This is reference to our conservation , from which, we understand that you would like us to advise on establishment of 100% Foreign Invested Company in (hereinafter referred to as “FIC’) in Hanoi, Vietnam.
We further understand that upon establishment, the FIC shall act as holding company to assist subsidiary companies of Client in Vietnam. We are therefore grateful to present you hereinafter our Legal Services Proposal for your review and consideration.
1. OUR PRELIMINARY COMMENTS
1.1. BRIEF INTRODUCTION ON SETTING UP FOREIGN INVESTED COMPANY IN VIETNAM
The establishment of a 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 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.
With respect to Investment Project, total investment capital of which is from 300,000,000,000 VND upward, Investor is required to prepare Feasibility Study for the Investment Project.
Generally, the relevant licensing authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine on granting of the Investment Certificate on the following basis:
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. By the way, we also would like to note that in the year of 2014, Vietnam National Assembly adopted a new law on Investment and Enterprise which shall become effect from 1st July 2015. Accordingly, the licensing procedure for setting up FIC shall have to undergo two following steps:
– Step 1: Obtainment of Investment Certificate. The Law requires that within 15 working days from submission of the application dossier the competent authority shall have to issue the Investment Certificate for Foreign Investor. However, having preliminarily discussed with the Licensing Authority, we do not much expect that the licensing authority can comply with this requirement in practice, especially, those relating to conditional investment sectors
– Step 2: After obtainment of Investment Certificate, Client shall be required to obtain the Certificate of Business Registration. The Law requires that within 05 working days from submission of application dossier, the competent authority shall have to issue the Certificate of Business Registration for forming the Foreign Invested Company.
1.2. SPECIFIC COMMENTS
Under Vietnam-WTO Commitments and under Vietnam Legal System, concept of holding company is not officially defined. According to our practical experience in similar case, up to now, only one wholly foreign owned company which is owned by Japanese Company has been registered as a holding company in Vietnam. Accordingly, such holding company has function of allocation and management of capital in investment projects and assisting in management, IT for companies invested by its Japanese Parent Company in Vietnam. It isconsidered as an exception in Vietnam and there have no similar case up to now despite of that there have been a large number of foreign co-operations applying for setting up the same in Vietnam.
Based on our understanding on structure of this business model, we are of opinion that you can consider setting up Foreign Owned Management Service Company (hereinafter referred to as “Management Company”). This shall allow the Company to manage and assist other subsidiary companies of Client in Vietnam. This structure is widely adopted by many foreign investors who have invested into at least 03 or 04 projects in Vietnam.
In order to secure high success possibility of the case, we highly recommend Client to carefully account following factors: Experience of Client: Experience of Client in Business Management is one of important factor that determining the success possibility of the case. Foreign Investor having no experience in the field is generally not favoured by the Licensing Authority. In this case, we understand that Client has been established and operating for a rather long time in Singapore. This shall much support for the case in Vietnam.
– Investment Capital of Management Company: Under Vietnam Law, Management Service Business does not require for minimum rate of investment capital.
However, upon applying for investment certificate, Client shall need to provide an estimate of capital required for operating the Foreign Invested Company in a medium or long term. According to our practical experience in previous cases, an amount of 200,000USD can be acceptable in this case. However, in case, the Management Company intends to make investment in other projects in Vietnam in future, the Management Company shall need to increase its charter capital. By the way, we also would like to note that, in case we obtain the Investment Certificate by 1st July 2015, Client shall be required to contribute 100% charter capital of the FIC within 03 months after completion of obtainment of Certificate of Business Registration.
However, if we can obtain the Investment Certificate before 1st July 2015, we can apply for an extended schedule of capital contribution, such as contribution of charter capital within 12 months from the date of setting up company.
1.3. Licensing Process
The roadmap for the incorporation of the FIC can be described in following steps
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 4 working days.
b. Licensing Procedure: 02 working days from receipt of documents duly signed and sealed from Client, we shall submit the application dossier for starting the licensing procedure. It shall take about 30 working days from submission of application dossier to the competent authority for the provincial licensing authority to grant the Investment Certificate. Post licensing: Within 15 working days we shall complete the post licensing procedures such as publishing the FIC in News Paper, obtaining seal and tax code registration.
d. For avoidance of any doubt, in practice, the administrative procedure can be longer due to that the competent authority must consult relevant ministries before granting License. In such case, SB Law shall try its best to accelerate the progress in order to obtain the approval at the soonest.
2. OUR SCOPE OF WORK
We propose our scope of work in this case as follows:
Description of work
Preparation of the application documents:
Notifying application documents required in accordance with Vietnamese law;
Drafting application documents required for submission purpose;
Liaising with SB Law 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 execution. 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 Investment Project.
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 seal of the FIC;
Obtaining the FIC’s tax code;
Placing an announcement on the establishment of the FIC in the newspaper;
3. PROFESSIONAL FEE
3.1. Professional Fee for performing the SB Law services as mentioned in item 4 above will be 4,000USD (Four thousand US Dollar). The above service fee is exclusive of 10% VAT, bank charge and cost for translation of documents from English into Vietnamese (10USD/150 words).
3.2. Services fee shall be paid to SB Law as follows:
– Within 03 working days from signing date of legal service contract, Client will pay for SB Law an advance payment which equivalent to 30% of the total estimated services fee.
– Within 03 working days from commencing Licensing Process, Client will pay for SBLaw an amount equivalent to 25% of the total estimated services fee;
– Within 05 working days from obtaining Investment Certificate, Client shall pay for SBLaw remained 45% of estimated fee and other expense on behalf of Client.
