Foreign-invested enterprises and how to set up

Foreign-invested enterprise is an enterprise established in the territory of another country by an investor of one country with all or part of its capital in order to conduct profitable business activities. Let’s find out foreign-invested enterprises and how to set up through the next post.

The concept of foreign-invested enterprises

Foreign-invested enterprise is an enterprise established in the territory of another country by an investor of one country with all or part of its capital in order to conduct profitable business activities.
“Many countries in the world do not distinguish between domestic investment capital and foreign investment capital and therefore, there is no concept of foreign-invested enterprises; they call enterprises established on the basis of capital contribution. of foreign investors according to their form of legal organization, for example: limited liability company, joint stock company…
The term foreign-invested enterprise is officially used in the 1996 Law on Foreign Investment in Vietnam (previously called foreign-invested enterprises). Accordingly, foreign-invested enterprises have the following characteristics: 1) Enterprises wholly or partly owned by foreign investors; 2) Being established and operating under Vietnamese law on the basis of an investment license issued by a state management agency in charge of foreign investment; 3) Having legal status under Vietnamese law; 4) Organized as a limited liability company. Currently, Vietnam is piloting the transformation of a number of foreign-invested enterprises into joint stock companies.
The Investment Law 2020 does not directly refer to this type of enterprise, but rather defines it in a general way in Clause 17, Article 3 as follows: “Foreign-invested economic organization is an economic organization with foreign investors. foreign members or shareholders.”
Thus, according to this regulation, we can understand basically, FDI enterprises are enterprises with foreign direct investment capital, regardless of the percentage of capital contributed by foreign parties. Foreign direct investment enterprises include:
  • Enterprises with 100% foreign capital.
  • Enterprises with foreign nationals, organizations established under foreign law investing (contributing capital for establishment, buying contributed capital).

Distinguish between foreign companies and foreign invested companies

Currently, there are still some investors who do not fully understand the concept and there is confusion between foreign companies and foreign-invested companies, leading to failure to identify or incorrectly identify legal Vietnamese laws apply to each type of enterprise.
A foreign company is a type of foreign organization and is defined in Clause 32, Article 3 of the Enterprise Law 2020 as follows:
“32. Foreign organization means an organization established in a foreign country under foreign law.”
On the other hand, a foreign-invested company is a type of economic organization established and operating under Vietnamese law under the forms of enterprises, cooperatives, unions of cooperatives and unions of cooperatives. other organizations conducting business investment activities and having foreign investors as members or shareholders.
From there, it can be seen that these two types of companies have major differences based on the law governing the establishment process of each type. Specifically, a foreign company is established according to the procedures and processes in accordance with foreign laws, while a foreign-invested company in Vietnam is a company established and operating in accordance with the Vietnam law.
In this article, we will delve into the current legal processes, procedures and policies for the establishment of a foreign-invested company in Vietnam.

Legal bases for the establishment of a foreign-invested company in Vietnam

  • Schedule of WTO commitments,
  • Investment Law 2020 and guiding documents;
  • Enterprise Law 2020 and guiding documents;
  • Specialized legal documents related to the field of investment.
  • Trade agreements with foreign investors’ nationalities.
  • Decree No. 09/2018/ND-CP detailing the Commercial Law and the Law on Foreign Trade Management on goods purchase and sale activities and activities directly related to the purchase and sale of goods by foreign investors. economic organizations with foreign investment capital in Vietnam;

Foreign-invested enterprises and how to set up in Vietnam

Foreign investors, including foreign individuals and organizations, are allowed to set up companies in Vietnam in accordance with the law. Before establishing a company, foreign investors must have an investment project and carry out an investment project. carry out the procedures for granting the Investment Registration Certificate in accordance with the law. In addition, the investor must meet the following conditions:

To own unlimited charter capital, except for the following cases

+ The percentage of foreign investors’ ownership in listed companies, public companies, securities trading organizations and securities investment funds in accordance with the law on securities;
+ The percentage of foreign investors’ ownership in state-owned enterprises equitized or converted into other forms shall comply with the law on equitization and transformation of state-owned enterprises;
+ The foreign investor’s ownership ratio which does not fall into the above two cases shall comply with other provisions of relevant laws and international treaties to which the Socialist Republic of Vietnam is a contracting party.

Investment form, scope of activities, Vietnamese partners participating in the implementation of investment activities and other conditions under the provisions of international treaties to which the Socialist Republic of Vietnam is a signatory

Thus, whether a foreign investor can establish a foreign-invested company will also depend on the industry in which the investor intends to do business in Vietnam. For example, with the business line of providing the service of sending workers to work abroad, investors are not allowed to set up a company with foreign capital to do this business because the current law stipulates only such business.
Enterprises established and operating under the Law on Enterprises have 100% charter capital of Vietnamese organizations and individuals to be licensed to operate (according to Article 6 of Decree 38/2020/ND-CP). Or with the film production service business, foreign investors are only allowed to invest in the form of a business cooperation contract or a joint venture with a Vietnamese partner to establish a company and the investor’s capital contribution. foreign investment must not exceed 51% of the charter capital of the company (according to point a Sub-sector D. Audiovisual services, Section2. Information services, Commitment 318/WTO/CK services). Foreign-invested enterprises and how to set up in Luatvn.vn?

Dossier for issuance of investment certificate

The investor’s dossier submitted to the investment registration agency includes

– A written request for the implementation of the investment project;
– A copy of the identity card / identity card or passport for the investor being an individual; a copy of the Certificate of Establishment or other equivalent document certifying the legal status of the investor being an organization;
– Investment project proposal, including the following contents: investor implementing the project, investment objectives, investment scale, investment capital and capital mobilization plan, location, duration, and investment schedule investment, labor demand, proposal for investment incentives, assessment of the project’s socio-economic impact and efficiency;
– A copy of one of the following documents: financial statements of the last 2 years of the investor; commitment to financial support of the parent company; financial institution’s commitment to financial support; guarantee on the financial capacity of the investor; documents explaining the financial capacity of the investor;
– Head office lease contract, Papers proving the lessor’s right to lease (Certificate of land use right, Construction permit, Certificate of business registration with real estate business function of the lessor). rental or equivalent documents).
– Proposing land use demand; In case the project does not request the State to allocate or lease land or permit the change of land use purpose, a copy of the location lease agreement or other document certifying that the investor has the right to use the site for implementation. current investment project;
– An explanation of the use of technology for investment projects, for projects using technologies on the list of technologies restricted from transfer in accordance with the law on technology transfer, including the following contents: name of the company; technology, technology origin, technological process diagram; main technical parameters, use status of main machinery, equipment and technological lines;
– BCC contract for investment projects in the form of BCC contract.

Time limit for processing applications

Within 15 days from the day on which the complete application is received, the investment registration agency shall issue an investment registration certificate; In case of refusal, the investor must be notified in writing and clearly state the reasons therefor.

The process of establishing a foreign-invested company in Vietnam

The process of establishing a foreign-invested company is carried out by the Foreign-invested enterprises and how to set up of Luatvn.vn Law Firm through the following steps:

Step 1: Prepare and submit the application for the Investment Registration Certificate

An application for an Investment Registration Certificate includes:
  • a) A written request for the implementation of an investment project;
  • b) Proposing investment projects;
  • A copy of the passport for the investor being an individual or a copy of the Certificate of Establishment or another equivalent document certifying the legal status of the investor being an organization;
  • c) A copy of one of the following documents: financial statements of the last 2 years of the investor; commitment to financial support of the parent company; financial institution’s commitment to financial support; guarantee on the financial capacity of the investor; documents explaining the investor’s financial capacity (can provide a Certificate of the investor’s bank account balance issued by a foreign bank);
  • d) Contract to lease the location where the investor intends to locate the head office;
  • e) Power of attorney of the investor for Luatvn.vn Law Firm to perform and submit the dossier at the competent authority.
The investor prepares the documents in items c, d, e; Documents issued by foreign agencies and organizations must be consular legalized and notarized translation.
Luartvn.vn Law Firm will prepare documents in sections a, b, f and submit documents on behalf of investors at the Department of External Economic Relations – Department of Planning and Investment.

Step 2: Track the application file and receive the Investment Registration Certificate

In case the application is not sufficient or rejected, the investment registration agency will notify the investor in writing and clearly state the reason. Luatvn.vn Law Firm will receive the Notice on behalf of the investor and adjust the dossier in accordance with regulations.
Within 15 days from the date of receipt of complete and valid dossiers, the investment registration agency will issue the Investment Registration Certificate.

Step 3: Prepare and submit the application for registration of the establishment of a foreign-invested company

A dossier of registration of establishment of a foreign-invested company includes:
  • a. Business registration application form;
  • b. Company rules;
  • c. A valid copy of one of the personal identification papers of the foreign investor being an individual, legal representative, capital contributors (for limited liability companies) or founding shareholders (for limited liability companies). with Joint Stock Company);
  • d. A copy of the Certificate of Establishment or other equivalent document certifying the legal status of the investor being an organization;
  • e. List of company members, for limited liability companies with two or more members, or List of founding shareholders and list of shareholders being foreign investors, for joint-stock companies;
  • f. Copy of Investment Registration Certificate (issued in Step 2);
  • g. A document appointing an individual to act as an authorized representative of the owner, member or shareholder being an organization (if any);
  • h. Authorization letter for Luatvn.vn Law Firm to perform and submit documents at the competent authority.
The investor prepares the documents in item c; Documents issued by foreign agencies and organizations must be consular legalized and notarized translation.
Luatvn.vn Law Firm will prepare documents in sections a, b, d, e, f, g, h and submit documents on behalf of investors at the Business Registration Office – Department of Planning and Investment.

Step 4: Receive the result as the Certificate of Business Registration

For a complete and valid application, the Business Registration Office will issue a Certificate of Business Registration within 03 working days from the date of receipt of the valid application.

Customers wishing to use social insurance declaration service please contact Luat VN for the most quick and accurate support! Hotline/zalo: 0763387788.

Công ty Luật VN

Địa chỉ: 60 Nguyễn Quang Bích, P. 13, Q. Tân Bình, TP.HCM

Mr. Phan
Email: luatvn.vn02@gmail.com

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