According to the Law on Investment and its guiding regulations, for investors entering the Vietnamese market, meeting initial legal requirements—such as obtaining an Investment Registration Certificate (IRC) or an Enterprise Registration Certificate (ERC)—is merely the beginning of a “legal marathon.” The “post-licensing compliance” stage has now become a cornerstone of state management, requiring investors to shift their mindset from a “request-grant” mechanism to one of “self-compliance.” Current state management trends are moving decisively from “pre-check” (strict entry barriers) to “post-check” (flexible entry with rigorous oversight), where market doors are wide open for reputable investors but ready to eliminate those who fail to uphold the law.
The Shift Toward “Post-Check” Management
Previously, the “pre-check” mechanism dominated the licensing and project approval process: regulatory authorities strictly scrutinized entry conditions and appraised dossiers before granting permits. However, this model led to backlogs, delays, and a waste of resources.
Today, Vietnam and many other nations are shifting toward “post-check” management. This means “entering the door” is easier, but “remaining” and “operating” are strictly monitored based on commitments and legal regulations. Essentially, this involves inspection and examination by authorities regarding project implementation after licensing, ensuring projects proceed on schedule, meet registered objectives, protect the environment, and fulfill tax obligations.
The Requirement for Proactive Legal Compliance
An investment license is not an “absolute shield.” If post-licensing inspections reveal violations, investors face severe sanctions. These range from administrative fines for delays, land misuse, or failure to submit statistical reports, to the most severe penalty: project revocation. This occurs when a project is not implemented as committed without a justifiable reason or is used for purposes other than those approved.
Other sanctions include the clawback of taxes and land rent. Discrepancies in financial declarations can lead to massive fines plus late payment interest. Many investors fail to foresee these issues until a “post-check” occurs, leading to significant unforeseen liabilities.
In the current era of digitalized management, an investor’s compliance history is stored in national systems. A “clean” corporate profile facilitates future project amendments (increasing capital, expanding scale) and grants priority in bidding for projects or accessing new investment incentive packages.
Global Benchmarks in “Post-Check” Management
| Criteria | Vietnam | Singapore | United States |
| Primary Model | Transitioning strongly toward post-check. | Extremely strict data-driven post-check. | Post-check combined with national security risk monitoring (CFIUS). |
| Transparency | Digitalizing the national investment management system. | Integrated information system between Tax, Customs, and Investment. | Public compliance reports for listed companies. |
| Consequences of Violations | Fines, project revocation, tax enforcement. | Heavy fines, potential permanent business bans, or criminal liability for management. | Class-action lawsuits and immediate stock price devaluation. |
In countries like Singapore, the post-check process relies entirely on self-assessment. If a business is found to have committed fraud during a post-check, its reputation is decimated, severely impacting all subsequent financial activities. This serves as a powerful deterrent, encouraging proactive compliance.
Illustrative Case Studies
FDI Project in an Industrial Park (IP): An investor was licensed for an electronic component manufacturing project with a commitment to disburse $50 million within two years. However, after three years, they had only built a basic shell and used part of the land as a warehouse (misalignment with investment objectives).
Result: Authorities conducted an inspection, determined the investor was “land-banking,” revoked the unused land area, and imposed administrative fines for progress delays.
Environmental Violations (Periodic Post-Check): Many enterprises, despite having operational licenses, secretly discharged untreated waste. Sudden environmental inspections resulted in billions of VND in fines and operational suspensions to remediate consequences, causing disruptions in the enterprise’s global supply chain.
Expert Advice from Siglaw Law Firm: Proactive Risk Management through Compliance
In an era of tightening post-check mechanisms, the attorneys at Siglaw emphasize: Post-licensing compliance is not merely a legal obligation; it is the most sustainable “insurance policy” for an investor’s capital. To optimize business operations and avoid legal pitfalls, enterprises should:
Establish a dedicated Compliance Department: Conduct internal audits periodically rather than waiting passively for inspection teams.
Maintain Scientific Record-Keeping: Ensure all capital disbursement documents, equipment invoices, and periodic reports are perfectly aligned with the Investment License.
Proactive Reporting: Any changes in project progress or objectives must be updated through formal amendment procedures immediately.
Proactive compliance builds a solid reputation and ensures maximum legal safety amidst market fluctuations.
Please contact Siglaw Firm for comprehensive consultation.
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