Company Registration for Trading Right in Vietnam

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Company registration for trading right in Vietnam

If you (foreign investor) are now considering possibility of forming a wholly foreign invested company in Vietnam. Upon forming, the company shall carryout the trading right over the massage machine and functional foods in Vietnam.

The company (hereinafter referred to as “NewCo” shall locate in Ho Chi Minh City, Vietnam.

1. Obtaining investment Certificate in Vietnam.

Under the current Vietnam Law, establishment of the NewCo shall require an Investment Certificate which is equivalent to a certificate of incorporation or business registration certificate from the licensing authority.

Depending on 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).

In order to obtain an Investment Certificate for establishment of a foreign invested company, Foreign Investor is required to propose an Investment Project.

Investment Project is understood as “a collection of proposals for the expenditure of medium and long-term capital in order to carry out an investment activity in a specific geographical area and for a specified duration”. Then, relevant competent authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine whether to grant Investment Certificate or not.

2. Business Lines of Foreign Invested Company in Vietnam

Kindly note that, in most other countries, a company in Vietnam is only permitted to conduct business activities that are narrowly defined and mostly codified into a published list of business activities called “business lines.” Generally, with respect to Foreign Invested Company, the permitted business lines must be closely tied to what is considered necessary for its particular investment project in Vietnam.

Business lines shall be the key determinant in possibility of establishment of foreign invested companies in Vietnam.
For instances, with respect to business lines classified to conditional investment sectors such as broadcasting and television and production, publishing and distribution of cultural products, transport and ports/airports, real estate business; import, export and distribution, mining, post and telecommunication, education and trainings, hospital and clinics, tobacco, banking and finance …, foreign investor must satisfy specific conditions to secure success of investment project.

Carrying out the trading right under Vietnam Law is considered as a conditional investment sector that require the foreign investor must strictly comply with special requirements applied by the competent authority. Particularly, in order to obtain the Investment Certificate, the NewCo must satisfy following criteria:
+ Foreign Investor setting up the NewCo must be a company duly established and operating in the country being member of WTO. Company having experience in the field shall be highly favoured.
+ Products to be traded must not listed as goods restricted or inhibited from Exportation, Importation or Trade.
+ Functional Food is classified to consumable goods, the competent authority may require the NewCo to setup the Retailed Sale Outlet in Vietnam.

Under Vietnam Law, foreign invested trading company is entitled to setup the first Retailed Sale Outlet.
From the second Retailed Sale Outlet, it must obtain the permission from the Competent Authority. It further also noted that both of the first Retailed Sale Outlet and the second Retailed Sale Outlet upward must have a sufficient floor space for storing goods and must be compliant with master plan of the city wherein the retailed sale outlet locate.

3. Investment Capital

Generally, except for several conditional investment sector such as real estate, finance and banking, education and trainings, there is no requirement for minimum investment capital.
However, foreign investor must have enough capital resources to successfully realise the business goals set out in the Investment Certificate. Investment Capital stated in the Investment Certificate shall include Equity and Loan Capital, in which, the Equity must be at least 20% of total Investment Capital.
Furthermore, it should be noted that Foreign Investor must contribute its capital contribution in accordance with the schedule stated in the Investment Certificate.
Generally, Members and owners of Limited Liability Company must pay in full the capital registered for contribution within a maximum of 36 months from the date of issuance of the Investment Certificate of the company.
In practice, generally, at least 20% of the total investment amount should be contributed as equity (rather than from loans).
In the case of a Joint Stock Company, founding shareholders of Joint Stock Company are required to register to subscribe together for at least 20% of the number of ordinary shares offered for sale.
With the respect to the trading field, according to our practical experience, the charter capital must be at least 100,000USD (One hundred thousand US Dollar).

SBLAW’s EXPERIENCE IN FOREIGN INVESTMENT

SBLaw is proud to assist a large number of clients in negotiation, licensing and post licensing procedures for the establishment and operation of their commercial presence in Vietnam.
Many big foreign investors in Vietnam are clients of SBLaw such as LG Electronic, ICBC, IBM, Nippon Steel etc.
Our services in the field of Foreign Investment covers a wide full range from assistance in market research, quantifying benefit and risks associated with investment policies of the government, foreign invested company formation, establishment of branches and representative office of foreign companies, expanding business of foreign invested company, obtaining business license or investment certificate for investors in Vietnam or in other countries.
In many circumstances, our capacity of communicating with the local community and intensive experience of our lawyers have made the local authorities and counter parties more comfortable in reaching agreement, resolving dead lock and have contributed to the success of the client’s business.

SCOPE OF WORKS OF LAWYER

Generally, with regard to establishment of a foreign invested company 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 including application, power of attorney, board resolutions in English language;
•Liaising with you to discuss the draft application documents;
•Amending the application documents based on your 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 your behalf;
•Monitoring and following up with the relevant authorities on the approval process;
•Keeping you updated on the developments and additional requirements, if any; and
•Assisting you in obtaining the investment certificate.

Post-licensing procedures:

Placing an announcement on establishment of Foreign Invested Company in the newspaper.

DELIVARABLES FOR LAWYER

The Deliverables will include documents prepared in English and Vietnamese as required for submission to licensing bodies. Your Company will review, approve and where necessary sign these documents.

SBLaw may provide English translations of these documents (or extracts thereof), but the translated documents should be used for reference other the purposes of discharging your Company’s responsibility for the positions taken and the underlying company information.