Violations of the Investment Law refer to acts that contravene legal provisions during the process of conducting investment activities in Vietnam. Such violations may adversely affect the business market and the order of State management. In this article, NPLaw invites readers to explore the legal issues relating to violations of the Investment Law.

I. Understanding violations of the Investment Law

Violations of the Investment Law are acts committed by investors or related organizations and individuals who fail to comply with the provisions of law in the process of operating investment activities. Such acts may include: investing in prohibited or restricted sectors; failing to comply with the registered investment contents; delay in project implementation; unlawful transfer of projects; failure to fulfill reporting or financial obligations; or breaches of regulations on the environment and land.

Violations of the Investment Law may be subject to administrative sanctions, suspension of investment activities, revocation of the Investment Registration Certificate, or even criminal prosecution, depending on the severity and consequences. Understanding and complying with the Investment Law is essential to ensuring that investment activities are conducted legally, sustainably, and effectively.

II. Legal regulations on violations of the Investment Law

1. Common violations of the Investment Law

Some typical violations often committed by investors (especially foreign investors) include:

  • Misrepresentation or dishonesty in investment registration dossiers;
  • Failure to implement projects according to committed schedules;
  • Unlawful project transfer without approval from competent authorities;
  • Failure to submit periodic investment reports as required;
  • Improper land use or without putting it into operation;
  • Non-compliance with environmental, safety, or fire prevention regulations;
  • Investment in unregistered sectors or prohibited business lines;
  • Failure to contribute sufficient investment capital within the registered timeframe;
  • Non-compliance with the law to obtain improper investment incentives.

2. Legal framework governing violations of the Investment Law

The legal framework governing investment law violations in Vietnam includes key legislative instruments such as:

  • The Law on Investment 2020;
  • Decree No. 122/2021/ND-CP.

3. Forms of sanctions for violations of the Investment Law

Pursuant to Article 3 of Decree No. 122/2021/ND-CP, sanctions for investment law violations include:

  • Caution;
  • Monetary fine.

In addition to primary sanctions, organizations and individuals committing violations may also be subject to one or more remedial measures.

4. Procedures for handling violations of the Investment Law

The procedure for handling violations of the Investment Law is executed as follows:

  • Detection of violations: Investment management agencies (such as the Department of Planning and Investment, Management Boards of IZs/EPZs/ECZs) may detect violations through periodic or ad hoc inspections, or through reports and denunciations;
  • Record of administrative violations: If grounds exist, the competent authority prepares a record, identifying the violative acts, responsible parties, and relevant evidence;
  • Verification and explanation: The violating entity is required to provide explanations. The authority collects additional documents and evidence to verify the extent of the violation;
  • Issuance of sanctioning decision: Based on the nature, severity, and consequences, the competent authority issues an administrative sanctioning decision or refers the case for criminal prosecution, if applicable.

5. Competence to handle violations of the Investment Law

According to Articles 73–76 of Decree No. 122/2021/ND-CP, the authorities competent to handle violations of the Investment Law include:

  • Inspectorate of the Ministry/Department of Planning and Investment;
  • People’s Committees at all levels;
  • Tax authorities;
  • Market surveillance authorities.

III. Questions on violations of the Investment Law

1. What factors determine whether a violation of the Investment Law is deemed “intentional” or “unintentional,” and how does it affect the sanctioning process?

  • A violation is deemed intentional if the violator is aware of its illegality but still commits it. Conversely, it is unintentional if the violator did not know or could not foresee the consequences, though he/she should and could have known;
  • Investors or business executives with legal knowledge who nonetheless commit violations are more likely to be deemed intentional; those unfamiliar with the law or who acted by mistake may be considered unintentional;
  • Repeated violations after warnings or prior sanctions are often treated as intentional; violations arising from vague legal provisions or errors by State authorities may be treated as unintentional;
  • Intentional violations are sanctioned more severely, potentially leading to criminal liability, while unintentional violations may be subject to leniency or administrative sanctions only.

2. Does failure to fully contribute charter capital as committed constitute a violation of the Investment Law, and what sanctions apply?

Where investors (founding members/shareholders) fail to fully contribute charter capital as committed or within the statutory deadline under the Law on Enterprise 2020, it constitutes a violation as provided in Clause 3, Article 46 of Decree No. 122/2021/ND-CP. The sanction includes a fine of 30,000,000 VND to 50,000,000 VND for failing to implement procedures to adjust charter capital or change members/shareholders with the business registration authority upon expiry of the capital contribution deadline, and after the adjustment period has lapsed while founding members/shareholders have not contributed sufficient capital. The violator is also compelled to execute procedures for capital adjustment or change of members/shareholders in accordance with the law.

3. What information is considered “untruthful or misleading” in investment registration dossiers, and what are the legal consequences?

Untruthful or misleading information in investment registration dossiers refers to false, distorted, concealed, or fraudulent declarations intended to secure approval of investment policies or issuance of Investment Registration Certificates. Examples include:

  • Investor information: False declarations on name, nationality, legal status, financial capacity, or investment experience;
  • Sources and total capital: Incorrect statements on financial capacity, undisclosed loans, or fictitious capital contributions;
  • Project site and scale: False information on address, land area, construction size, or anticipated workforce;
  • Business lines and objectives: False declarations to circumvent investment conditions or gain improper incentives;
  • Commitments on environment, fire prevention, or occupational safety: Inaccurate or unfeasible declarations;
  • Forged supporting documents: use of falsified financial statements, legal papers, or capacity confirmations.

Legal consequences include:

  • Refusal of issuance of the Investment Registration Certificate if detected during appraisal;
  • Revocation of the Investment Registration Certificate if discovered post-issuance (Article 48, Law on Investment 2020);
  • Administrative sanctions under Section 2, Chapter II of Decree No. 122/2021/ND-CP;
  • Denial or revocation of investment incentives;
  • Criminal liability for document forgery, fraud, or causing serious damage to the State or other investors.

4. How are violations in capital contribution, share purchase, or equity acquisition handled?

Pursuant to Articles 16 and 46 of Decree No. 122/2021/ND-CP:

  • A fine of 80,000,000 VND to 100,000,000 VND applies where investors contribute capital or acquire shares/equity in Vietnamese economic organizations without satisfying investment conditions applicable to foreign investors;
  • A fine of 20,000,000 VND to 30,000,000 VND applies where contributions are made in forms not recognized by law, or where investors contribute capital without having the legal right to do so;
  • Remedial measures include compulsory change of members/shareholders in cases of unlawful capital contribution.

5. In cases where foreign investors violate the Investment Law, what is the procedure for project revocation or deportation?

Where violations by foreign investors lead to project revocation or deportation, the procedure is as follows:

  • The competent authority inspects and verifies the violation (such as failure to implement projects, deviation from objectives, or misrepresentation in dossiers);
  • Issuance of sanctioning decision (monetary fine, suspension, remedial measures, etc.);
  • Revocation of the Investment Registration Certificate in cases of serious violations under Article 48 of the Law on Investment 2020;
  • Deportation, where applicable: If violations relate to residence or security, the Immigration Department may issue a deportation decision.

IV. Legal advisory services on violations of the Investment Law

The above is NPLaw’s article on violations of the Investment Law. With a team of experienced lawyers and legal specialists, NPLaw is always ready to accompany, advise, and support Clients on legal matters relating to investment law violations. For legal assistance, please contact NPLaw.