I. Current situation regarding the suspension of operations of foreign-invested enterprises

Foreign-invested enterprises have become a major development trend in Vietnam in recent years, driven by international integration needs and the expansion of an open economy. The establishment and operation of enterprises must strictly comply with legal regulations; accordingly, enterprise owners are also required to have a thorough understanding of the legal provisions governing circumstances that may result in the suspension of business operations.

So, how does current Vietnamese law regulate the suspension of operations of foreign-invested enterprises? Let us explore such an issue together with NPLaw through the following article.

II. Legal regulations on the suspension of operations of foreign-invested enterprises

1. How is the suspension of operations of a foreign-invested enterprise understood?

Pursuant to Clause 17 Article 3 of the Law on Investment 2020, the law does not separately classify foreign-invested enterprises, but generally defines them as economic organizations having members or shareholders who are foreign investors. It means that any enterprise with capital contributions from foreign individuals or organizations, regardless of the contribution ratio, is regarded as a foreign-invested enterprise.

Specifically, foreign-invested enterprises include two main types:

  • Wholly foreign-owned enterprises: Enterprises in which 100% of the investment capital is owned by foreign investors.
  • Enterprises with foreign capital contribution: Enterprises having capital contributions from foreign individuals or organizations, without distinction as to the capital contribution ratio.

Pursuant to Clause 1 Article 78 of the Penal Code 2015, suspension of operations for a specific duration is understood as the temporary cessation of operations of a commercial legal entity in one or several sectors in which such entity commits criminal acts causing harm to human life, health, the environment, or public security, order, and safety, where the consequences are practically remediable.

Accordingly, the suspension of operations of a foreign-invested enterprise may be understood as a decision issued by a competent authority to temporarily suspend or permanently terminate the operations of a foreign-invested enterprise that has committed violations of law, for a specified period or indefinitely.

2. In which cases may the operations of the foreign-invested enterprise be suspended?

Pursuant to Clause 2 Article 206 of the Law on Enterprise 2020, it is provided that:

- Business registration authorities and competent State authorities may require an enterprise to temporarily suspend operations, suspend operations, or terminate business activities in the following cases:

  • Suspension or termination of conditional business lines or business lines subject to market access conditions applicable to foreign investors where it is discovered that the enterprise no longer satisfies the corresponding statutory conditions;
  • Temporary suspension of business operations at the request of competent authorities in accordance with tax administration laws, environmental laws, and other relevant legal provisions;
  • Suspension of operations or termination of one or several business lines or activities in certain sectors according to a court decision.

3. Procedures for suspending the operations of foreign-invested enterprises

The suspension of operations of the foreign-invested enterprise is decided by the competent State authority responsible for the specific sector concerned, in accordance with the procedures stipulated in specialized legal instruments governing the sector in which the enterprise commits violations (for example: environmental protection, fire prevention and fighting, labor, or investment and business activities).

Pursuant to Articles 66 and 67 of Decree No. 01/2021/NĐ-CP, within 03 working days from the date of receipt of a written notice from a competent State authority regarding the suspension of operations of the enterprise, or upon the enterprise’s completion of sanctions or judicial measures in accordance with specialized laws, the Business Registration Office shall update such information in the National Database on Enterprise Registration and publicly disclose it on the National Enterprise Registration Portal.

III. Questions regarding the suspension of operations of foreign-invested enterprises

1. What factors may lead to the suspension of operations of the foreign-invested enterprise?

Foreign-invested enterprises in Vietnam may have their operations suspended for various reasons, such as violations of laws, failure to satisfy business conditions, or non-compliance with requirements relating to taxation, labor, and environmental protection. Factors leading to the suspension of operations may include:

  • Violations of investment and business laws: Failure to comply with regulations on foreign investment or violations in business operations, such as conducting business in prohibited or restricted sectors for foreign investors;
  • Operation without meeting statutory requirements on capital, professional capacity, or business licenses for certain conditional sectors such as insurance, finance, or healthcare;
  • Failure to fully perform financial obligations to the State, including late tax payment or tax evasion;
  • Violations of labor laws, such as failure to comply with occupational safety regulations or failure to implement compulsory social insurance regimes for employees;
  • Violations of environmental regulations: Enterprises operating in sectors with significant environmental impacts, such as industrial production or natural resource exploitation, that cause environmental pollution without implementing remedial measures; 
  • Failure to submit financial statements on time or provision of inaccurate information;
  • Illegal business operations, such as engaging in business lines or services without a valid license or with an expired license.

2. Are there any differences between the regulations on suspension of operations applicable to foreign-invested enterprises and domestic enterprises?

Based on the applicable laws governing each specific sector in which violations occur, the regulations on suspension of operations applicable to foreign-invested enterprises do not differ from those applicable to domestic enterprises. They are governed by the same legal instruments and subject to the same forms of sanctions and their levels, and remedial measures for administrative violations as prescribed therein.

3. Which authorities have the competence to issue decisions on suspension of operations of foreign-invested enterprises?

The authority competent to issue a decision on suspension of operations of the foreign-invested enterprise depends on the nature of the enterprise’s legal violations in the specific sector concerned. 

For instance, in the case of violations in the environmental sector, the competent sanctioning authorities according to Clauses 2, 3, and 4 Article 58 of Decree No. 45/2022/NĐ-CP include: The Chief Inspector of the Department of Natural Resources and Environment; the Head of a specialized inspection delegation on natural resources and environment of the Department of Natural Resources and Environment or the Vietnam Environment Administration; the Head of a specialized inspection delegation on natural resources and environment of the Ministry of Natural Resources and Environment; the Chief Inspector of the Ministry of Natural Resources and Environment; and the Director General of the Vietnam Environment Administration.

Accordingly, the determination of the specific authority competent to issue a decision on suspension of business operations for a specific duration is based on the severity of the violation and the applicable monetary fine for environmental violations.

4. How does the suspension of operations of the foreign-invested enterprise affect the rights and interests of foreign investors?

The suspension of operations of the foreign-invested enterprise inevitably affects the rights and interests of foreign investors. During the period in which the enterprise is suspended by a competent authority, all business, production, export of goods, products, and services must cease, thereby adversely affecting project schedules, revenue, profits, and other business-related matters, all of which may be delayed or disrupted.

5. In case of suspension of operations, does the foreign-invested enterprise have the right to appeal or request reconsideration of the decision?

A foreign-invested enterprise has the right to file a complaint against an administrative decision of a competent authority where there are grounds to believe that such decision is unlawful and directly infringes upon the lawful rights and interests of the enterprise.

Pursuant to Clause 2 Article 2 and Article 7 of the Law on Complaints 2011, complainants, including individuals, agencies, and organizations, may file lawsuits with the person who issued the administrative decision or the agency whose officials committed administrative acts, or initiate an administrative lawsuit before a court in accordance with the Law on Administrative Procedures.

6. Are joint-venture companies with foreign investment required to comply with the same suspension regulations as wholly foreign-owned enterprises?

Joint-venture companies with foreign investment and wholly foreign-owned enterprises operating in Vietnam are all required to comply with Vietnamese law. Where violations of law occur during business operations resulting in suspension by competent authorities, such enterprises are subject to sanctions in accordance with the legal provisions corresponding to the specific violations committed.

IV. Legal consultancy services relating to the suspension of operations of foreign-invested enterprises

The above constitutes NPLaw’s responses to issues concerning the suspension of operations of foreign-invested enterprises. Should you require further clarification or legal assistance in this regard, please do not hesitate to contact NPLaw using the details below: