Question: I am a foreigner. I would like to know about the costing and procedures to set up a limited company in Vietnam.
The company provides services including,
Advisory, guidance and operational assistance services concerning decision areas which are financial in nature, such as working capital and liquidity management, determination of an appropriate capital structure, analysis of capital investment proposals, development of accounting systems and budgetary controls, business valuations prior to mergers and/or acquisitions, etc.
Answen: This is reference to your email from which, we understand that you would like us to advise on establishment of Foreign Invested Company (hereinafter referred to as “FIC’) to provide advisory, guidance and operational assistance servicesconcerning decision areas which are financial in nature, such as working capital and liquidity management, determination of an appropriate capital structure, analysis of capital investment proposals, development of accounting systems and budgetary controls, business valuations prior to mergers and/or acquisitions, etc..
We are therefore grateful to present you hereinafter our Legal Services Proposal for your review and consideration.
1. SUMMARY OF BACKGROUND AND PRELIMINARY COMMENTS
1.1. SUMMARY OF BACKGROUND
According to information as provided by you, we understand that Client would like to setup a foreign invested company (Hereinafter referred to as “FIC”) in Hanoi. Upon establishment, FIC shall conduct following business activities:
a) Advice on working capital and liquidity management, determination of an appropriate capital structure;
b) Analysis of capital investment proposals, development of accounting systems and budgetary controls, business valuations prior to mergers and/or acquisitions.
The above services can be classified to (i) Management Consultation Service and (ii) Financial Consultation Service.
1.2. PRELIMINARY COMMENTS
1.2.1. VIETNAM LAW ON ESTABLISHMENT OF FIC
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. With respect to management consultation service and financial consultation service, Vietnam Government does not impose any minimum capital rate. However, according to our practical experience, you should consider an amount of 100-150,000USD upward.
c. Experience of Client in the field of business consultation service and financial consultation service also is a notable thing. Vietnam Government much favourn Foreign Investors who are experienced in the same field for many years before setting up FIC in Vietnam.
1.2.2. CONCEPTS OF MANAGEMENT CONSULTATION SERVICES AND VIETNAM REGULATION ON MANAGEMENT CONSULTATION SERVICE
Under Vietnam-WTO’s commitment, management consultation service is classified to CPC 865 which includes (i) general management consulting; (ii) financial management consulting; (iii) marketing management consulting; (iv) human resources management consulting; (v) production management consulting; (vi) public relations; and (vii) other management consulting services. Vietnam Government does not impose any restriction to foreign investor who wishes to setup FIC for providing management consultation services in Vietnam.
Accordingly, Client can either setup (i) Wholly Foreign Owned Company or (ii) Joint Venture Company in Vietnam for supplying Management Consulting Services.
1.2.3. CONCEPTS OF FINANCIAL CONSULTATION SERVICES AND VIETNAM REGULATION ON FINANCIAL CONSULTATION SERVICES
Under Vietnam Law, financial consultation service is classified to conditional business activities. Accordingly, in order to providing financial consultation services, FIC shall need at least 02 experts who are granted Accountancy Practice Certificate. Furthermore, one of following persons: Company’s Owner, Member of a Partnership, Chairman or Director must also own Accountancy Practice Certificate.
In this case, if you wish to setup FIC for providing financial consultation service in Vietnam, you should use a company already established in your home country operating in the same field for at least 03 years to setup a subsidiary in Hanoi. Individual Investor who wishes to setup FIC for providing financial consultation service shall not be favoured and therefore possibility of success is not very high.