of Foreign Investment Projects in Vietnam
General Procedures for Termination
Voluntary Termination: If an investor decides to terminate a project under Point a, Clause 1, Article 48 of the Law on Investment 2020, they must submit a termination decision to the investment registration authority within 15 days from the decision date, along with the Investment Registration Certificate (if any).
Contractual or Time-Based Termination: If a project is terminated under Points b and c, Clause 1, Article 48 of the Law on Investment 2020 (i.e., as per contract conditions or upon expiration of the investment duration), the investor must notify and return the Investment Registration Certificate (if any) to the authority within 15 days of termination, accompanied by documents evidencing the termination.
The investment registration authority will then notify relevant agencies about the project’s termination.
Involuntary Termination: For projects terminated under Clause 2, Article 48 of the Law on Investment 2020, the investment registration authority will issue a decision to terminate the project and revoke the Investment Registration Certificate. The certificate becomes invalid from the effective date of the termination decision.
Liquidation of Projects
Investors are responsible for liquidating projects under asset liquidation laws.
For projects involving state-allocated or leased land or land with adjusted usage rights, the handling of land use rights and associated assets must comply with land laws and relevant legal provisions.
If the investor’s organization faces dissolution or bankruptcy during project liquidation, the procedures will follow laws governing the dissolution or bankruptcy of economic organizations.
By understanding the reasons, procedures, and legal consequences of terminating foreign investment projects in Vietnam, investors can ensure compliance with regulations and minimize potential risks.
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