diff --git a/.pre-commit-config.yaml b/.pre-commit-config.yaml
index 091a32c89..184d3b4b4 100644
--- a/.pre-commit-config.yaml
+++ b/.pre-commit-config.yaml
@@ -16,7 +16,7 @@ repos:
   hooks:
   - id: pyupgrade
 - repo: https://github.com/PyCQA/isort
-  rev: 5.6.3
+  rev: 5.6.4
   hooks:
   - id: isort
 - repo: https://github.com/ambv/black
diff --git a/docs/changelog/1982.bugfix.rst b/docs/changelog/1982.bugfix.rst
new file mode 100644
index 000000000..09f05b8d3
--- /dev/null
+++ b/docs/changelog/1982.bugfix.rst
@@ -0,0 +1 @@
+Bump embedded setuptools from ``50.3.0`` to ``50.3.1`` - by :user:`gaborbernat`.
diff --git a/docs/changelog/1983.bugfix.rst b/docs/changelog/1983.bugfix.rst
new file mode 100644
index 000000000..32a973f9b
--- /dev/null
+++ b/docs/changelog/1983.bugfix.rst
@@ -0,0 +1 @@
+After importing virtualenv passing cwd to a subprocess calls breaks with ``invalid directory`` - by :user:`gaborbernat`.
diff --git a/src/virtualenv/seed/wheels/embed/__init__.py b/src/virtualenv/seed/wheels/embed/__init__.py
index 509f915a3..f153e0397 100644
--- a/src/virtualenv/seed/wheels/embed/__init__.py
+++ b/src/virtualenv/seed/wheels/embed/__init__.py
@@ -7,32 +7,32 @@
 BUNDLE_SUPPORT = {
     "3.10": {
         "pip": "pip-20.2.3-py2.py3-none-any.whl",
-        "setuptools": "setuptools-50.3.0-py3-none-any.whl",
+        "setuptools": "setuptools-50.3.1-py3-none-any.whl",
         "wheel": "wheel-0.35.1-py2.py3-none-any.whl",
     },
     "3.9": {
         "pip": "pip-20.2.3-py2.py3-none-any.whl",
-        "setuptools": "setuptools-50.3.0-py3-none-any.whl",
+        "setuptools": "setuptools-50.3.1-py3-none-any.whl",
         "wheel": "wheel-0.35.1-py2.py3-none-any.whl",
     },
     "3.8": {
         "pip": "pip-20.2.3-py2.py3-none-any.whl",
-        "setuptools": "setuptools-50.3.0-py3-none-any.whl",
+        "setuptools": "setuptools-50.3.1-py3-none-any.whl",
         "wheel": "wheel-0.35.1-py2.py3-none-any.whl",
     },
     "3.7": {
         "pip": "pip-20.2.3-py2.py3-none-any.whl",
-        "setuptools": "setuptools-50.3.0-py3-none-any.whl",
+        "setuptools": "setuptools-50.3.1-py3-none-any.whl",
         "wheel": "wheel-0.35.1-py2.py3-none-any.whl",
     },
     "3.6": {
         "pip": "pip-20.2.3-py2.py3-none-any.whl",
-        "setuptools": "setuptools-50.3.0-py3-none-any.whl",
+        "setuptools": "setuptools-50.3.1-py3-none-any.whl",
         "wheel": "wheel-0.35.1-py2.py3-none-any.whl",
     },
     "3.5": {
         "pip": "pip-20.2.3-py2.py3-none-any.whl",
-        "setuptools": "setuptools-50.3.0-py3-none-any.whl",
+        "setuptools": "setuptools-50.3.1-py3-none-any.whl",
         "wheel": "wheel-0.35.1-py2.py3-none-any.whl",
     },
     "3.4": {
diff --git a/src/virtualenv/seed/wheels/embed/setuptools-50.3.0-py3-none-any.whl b/src/virtualenv/seed/wheels/embed/setuptools-50.3.1-py3-none-any.whl
similarity index 94%
rename from src/virtualenv/seed/wheels/embed/setuptools-50.3.0-py3-none-any.whl
rename to src/virtualenv/seed/wheels/embed/setuptools-50.3.1-py3-none-any.whl
index af9f66f15..7b67c2ca2 100644
Binary files a/src/virtualenv/seed/wheels/embed/setuptools-50.3.0-py3-none-any.whl and b/src/virtualenv/seed/wheels/embed/setuptools-50.3.1-py3-none-any.whl differ
diff --git a/src/virtualenv/util/subprocess/_win_subprocess.py b/src/virtualenv/util/subprocess/_win_subprocess.py
index 33c77e312..4c4c5d029 100644
--- a/src/virtualenv/util/subprocess/_win_subprocess.py
+++ b/src/virtualenv/util/subprocess/_win_subprocess.py
@@ -7,7 +7,7 @@
 import platform
 import subprocess
 from ctypes import Structure, WinError, byref, c_char_p, c_void_p, c_wchar, c_wchar_p, sizeof, windll
-from ctypes.wintypes import BOOL, BYTE, DWORD, HANDLE, LPVOID, LPWSTR, WORD
+from ctypes.wintypes import BOOL, BYTE, DWORD, HANDLE, LPCWSTR, LPVOID, LPWSTR, WORD
 
 import _subprocess
 
@@ -63,8 +63,8 @@ def __int__(self):
 
 CreateProcessW = windll.kernel32.CreateProcessW
 CreateProcessW.argtypes = [
-    LPCTSTR, LPTSTR, LPSECURITY_ATTRIBUTES,
-    LPSECURITY_ATTRIBUTES, BOOL, DWORD, LPVOID, LPCTSTR,
+    LPCWSTR, LPWSTR, LPSECURITY_ATTRIBUTES,
+    LPSECURITY_ATTRIBUTES, BOOL, DWORD, LPVOID, LPCWSTR,
     LPSTARTUPINFOW, LPPROCESS_INFORMATION,
 ]
 CreateProcessW.restype = BOOL
@@ -107,13 +107,17 @@ def CreateProcess(
         wenv = (c_wchar * len(env))()
         wenv.value = env
 
+    wcwd = None
+    if cwd is not None:
+        wcwd = unicode(cwd)
+
     pi = PROCESS_INFORMATION()
     creation_flags |= CREATE_UNICODE_ENVIRONMENT
 
     if CreateProcessW(
         executable, args, None, None,
         inherit_handles, creation_flags,
-        wenv, cwd, byref(si), byref(pi),
+        wenv, wcwd, byref(si), byref(pi),
     ):
         return (
             DUMMY_HANDLE(pi.hProcess), DUMMY_HANDLE(pi.hThread),
diff --git a/tests/unit/test_util.py b/tests/unit/test_util.py
index 351d52862..ca3f31f18 100644
--- a/tests/unit/test_util.py
+++ b/tests/unit/test_util.py
@@ -1,5 +1,11 @@
 from __future__ import absolute_import, unicode_literals
 
+import subprocess
+import sys
+
+import pytest
+
+from virtualenv.info import IS_WIN, PY2
 from virtualenv.util.subprocess import run_cmd
 
 
@@ -8,3 +14,14 @@ def test_run_fail(tmp_path):
     assert err
     assert not out
     assert code
+
+
+@pytest.mark.skipif(not (PY2 and IS_WIN), reason="subprocess patch only applied on Windows python2")
+def test_windows_py2_cwd_works(tmp_path):
+    cwd = str(tmp_path)
+    result = subprocess.check_output(
+        [sys.executable, "-c", "import os; print(os.getcwd())"],
+        cwd=cwd,
+        universal_newlines=True,
+    )
+    assert result == "{}\n".format(cwd)