Chinese investors often enter Vietnam project by project — one legal entity per project. After 3–5 years, many groups end up with 3–4 overlapping subsidiaries: duplicated accounting/HR functions, difficult consolidated reporting, inflated administrative costs. This article presents five restructuring operations specific to Chinese-invested enterprises in Vietnam — focused on real-world scenarios and common bottlenecks, not general concepts (see our overview: Corporate Restructuring in Vietnam).
Background in brief: Enterprise Law 59/2020/QH14 (in force; amended by Law 76/2025/QH15) provides the forms of corporate reorganization: division, demerger, consolidation, merger, and conversion of company type.
Operation 1 (flagship): merging subsidiaries within the same Chinese group in Vietnam
Typical scenario: a Chinese group has 2–3 legal entities in Vietnam (e.g., one 100% Chinese-owned manufacturing company + one trading/logistics company + one upgraded representative office) and wants to consolidate into a single entity to optimize governance, tax and HR.
Choosing the form:
- Merger — keep one “anchor” entity (usually the manufacturing company already holding the Investment Registration Certificate, land and licenses → fewer license re-applications), the others cease to exist;
- Consolidation — dissolve all old entities and form a brand-new one: heavier procedures but a “clean” history.
Neither form is absolutely better — the choice depends on the legal-file quality of each subsidiary.
Typical procedure chain: (a) owner decision (the Chinese parent) + merger contract; (b) enterprise-registration changes for the surviving company + termination of the merged company; (c) adjustment of the investment project/IRC — project consolidation under Investment Law 143/2025/QH15 (the step foreign-invested enterprises most often miss); (d) intra-group land-use-right transfer (change registration under the 2024 Land Law); (e) tax-code termination for the merged company after tax finalization; (f) updating beneficial owners after reorganization (Law 76/2025/QH15).
Operation 2: converting company type to admit new investors
A 100% Chinese-owned single-member LLC converts into a multi-member LLC or joint-stock company when a Vietnamese partner or foreign fund joins. This is tied to the capital-contribution/share-purchase procedures for foreign investors (2025 Investment Law + Decree 96/2026/ND-CP): check market-access conditions (Article 8) before signing, then register the company-type conversion.
Operation 3: division/demerger for partial divestment
Carve out a business line or a project land parcel into a new legal entity, then transfer that new entity — instead of selling the whole company. This allows staged exits without disrupting remaining operations. For choosing the transfer object (selling the new entity vs. transferring the project), see our comparison of the two deal structures in the companion article on project transfer vs. share purchase.
Operation 4: completing the transition under China’s Foreign Investment Law
Article 42 of China’s Foreign Investment Law (effective 1 January 2020) repealed the three old FIE laws (wholly foreign-owned enterprises, equity joint ventures, contractual joint ventures); existing foreign-invested enterprises could retain their old organizational forms for five years — the transition period ended on 1 January 2025. Consequence: for Vietnam–China joint ventures established before 2020 under the old JV models, the Chinese side should have completed conversion under China’s Company Law; the Vietnamese side needs to review and align its charter with the 2020 Enterprise Law. An unconverted legacy JV = compliance risk on the Chinese side.
Operation 5: post-M&A restructuring
A Vietnamese company acquired by a Chinese investor typically needs governance consolidation: standardizing the charter and board structure under the 2020 Enterprise Law, adjusting the Investment Registration Certificate to the new ownership structure, and unifying HR, finance and compliance policies between buyer and target.
Practical bottlenecks across all five operations
- Labor: the surviving company inherits the merged company’s employees’ labor contracts (Articles 42–44 of the Labor Code — workforce utilization plans upon structural/technological change); severance allowance: one month’s salary per year of service, minimum two months’ salary (Article 47). Chinese employees: work permits are tied to the old entity → must be re-issued for the new entity (Decree 219/2025/ND-CP). SI: close the books at the old entity and continue contributions at the new one — avoid gaps.
- Tax: finalize corporate income tax up to the merger date; loss carry-forward (if any) per regulations — engage the tax authority before acting.
- Economic concentration: an intra-group merger may still fall within economic-concentration assessment if thresholds are exceeded (Article 13 of Decree 35/2020/ND-CP) — self-assess; do not assume exemption.
- IRC adjustment: every merger/consolidation/conversion involving an investment project triggers the duty to adjust the investment project under the 2025 Investment Law — the most-missed step.
Why do Chinese investors so often need restructuring?
The “one entity per project” model enables fast rollout initially, but after a few years produces 3–4 overlapping companies: duplicated accounting, HR and admin; complex consolidated reporting; each entity with its own IRC, tax code and compliance dossier. Internal restructuring to consolidate entities cuts administrative costs and compliance risk — provided the sequence is done correctly and the investment-project adjustment duty is not missed.
Frequently asked questions
What is the difference between a merger and a consolidation?
Merger: one existing entity survives (others merge into it); consolidation: all dissolve and a completely new entity is formed. A merger is usually lighter on licensing when the “anchor” entity already holds the IRC and land.
What if the merged company has tax debts?
Tax must be finalized up to the merger date before terminating the tax code. Tax obligations do not “disappear” when the entity is dissolved — engage the tax authority from the start.
How to handle a Chinese employee whose work permit is tied to the old company?
Work permits are tied to the employing entity; when the entity changes through a merger, re-issuance for the new entity is required under Decree 219/2025/ND-CP.
What is the risk for a 2015 Vietnam–China JV that never converted its model?
The five-year transition under Article 42 of China’s Foreign Investment Law ended on 1 January 2025 — the Chinese side faces compliance risk; both sides should review, complete the conversion, and align the Vietnamese-side charter with the 2020 Enterprise Law.
Sources
- Enterprise Law 59/2020/QH14 (in force; amended by Law 76/2025/QH15, effective 1 July 2025): division, demerger, consolidation, merger, company-type conversion; beneficial-owner updates after reorganization;
- Investment Law 143/2025/QH15 (effective 1 March 2026): investment project/IRC adjustment after reorganization; foreign investors’ market-access conditions (Article 8, Clause 2 Article 21); Decree 96/2026/ND-CP (31 March 2026);
- Labor Code 45/2019/QH14: Articles 42–44 (workforce plans upon structural/technological change), Article 47 (severance allowance);
- Land Law 31/2024/QH15 (1 August 2024): intra-group land-use-right transfer upon merger; SI Law 41/2024/QH15 (1 July 2025); Decree 219/2025/ND-CP (7 August 2025);
- China’s Foreign Investment Law (effective 1 January 2020): Article 42 (five-year transition, ended 1 January 2025);
- Decree 35/2020/ND-CP (Article 13): economic-concentration assessment thresholds.
See also: Corporate Restructuring in Vietnam (general concepts and procedures).
For reference only; not legal advice. This content was drafted by AI and will be quality-checked by the AI Legal Council of FLAT Law Firm before publication review; it is not legal advice from a human lawyer. Regulations may change; please check the current legal texts before relying on this information.
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