Question: We want to set up joint venture company which is owned by Singapore Logistic Co., Ltd and a Vietnamese Partner in Binh Duong Province. Upon establishment, our company shall carry out business activities in the field of: (i) Transportation Agency; (ii) Warehouse Service; (iii) Forwarding Service; (iv) Loading Services; and (v) Brokerage and Auction Agency, please advise the legal procedure?
Answer: This is reference to your email from which, we were requested to provide legal advice for setting up joint venture company (hereinafter referred to as “FIC”) which is owned by Singapore Logistic Co., Ltd (hereinafter referred to as “Client”) and a Vietnamese partner in Binh Duong Province .
Upon establishment, FIC shall carry out business activities in the field of: (i) Transportation Agency; (ii) Warehouse Service; (iii) Forwarding Service; (iv) Loading Services; and (v) Brokerage and Auction Agency. We therefore would like to present you our legal information for your consideration.
1. General Comments
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 2014 is only 15 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 several cases that involves with relocation of 10,000 people or more in highlands; 20,000 people or more in other areas or requirement for changes of land purposes or project in several special field such as Construction and operation of airports; air transport; Construction and operation of national seaports; Petroleum exploration, extraction, and refinery etc, it shall require for approval from the National Assembly, Prime Minister or Provincial People Committee before starting the licensing process. In this case, we assume that your case is not subject to such requirement for approval. However, we reserve our right to re-quote our professional fee and amend the work schedule if your case is subject to approval of the National Assembly, Prime Minister or the Provincial People Committee. In order to setup a FIC, it shall require you 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. For granting the Investment Certificate, 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:
- 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.
- Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
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.
2.1.Transportation Agency Service (CPC 748): According to roadmap of opening market under Vietnam’s WTO commitments, from the year of entering into WTO, Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 7 years after entering into WTO, foreign ownership restriction shall be removed. Thus, with respect to these services, Client shall not face with difficulties in obtaining Investment Certificate for establishment of FIC;
2.2.Warehousing Service: These services can be classified to Warehousing Service (CPC 742). According to roadmap of opening market under Vietnam’s WTO commitments, from the year of entering into WTO, Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 7 years after entering into WTO, foreign ownership restriction shall be removed. Thus, with respect to these services, Client shall not face with difficulties in obtaining Investment Certificate for establishment of FIC;
In case, Client wishes to lease warehouse from other entities for re-leasing, we would like to note as follows: Under Vietnam Real Estate Law 2014, Foreign Investors are permitted to lease existed properties for re-lease. However, please also note that in such case, paid up capitl of the FIC must be at least 20,000,000,000VND (Twenty billion Vietnam Dong).
2.3.Forwarding service: We understand that, scope of this service shall cover required work items for custom clearance. According to Vietnam-WTO Commitment, foreign investors are permitted to joint venture with local partner(es) to provide custom clearance service. Vietnam Government does not limit foreign ownership in such Joint Venture. Then, in order to satisfy this condition, Client shall have to joint venture with at least a Vietnamese Partner to setup a Joint Venture Company. The ownership of Vietnam Partner in Joint Venture Company should be at least 01%. Then, in this case, setting up FIC does not face with much difficulty.
2.4.Goods Loading Service: Vietnam Government does not limit right of foreign investor to provide this service. Then, we are of opinion that setting up a Joint Venture Company for providing this service shall not face with much difficulty.
2.5.Brokerage Agency and Auction: Vietnam Government does not commit open market for these services. Then, it shall very much depend on sole direction of Vietnam Government. However, according to our practical experience in previous similar case, we are of opinion that chance for getting approval for this service is not high, below 10%. Then, we highly recommend Clien to consider withdrawing these services from business plan of setting up FIC.
3. Licensing process
The roadmap for the incorporation of the FIC can be described in following steps as follows:
3.1.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 12 working days.
3.2.Licensing procedure: Within 03 working days from receipt of duly signed and sealed application dossier, we shall submit the application dossier for starting the licensing procedure. It shall take about 3 months from submission of application dossier to the competent authority for the provincial licensing authority to grant the Investment Certificate and Certificate of Business Registration.
3.3.Post licensing: Within 07 working days from receipt of Certificate of Business Registration, we shall complete the post licensing procedures such as announcing on establishment of FIC, obtaining seal and tax code registration.