Establishment of a wholly foreign invested company to conduct exporting activities in Hochiminh City

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SBLAW would like to give some information about establishment of a wholly foreign invested company to conduct exporting activities in Hochiminh City as follows:

 

I. EXECUTIVE SUMMARY

 

Under Vietnam Law on Investment, in order to obtain an Investment Certificate for establishing a foreign invested company, the 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 the Investment Certificate or not.

 

Assessment of the legitimacy of an Investment Project shall be based on legal framework of Vietnam, including Vietnam’s WTO Commitments, Vietnam’s Investment Law, Vietnam’s Enterprise Law and Regulations applicable to specific industries as well as the master economic development plan of the city or province where the company shall register its head-office.

 

Meanwhile, a conclusion regarding to the feasibility of an Investment Project shall be based on assessment on the financial ability of the Foreign Investor, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.

 

II. SPECIFIC COMMENTS

 

Through discussion, S&B Law understands that the Owner (“Foreign Investor”) is the company, which was duly established under Indian Law. Now the Foreign Investor intends to establish a 100% foreign-owned company in Ho Chi Minh City, Vietnam (“NewCo”) to conduct the business line as follows:

 

– Exportation of agricultural products;

 

Under the applicable law of Vietnam, as well as Vietnam’s WTO Commitments, from the 01stJanuary 2009, foreign investor is allowed to establish a 100% foreign-owned company in Vietnam to conduct exporting activities.

 

In order to optimize your success in setting up the NewCo as mentioned above, please consider the following matters as suggested by the licensing authority of Ho Chi Minh City:

 

– The Foreign Investor must be experienced in the field of exportation. This experience could be demonstrated through business lines/operation activities recorded in the Business Registration License or Charter of such investors or any other documents could indicate these experiences;

 

– HS Code of proposed products must be free of products from the List of restricted/abandoned-trading’s products, etc. according to Vietnam’s laws. Such lists can be promulgated and changed from time to time by the State Authorities. Once the Client provides its List of proposed products with its HS Code in detail, S&B Law will cross-check and inform to you for further consideration.

 

– Although Vietnam Law on Investment does not request a minimum amount of charter capital to setup a company operating in the field of exportation, the Charter Capital for establishment of NewCo should be at least 100,000~200,000 USD. In addition, the Foreign Investor must prove that the amount of investment capital used to run such company is sufficient. The Foreign Investor could use the audited annual financial statement and/or banking statement to prove the financial capacity. Furthermore, it is noted that it is possible to contribute to the charter capital by many installments of a duration of three (03) or six (06) months, but it cannot exceed thirty-six (36) months in case a limited liability company;

 

– The Investors must provide the papers/documents proving the lawful ownership of the landlord as well as using right of the investors regarding the NewCo’s proposed registered address. Besides, to use the warehouse (if any), the investors must obtain the acceptance from the District People’s Committee;

 

Last but not least, under the applicable laws and regulations on investment, once the Foreign Investors are granted the Investment Certificate which permits them to exercise activities in the field of exportation, they could open their first retail and/or wholesale store in Ho Chi Minh City accordingly without further license, provided that such store is matched with planning of Ho Chi Minh City authority. However, if the NewCo intends to open a second retail or wholesale store upward, it has to apply for another license with many assessments and evaluation procedures on “Economic Needs Tests” (a test that conditions market access upon the fulfillment of certain economic criteria).

 

The common period of granting an Investment Certificate for this type of company is in the region of fifty to sixty (50 – 60) working days from submission of valid dossier.