We understand that you would like us to advise on establishment of a Joint Stock Company in which 49% is owned by local partner and 51% is owned by foreign investor (hereinafter referred to as “FIC’) in Hanoi, Vietnam.
We further understand that upon establishment, the FIC shall export agricultural products from Vietnam. We are therefore grateful to present you hereinafter our Legal Services Proposal for your review and consideration.
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.
2. SPECIFIC COMMENTS
With the respect to the importation of construction material of the FIC, according to the Item 1, Article No. 4 of Decree No.23/2007/ND-CP dated 12 February 2007 of the Government providing regulation for implementation of commercial law regarding purchase and sale of goods and activities directly related to the purchase and sale of goods by enterprises with foreign owned capital in Vietnam (Hereinafter referred to as “Decree No.23/2007/ND-CP”), foreign investors who satisfy following conditions shall be entitled to license for activities of trading in Vietnam:
– It is an investor belonging to a country or territory participating in an international
– The form of investment is consistent with the schedule/s undertaken in international treaties of which the Socialist Republic of Vietnam is a member and is consistent with the law of Vietnam;
– The goods and services in which business is conducted are consistent with treaty of which the Socialist Republic of Vietnam is a member and in such treatyVietnam has undertaken to open the market on activities of purchase and sale of goods and activities directly related to purchase and sale of goods; international treaties of which the Socialist Republic of Vietnam is a member and is consistent with the law of Vietnam;
Vietnam’s undertaking to open the market and are consistent with the law of Vietnam;
– The scope of operation is consistent with Vietnam’s undertaking to open the
– It has approval from the State body authorized in Vietnam.
In case, foreign investor is citizen of country member of WTO, Client shall be entitled to setup a FIC for importing construction material into Vietnam. However, we also would like to note that, FIC shall not be allowed to import cement and clinker as these goods are inhibited from importation and FIC must not be involve with distribution of imported goods within Vietnam Market.
Regarding to assembly or installation of construction material, FIC can provide the service to customers consuming goods imported by FIC. However, for this service, Client must lease a small factory or warehouse for performing construction material assembly.
For securing possibility of obtaining Investment Certificate for FIC, we highly recommend Client to carefully consider following matters:
– Capital: Vietnam Law does not stipulate minimum capital amount for this industries.
However, according to our practical experience in previous case, an amount of 100,000USD upward should be reasonable. The Vietnam Government can also recommend you to increase the Capital Amount if the number of goods to be registered is large;
– Parent Company must have positive business operation result in at least 02 recent years. This must be evidenced by audited Financial Statements for 01 recent year and bank account statement.
– Head office address of the FIC in Vietnam must be compliant with master plan of Vietnam.
– Location and scale of warehouse or factory must be compliant with master plan of the City and it must secure enough space for assembly of construction material.
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 market and is consistent with the law of Vietnam;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 02 months from submission of application dossier to the competent authority for the provincial licensing authority to grant the Investment Certificate2
– 03 working days from receipt of Investment Certificate issued by the competent authority, we shall submit the application dossier for obtainment of Certificate of Business Registration. We shall obtain the Certificate of Business Registration within 05 working days from the submission date.
c. Post licensing: Within 15 working days we shall complete the post licensing procedures such as publishing the FIC in News Paper, obtaining seal.
– 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.
