Under the Enterprise Law, a foreign-invested company (Hold Co) is permitted to set up new companies in Vietnam. However, the procedures for setting up a new subsidiary by a Hold Co is not clear. In particular,

• Decree 108/2006 implementing the Investment Law only expressly allows a Hold Co being a joint venture company to set up a new joint venture company and a Hold Co being a wholly foreign-owned company to set up a new wholly foreign-invested company. As such, if a licensing authority takes a strict view based on the provisions of Decree 108/2006 then a Hold Co being joint venture company may not be allowed to set up a wholly owned subsidiary or a Hold Co wholly foreign-invested company may not be able to set up a joint venture company.
• A Hold Co will need to obtain a new Investment Certificate for setting up a new subsidiary (New Co IC). The question is whether and how the existing investment certificate of the Hold Co (Hold Co IC) should be amended. In principle, if as a result of the establishment of a new subsidiary, there is any change to the details recorded in the Hold Co IC (e.g. increase of charter capital) then Hold Co IC will also need to apply to amend the Hold IC to reflect such change. However, the law is not clear whether amendment to the Hold Co IC needs to be made before or after the New Co IC.
• If the Hold Co borrows funds from foreign lenders to make capital contribution to New Co then technically, no amendment to the Hold Co IC is required. However, the regulations on foreign loans do not have procedures for registration of foreign loans by a Hold Co for the purpose of contributing capital into another company.