A project company – a single-purpose vehicle holding one investment project and nothing else – is the structure most Vietnamese infrastructure, energy and real estate transactions are built on. It is not required by law, but almost every financed project ends up with one, and understanding why explains a great deal about how Vietnamese deals are put together.
Why sponsors use a project company
Four reasons drive it. Ring-fencing: lenders finance a defined set of cash flows and refuse exposure to unrelated group liabilities. Security: a lender can take share security over a project company cleanly, whereas security over a mixed-activity operating company is partial and difficult to enforce. Exit: selling a project company transfers the asset in one step, avoiding the consent-heavy route in our project transfer guide. And partnership: joint venture partners can hold different percentages in different project companies rather than negotiating one blended stake.
The cost is administrative. Each project company carries its own certificate, accounting, tax filings, audit and compliance calendar, and the group must be willing to resource that discipline across a portfolio.
Structuring the project company
Three decisions matter at formation. Form – a limited liability company suits closely held projects, while a joint stock company is preferred where equity will be widely held or listed later. Ownership chain – whether the foreign sponsor holds directly or through a regional holding vehicle, which determines treaty access and the exit tax position. And capitalisation – the split between charter capital and shareholder loan, which drives the interest deductibility and repatriation analysis.
Foreign sponsors should settle the market access analysis before incorporation, as our market access guide explains, because the project company’s permitted business lines fix what the project can lawfully do.
The project company and the land
Where land is involved the project company is normally the land user, holding the lease or allocation and the certificate in its own name. That alignment – one company, one project, one land instrument – is what makes the vehicle financeable and saleable, and our land use rights guide covers the instrument itself.
Sponsors who allow the land to sit in one entity and the project in another create a structure that lenders discount heavily and buyers price down, because enforcement and transfer both require two consents instead of one.
Life cycle: from formation to exit
A project company typically passes through four phases. Formation and licensing, where the certificate and land are secured. Construction, where the implementation schedule and the security in our project security deposit guide govern. Operation, where the compliance calendar and any incentive conditions must be maintained. And exit – a share sale, a project transfer, or a merger into the wider group under our project merger guide.
Groups that plan the exit at formation rather than at disposal consistently realise more value, because the structure a buyer wants to acquire is decided years before the buyer appears.
Project company FAQs
Can one company hold several projects?
Yes, and many operating businesses do. The single-purpose structure is a financing and exit preference rather than a legal requirement.
When should the project company be formed?
Under the current Law on Investment a foreign investor may establish the entity before obtaining the certificate, with a market access commitment in the application – see our business registration guide.
What if the project is later divided?
A division may require a second vehicle, and the two exercises are usually run together – our project division guide covers the sequence. Texts are published via the Ministry of Finance.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
