What are the things that you have to know when establishing a Foreign-Invested Enterprise?
Pursuant to Clause 22, Article 3 of the Law on Investment 2020: “Foreign-invested economic organization means an economic organization with foreign investors as members or shareholders.”
From the above-mentioned provision, we can understand that the procedures for establishing a Foreign-Invested Enterprise (also known as a foreign-invested economic organization) are the procedures for establishing a company with individuals of foreign nationality. It is organized and established as prescribed by foreign law, making investments to establish a company or investments to contribute capital, stock purchases, and capital contributions for operating Vietnamese companies.
Guidance on complementary orders and procedures
Step 1: The procedures for applying for the Investment Registration Certification
Before establishing the economic organization, foreign investors must have an Investment Project and apply for the Investment Registration Certification (Point c, Clause 1, Article 22 of the Law on Investment 2020).
Pursuant to Article 36 of Decree on 31/2021/ND-CP/, the document includes:
- A proposal text for the implementation of an investment project, including a commitment that incurs all costs and risks if the project isn't accepted;
- Documents relating to the investor’s legal status;
- Documents demonstrating the investor’s financial capacity include at least one (01) of the following: the investor’s financial statements for the last two (02) years; a commitment to financial support from the holding company; a commitment to financial support from a financial organization; a guarantee for the investor’s financial capacity; other documents demonstrating the investor’s financial capacity;
- The proposal for the investment projects includes the following main contents: the investors or investor selections, investment purposes, investment types, investment capitals and mobilized capital plans, addresses, duration, implementing progress, information on the status quo of land use at the project site, a proposal for land use needs (if any), labor needs, a proposal for receiving investment incentives, effects, socio-economic efficiencies of the project, and a preliminary assessment of environmental impact (if any) as prescribed by the law for environmental protection.
In cases where the law on construction stipulates the foundation of pre-feasibility study reports, the investor is allowed to submit pre-feasibility study reports instead of investment project proposals;
- If the investment project doesn't require the State to give and lease land, allow the change of land use purposes, the investor will submit a material copy of the land use rights or other document determining the use rights for the project site;
- Explanatory content on technology used in investment projects for the appraisable projects, collection of technology opinions shall comply with the law on technology transfer;
- Other documents relating to the investment projand requirements on the conditions and capacities of investors shall comply with the law (if any).
Conditions for implementing the procedures
Within 15 days from the date of receiving the valid document to implement the procedures for establishing a Foreign-Invested Enterprise, the investment registry shall grant an Investment Registration Certificate to the investor when such a project demands the following conditions:
- The investment project that is not in the industries banned from business investment;
- There is a location to implement the investment project;
- The investment project has to comply with the plan as prescribed in point c, clause 3, Article 33 of the Law on Investment 2020;
- It must demand the requirements of an investment rate per area, used labor amount (if any);
- It must demand the requirements of the market approach for foreign investors.
Which authorities are competent to issue the Investment Registration Certificate?
- The Board of Management of Industrial Area, Export Processing Zone, High-Tech Park, and Economic Zone shall issue, adjust, and revoke Investment Registration Certificate for investment projects in Industrial Area, Export Processing Zone, High-Tech Park, and Economic Zone, except as otherwise required by Clause 3 of this Article.
- The Department of Planning and Investment shall issue, adjust, and revoke the Investment Registration Certificate for investment projects beyond the Industrial Area, Export Processing Zone, High-Tech Park, and Economic Zone, except as otherwise required by Clause 3 of this Article.
- The Investment Registry is known as the place where the investors implement the investment projects, locate or expect to locate the executive office. This Investment Registry shall issue, adjust, and revoke Investment Registration Certificate for the following investment projects:
- The investment project is implemented in 2 administrative units at the provincial or higher level;
- The investment project is implemented in or beyond the Industrial Area, Export Processing Zone, High-Tech Park, and Economic Zone;
- The investment projects in Industrial Area, Export Processing Zone, High-Tech Park, and Economic Zone are known as the places where a Board of Member hasn’t been established or is beyond the Board of Management’s control of Industrial Area, Export Processing Zone, High-Tech Park, and Economic Zone.
Step 2: Implementation of the procedures for establishing a company
It depends on whether the foreign investor is an individual or an organization that chooses the appropriate type of company.
- If the foreign investor is an organization, they can choose a Limited Liability Company (Co., Ltd), or a Joint Stock Company;
- If the foreign investor is an individual or acts as a capital contributor to a Vietnamese individual, they can choose the following type of company: Limited Liability Company, Joint Stock Company or Partnership.
Depending on three (03) types of companies, the establishment registration files of the company shall be different. According to Article 21 to Article 24 of Decree No. 01/2020/ND-CP, which particularly guides each file for each type.
Competent licensing authorities: the Business Registration Authorities belong to the Department of Planning and Investment in the province or city under the central government where the company carries out the procedures for establishing a Foreign-Invested Enterprise as its headquarters.
Note: If an economic organization (including a Foreign-Invested Enterprise) belongs to one of the cases as prescribed in clause 1, Article 23 of the Law on Investment 2020, it must satisfy the conditions and implement the investment procedures as defined by the provisions for the foreign investor when investing and establishing in another economic organization. Specifically, such cases include:
- The foreign investor holds over 50% of the charter capital or all partnership membership as a foreign individual for the economic organization, which is a partnership;
- The foreign investor holds over 50% of charter capital as defined by point a of this Clause;
- The foreign investor and economic organization hold over 50% of charter capital as defined by point a of this Clause.
If the economic organization is not one of the above subjects, it shall implement conditions and investment procedures as defined by the provisions for the domestic investor when investing and establishing in another economic organization.
These are all information relating to the procedures for establishing a Foreign-Invested Enterprise as prescribed by Vietnamese Law. NPLaw specializes in providing legal services all-around relating to domestic and abroad investments such as Enterprise, Real Estate, Intellectual Property, Labor; Drafting Consultation, negotiations and concluding support for the Commercial Contract, domestic and abroad Service Contract; consultations and support for implementing licensed procedures of licenses, etc. With our professional Lawyers and Specialists, we have the full ability to consult with and support customers as they implement the above procedures.
