Question: We are the construction contracting company in India which is owned by South Korean. Now we want to incorporate our business setup in Ho Chi Minh cat Vietnam for the same business field.
As we surveyed, there are various type of the company incorporation in Vietnam, like wholly foreign-owned LLC, partially foreign-owned LLC, Public Limited Company (JSC) and Branch Office, etc.
We are planning to take some construction projects in Vietnam and it will be starting very soon.
Our business fields are Electrical Works Contracting, Mechanical Works Contracting, Mechanical Utility Works Contracting, Fire Fighting Works Contracting and some related Civil Works.
Hence we would like to request you to provide us the information of the type of the incorporation, procedure, formalities for the incorporation, any license required for construction contracting and all fee structures, etc.
Hope to hear your prompt response and it will be highly appreciated.
Answer:
This is reference to your email from which, we understand that your company (herein after referred to as “Client”) intends to expand its business into Vietnam (hereinafter referred to as “Services”).
You therefore would like us to assist in legal advice for above said purpose. We are grateful to present you hereinafter our Legal Services Proposal for your review and consideration.
1. BACKGROUND OF THECASE AND OUR PRELIMINARY COMMENTS
1.1. Our understanding about your goals
It is our understanding that Client plans to expand its services into Vietnam. The Services shall be Electrical Works Contracting, Mechanical Works Contracting, Mechanical Utility Works Contracting, Fire Fighting Works Contracting and some related Civil Works. Location of the business may be Ho Chi Minh City. According to Vietnam-WTO Commitments, the Services are classified to CPC 511-518.
1.2. Options available to Client
Under Vietnam Law, in order to achieve its goal, Client can consider following options:
– Setting up Wholly Foreign Invested Company: With this option, Client shall can setup a Limited Liability Company which is 100% owned by Client. This option is generally adopted by Foreign Investor who does not wish to share its benefit with any other business partner.
90% Foreign Investors in Vietnam in the Service Field which does not restrict foreign ownership select this option due to that it allow them to totally control their business in Vietnam. Furthermore, this option does not restrict them to enjoy tax incentive (if any) applicable under Vietnam Law;
– Setting up Partial Foreign Invested Company (Joint Venture Company): With this Option, Client must co-operate with at least one local partner to setup the Company in Vietnam.
The Joint Venture Company can be structured under the form of Limited Liability Company with two members upward or Joint Stock Company
This option is generally selected by Foreign Investors running business in the field which restricts foreign ownership under Vietnam Lawor requires for leasing factory etc.
We would like to note that Joint Venture Company doesnot offer more incentive to Foreign Investor in comparison with other option;
– Public Limited Company (Joint Stock Company): In fact, this is not an option. Joint Stock Company is the way that you structure your company in Vietnam. It is available for both of Wholly Foreign Invested Company (if you co-operate with at least 02 foreign investors to setup the Joint Stock Company) and Joint Venture Company (if you co-operate with at least 02 business partners to setup the Joint Stock Company and at least one business partner must be Local Partner);
– Setting up Branch Office: For the construction service, under Vietnam-WTO commitment, it is possible for setting up Branch Office in Vietnam. However, in practice, this option is not favored by the Licensing Authority. When you submit the application dossier for setting up Branch Office, the Licensing Authority shall guide you to setup wholly foreign invested company in Vietnam. Thus, this option is not popular in Vietnam now.
In the light of above analysis, we are of opinion that, you should adopt the Option 1
– Setting up Wholly Foreign Invested Company. For your further understanding about procedure for setting up a Wholly Foreign Invested Company or a Joint Venture Company (hereinafter jointly referred to as “FIC”) in Vietnam, please find detailed information in the Item 1.3 below.
1.3. Setting up FIC in Vietnam
The establishment of the FIC in Vietnam requires an Investment Certificate from the licensing authority. Depending upon the location of the company, the licensing authority may be the Provincial People’s Committee (for companies located outside industrial or export processing zones) or the provincial Industrial and Export Processing Zones Management Authority (for companies located in industrial or export processing zones)
We would like to clarify that the procedure for establishment of a FIC in Vietnam generally takes a rather long time in comparison with other countries in the region.
Our practical experiences show that although the total time for establishment of a foreign invested company as stipulated under Vietnam Investment Law 2005 is only 20 – 45 days, the actual process may take a longer time due to that the competent authority must consult other relevant offices to evaluate the investment project.
Possibility of establishment of a FIC in Vietnam shall very much depend on following factors:
a. the legal framework including Vietnam’s WTO Commitments, Vietnam Investment Law, Vietnam Enterprise Law, Regulations applicable to specific industries as well as the master economic development plan of the city or province that the FIC shall register its head-office.
b. Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
c. Head office of the FIC should be in line with master plan of the City.
2. SCOPE OF WORK
For setting up a FIC in Vietnam, our scope of work shall be as follows:
Preparation of the application documents:
Notifying application documents required in accordance with Vietnamese law;
Drafting application documents required for submission purpose;
Liaising with SBLaw to discuss the draft application documents;
Amending the application documents based on Client’s comments;
Obtaining preliminary comments from the licensing authority on the draft application documents;
Finalizing the application documents following comments from the licensing
authority; and
Translating the final version of the application documents into Vietnamese for
Licensing procedures:
Submitting the application dossier to the licensing authority on Client’s behalf;
Monitoring and following up with the relevant authorities on the approval process;
Keeping your company updated on the developments and additional requirements,
if any; and
Assisting Client in obtaining the investment certificate for the FIC.
Post-licensing procedures:
Upon the issuance of the investment certificate, the FIC shall be required to carry out immediate administrative procedures.
Our services include:
Obtaining the FIC’s tax code;
Placing an announcement on the establishment of the FIC in the newspaper;
The roadmap for the incorporation of the FIC can be described in following steps as follows:
a. Preparing the application dossier: We shall collect necessary information and
documents from you. Upon receipt of necessary information and documents from you, we shall translate documents from English into Vietnamese and prepare the application dossier under the standard forms. The initial drafted application dossier shall be sent to you for your comments. Then, after updating the application dossier based on your comments, we shall obtain the preliminary comments from the competent authority and send the finalized application dossiers for you to sign and seal.
We anticipate that this phase shall be completed within 05-07 working days. The prepared documents shall then be sent to you for review, signing and seal.
b. Submission of application dossier: Within 02 working days from receipt of duly signed and sealed application dossier, we shall submit the application dossier to the competent authority. It shall take about 45 working days from submission of application dossier to the competent authority for the provincial licensing authority to grant the Investment Certificate. However, if Client wishes to obtain License for Import, Export and supply construction materials or equipment or spare part thereof, the process can be longer as ittakes time to consult relevant Ministries such as Ministry of Industry and Trade, Ministry of Planning and Investment and Ministry of Finance.
c. Post licensing: Within 13 working days we shall complete the post licensing procedures such as publishing the establishment of FIC in News Paper, obtaining seal and tax code registration.
3. DELIVARABLES
The Deliverables will include documents prepared in English. Vietnamese Version shall be provided if the document is required for submission to licensing bodies. Client will review, approve and where necessary sign these documents.
