Setting Up A Foreign Owned Company In Vietnam

Despite the complicated developments of the COVID-19 epidemic, Vietnam is still an ideal investment destination for foreign investors. As of December 20, 2021, the total registered capital for establishing new companies, adjusting and contributing money to buy shares, and buying capital contributions from foreign investors reached 31.15 billion USD, up 9.2% compared to the previous year. To assist foreign investors in carrying out the procedures for establishing a foreign-owned company in Vietnam, Van Luat sends readers specific instructions as follows:

General provisions of the Law on Investment in Vietnam

From January 1, 2021, the Law on Enterprises 2020 (“LE”) and the Law on Investment 2020 (“LI”) replace the previous laws of 2014 and generally govern investment activities and the establishment and operation of enterprises in Vietnam.

The LE and LI continuously confirm to guarantee the legal capital and assets of foreign investors in Vietnam and allow foreigners to invest in most sectors of the economy, particularly in export-oriented agricultural activities, new materials, high technology, development research, and environmental protection, and others of similar nature.

There are four different types of foreign investment in Vietnam:

100% foreign-owned entity: Limited Liability Company, with One or More Members (“LLC“); Joint Stock Company (“JSC“); Partnership; or other economic organization.
capital contribution to; purchase of shares; capital contribution portions in a Vietnamese company
public-private partnership (“PPP”) contract; and
Business Co-operation Contract (“BCC”): This form of investment does not set up a new legal entity. The investors in a Business Cooperation Contract (BCC) share the revenues and products arising from a BCC. It is a cooperation agreement between foreign investors and at least one Vietnamese partner to carry out specific business activities.

So, what is the procedure for establishing a company with foreign investment in the form of investment from foreign investors? The process for establishing a foreign-invested company in the form of investment in establishing an economic organization in the above investment forms. This article only analyzes the structure of investment, which is the form of establishing financial organizations when foreign investors invest in Vietnam.

Legal provisions for the establishment of foreign companies in Vietnam

According to the Vietnam Law on Investment and Vietnam WTO’s Commitments, you can set up a wholly foreign-invested company in Vietnam. However, we would like to note that during the licensing process, the competent authority might scrutinize some of the following points:

An investor must provide an accurate address of the location where the company is based. Also, competent authorities shall require the investor to give a physical lease contract and other related documents for the site.

*Charter capital of NewCo: Vietnam Law does not imply a minimum amount of investment capital to set up a company operating in your company’s field. However, the foreign investor must prove that the investment capital is sufficient to run NewCo. To prove that they have enough financial capacity before setting up a company, the investor must provide a bank statement certifying the balance in the bank. After NewCo is set up, the investor must transfer such an amount to NewCo’s account. The investor may have three months to fully share the registered charter capital applied to JSC and no more than 36 months to transfer the registered charter capital to LLC fully.

*Business of NewCo: Currently, there are restrictions related to business for enterprises with 100% foreign capital. Specifically, there are prohibited occupations of foreign enterprises and the implementation of business conditions.

It is worthy of note that establishing any new economic organization is required to attach the establishment to an investment project in Vietnam. The LI and LE separate applications for the issuance of Investment Registration Certificates (“IRC”) of investment projects and applications for the distribution of Enterprise Registration Certificates (“ERC”) of the newly-established economic organization.

2.1. Procedures for applying for IRC (for investment projects not subject to the approval of investment policies)

Before establishing an economic organization, a foreign investor must have an investment project and carry out procedures for granting and adjusting the IRC, except for the case of starting up a small or medium-sized enterprise with a start-up. The law’s creation and investment funds for innovative start-ups support small and medium-sized enterprises.

Condition:
investment projects not in industries or trades banned from business investment;
Having a location for the implementation of the investment project;
investment projects following the planning specified in the LI;
Satisfy the conditions on investment rate per land area and number of employees (if any);
Meeting market access conditions
Documents: A dossier of applications for an investment registration certificate includes:
A written request for implementation of the investment project, including a commitment to bear all costs and risks if the project is not approved;
Documentation of the investor’s legal status;
documents proving the investor’s financial capacity, including at least one of the following documents: financial statements for the last two years of the investor; commitment to the financial support of the parent company; financial institution’s commitment to financial aid; guarantee on the financial capacity of the investor; other documents proving the investor’s financial capacity;
the investment project proposal includes the following principal contents: investor or investor selection form; investment objective; investment scale; investment capital and capital mobilization plan; location; time limit; implementation progress; information on the current status of land use at the project site and proposed land use demand (if any); labor demand; proposal for investment incentives; socio-economic impacts and efficiency of the project; and preliminary assessment of the environmental effects (if any) following the law on environmental protection.
Where the construction law stipulates the preparation of a pre-feasibility study report, the investor may submit a pre-feasibility study report instead of the investment project proposal;
If the investment project does not request the state to allocate or lease land or permit a change of land use purpose, a copy of the paper on land use rights or other documents determining the land use right must be submitted. Points for implementing investment projects.
The explanation of the technology used in the investment project, for the project subject to appraisal and consultation on technology following the law on technology transfer;
BCC contract for investment projects in the form of a BCC contract
Other documents related to the investment project, requirements on conditions, and capacity of the investor as prescribed by law (if any).
Time: 15 days from the date of receipt of a complete and valid request for issuing the Investment Registration Certificate from the investor.

Setting Up A Foreign Owned Company In Vietnam

2.2. Procedures for applying for ERC

An enterprise is granted an enterprise registration certificate when it fully meets the following conditions:
The registered business lines and trades are not banned from business investment.
The name of the business is set according to regulations;
have a valid business registration file;
Fully pay the business registration fee following the law on charges.
Documents:
business registration application form.
company rules
List of members (for limited liability companies with two or more members or joint-stock companies)
Copies of the following documents:
Individual legal papers of individuals, for members being individuals, legal representatives;
Legal documents of the organization for members being an organization and the document appointing an authorized representative; legal papers of individuals for authorized representatives of members being organizations.
For members being foreign organizations, copies of legal papers of the organization must be consular legalized;
investment registration certificate;
Time: 03 days from the date of receipt of a complete and valid request to issue the Certificate of Business Registration.

NOTE: All documents must be legalized and translated into Vietnamese.

With the above article, Van Luat hopes to bring helpful information to readers about the procedure for setting up a foreign-owned company in Vietnam. Van Luat helps with a complete service package, setting up a foreign-owned company in Vietnam with optimal spending and maximum efficiency for customers. If you have any questions regarding this matter, don’t hesitate to contact Van Luat immediately at 0919 123 698. We always have a specialist ready to give you a free consultation.

This was posted on August 1, 2010.

Sincerely thanks!

This was posted on August 1, 2010.