Vietnam is an emerging economy with a lot of potential for foreign businesses interested to open a company. The lower labor costs compared to other surrounding countries have attracted a massive growth in foreign direct investment (FDI). In the first five months of 2019, year-on-year growth of FDI in Vietnam was 69.1%, clearly, companies around the world are taking notice. In order to assist foreign investors in carrying out the procedures for open the company in Vietnam, Van Luat sends readers specific instructions as follows:

XEM THÊM: Can I open the company in Vietnam?

Forms of company establishment by foreign investors in Vietnam

From 1 January 2021, the Law on Enterprises 2020 (“LE”) and Law on Investment 2020 (“LI”) replace the previous Laws of 2014 and generally govern investment activities, establishment and operation of enterprises in Vietnam.  The LE and LI continuously confirm to guarantee the legal capital and assets of foreign investors in Vietnam, and allow foreigners to invest in most sectors of the economy, particularly in sectors of export-oriented, agricultural activities, new materials, high technology, development research, environment protection, and others of similar nature.

There are two principal forms of company establishment by foreign investors in Vietnam:

  1. 1. Direct investment – Establishing a new enterprise.
  2. Indirect investment – investment in Vietnam by investing in an existing enterprise: With the majority of foreign-owned capital (51%), it requires at least 2 shareholders. The foreign investor could hold up to 99% shares.
How to register a vietnam company – easy step?
How to register a vietnam company – easy step?

2. Legal provisions on the establishment of foreign companies in Vietnam

2.1. Direct investment – Establishing a new enterprise.

Foreign invested enterprises with a single investor may only be established as a limited liability company. A joint stock company must have at least three shareholders. Different considerations should be taken into account in selecting the entity to be established, as the governance regime, financing options, disclosure requirements and other operational aspects of the entities differ depending on whether the investment is carried out by a limited liability company or a joint stock company.

It is worthy of note that for establishment of any new economic organization, it is required to attach the establishment to an investment project in Vietnam. The LI and LE separate application for the issuance of Investment Registration Certificates (“IRC”) of investment projects and application for the issuance of Enterprise Registration Certificates (“ERC”) of the newly-established economic organization.

2.1. Procedures for applying for IRC (for investment projects not subject to approval of investment policies)

Before establishing an economic organization, a foreign investor must have an investment project and carry out procedures for granting and adjusting the IRC, except for the case of setting up a small and medium-sized enterprise with a start-up. Creation and investment funds for innovative start-ups in accordance with the law on supporting small and medium-sized enterprises.

Condition:

  • Investment projects not in industries or trades banned from business investment;
  • Having a location for the implementation of the investment project;
  • Investment projects in accordance with the planning specified at the LI;
  • Satisfy the conditions on investment rate per land area, number of employees (if any);
  • Meeting market access conditions

Documents:

  • A dossier of application for an investment registration certificate includes:
  • A written request for implementation of the investment project, including a commitment to bear all costs and risks if the project is not approved;
  • Documentation of investor’s legal status;
  • Documents proving the investor’s financial capacity, including at least one of the following documents: financial statements for the last 2 years of the investor; commitment to financial support of the parent company; financial institution’s commitment to financial support; guarantee on the financial capacity of the investor; other documents proving the investor’s financial capacity;
  • Investment project proposal includes the following main contents: investor or investor selection form, investment objective, investment scale, investment capital and capital mobilization plan, location, time limit, implementation progress, information on the current status of land use at the project site and proposed land use demand (if any), labor demand, proposal for investment incentives, socio-economic impacts and efficiency of the project, preliminary assessment of environmental impacts (if any) in accordance with the law on environmental protection.
  • Where the construction law stipulates the preparation of a pre-feasibility study report, the investor may submit a pre-feasibility study report instead of the investment project proposal;
  • If the investment project does not request the State to allocate or lease land or permit the change of land use purpose, a copy of the paper on land use rights or other documents determining the land use right must be submitted. points for implementing investment projects;
  • The explanation of the technology used in the investment project, for the project subject to appraisal and consultation on technology in accordance with the law on technology transfer;
  • BCC contract for investment projects in the form of BCC contract;
  • Other documents related to the investment project, requirements on conditions and capacity of the investor as prescribed by law (if any).
  • Time: 15 days from the date of receipt of a complete and valid request for the issuance of the Investment Registration Certificate from the investor.

2.2. Procedures for applying for ERC

Conditions:

  • An enterprise is granted an Enterprise Registration Certificate when it fully meets the following conditions:
    • The registered business lines and trades are not banned from business investment;
    • The name of the business is set according to regulations;
    • Have a valid business registration file;
    • Fully pay the business registration fee in accordance with the law on fees and charges.

 

Documents:

  • Business registration application form.
  • Company rules.
  • List of members (For limited liability companies with 2 or more members, joint stock companies)
  • Copies of the following documents:
  • Legal papers of individuals, for members being individuals, legal representatives;
  • Legal documents of the organization for members being an organization and the document appointing an authorized representative; legal papers of individuals for authorized representatives of members being organizations.
  • For members being foreign organizations, copies of legal papers of the organization must be consularly legalized;
  • Investment registration certificate;
  • Time: 03 days from the date of receipt of a complete and valid request for the issuance of the Certificate of Business Registration

NOTE: All documents must be legalised and translated to Vietnamese language

3. Indirect investment – investment in Vietnam by investing in an existing enterprise

Investors may also choose to indirectly invest in Viet Nam by acquiring a stake in an existing Vietnamese enterprise. Often, extensive internal and external authority approvals will be required. The precise procedural requirements for effecting such an acquisition will differ depending on:

  • whether the target entity already has foreign investors and an Investment Certificate for an approved project;
  • whether the investor is acquiring existing equity by way of transfer, or newly issued equity;
  • the form of the target entity (whether a single or multiple-member limited liability company, or a shareholding company); and
  • the sector in which the entity operates.

With the above article, Van Luat hopes to be able to bring useful information to readers about the procedure for START BUSINESS IN VIETNAM. Van Luat helps with a full service package START BUSINESS IN VIETNAM with optimal spending and maximum efficiency for customers. If you have any questions regarding this matter, don’t hesitate to contact Van Luat immediately at 0919 123 698. We always have a specialist ready to give you a free consultation.

 

Sincerely thank!

Leave a Reply

Your email address will not be published. Required fields are marked *

Reach us on WhatsApp
1
[twwr-whatsapp-chat id="2978"]