Establish foreign-owned road cargo transport companies

Currently, there are many infrastructure projects in Vietnam have been operated as well as some national key projects are invested such as:

• North – South Expressway: connecting 20 cities and provinces from Hanoi to Ho Chi Minh City, expected to be operated in 2025;
• Long Thanh International Airport: be started soon;
• Ho Chi Minh City – Long Thanh – Dau Giay Expressway: completely operated in 2015;
• Ben Luc – Long Thanh Expressway: the largest expressway project in the South of Vietnam, expected to be operated in 2019;
• And other key projects.

Simultaneously, Vietnam’s economy is strongly growing, especially manufacturing industry. Hence, the demand on road freight transportation services is quite high between cities, provinces, industrial zone and export-processing zones. Investing in road cargo transportation services is promised to be a potential business for foreign investors. However, before official starting business, besides conducting research on the market, benefits or establishing relationships with partners, foreign investors should pay attention on the laws in order to make your investment plan easier and more effective. To give our Clients a hand to deal with legal issues, Viet An Law Firm collects and provides some basic information as follows:

 Legal documents:

• The Schedule of Specific Commitments in Services of Vietnam in WTO;
• ASEAN Framework Agreement on Services and initial packages of commitments;
• The Law on Investment 2014;
• The Law on Enterprises 2014;
• The Law on Commerce 2005;
• Decree No.140/2007/NĐ-CP providing detailed regulations on the commercial law regarding conditions for engaging in logistic services business, and limitations on liability of logistic services business entities;
• Decree No. 86/2014/NĐ-CP on business and conditions for transportation business by auto;
• The Law on Road Traffic 2008;
• Other under law documents.

In accordance with point đ clause 2 Article 4 Decree No. 140/2007/NĐ-CP, road transport service is one of the logistics services relating to transportation. Clause 2 Article 64 of the Law on Road Traffic 2008 regulates that road transport business includes passenger transportation and cargo transportation. In the Schedule of Specific Commitments in Services of Vietnam in WTO, the CPC code of cargo transportation service is CPC 7123. Under those regulations, foreign investors establish foreign-owned road cargo transport companies in Vietnam are bounded by 2 limitations: investment form and foreign capital limitation.

• Investment form: In accordance with the Schedule of Commitments in Services of Vietnam in WTO and AFAS as well as Decree No. 140/2007/NĐ-CP, foreign investors must establish joint-ventures with Vietnamese partners to execute road cargo transport company;
• Foreign capital:

Investors from countries or territories being members of WTO: foreign capital does not exceed 51% of the total capital of the joint-venture;

Investors from countries being members of Association of Southeast Asian Nations: foreign capital does not exceed 70% of the total capital of the joint-ventures;

• Drivers: All drivers must be Vietnamese citizens.

Foreign investors have two ways to invest: establish a foreign-owned road cargo transport company in Vietnam with Vietnamese partners or contribute capital, purchase shares, purchase capital contribution in Vietnamese road cargo transport company.

Option 1: Establish a foreign-owned road cargo transport company in Vietnam

Step 1: Foreign investors apply for the Investment Registration Certificate

An application includes:

• A written request for permission for project execution;
• Individual investors: copies of ID or passport of each individual;
• Organization investors: copies of Establishment Certificate or equivalent paper confirming the legal status;
• Project proposal;
• Copies of financial statements in the current 02 years or financial support commitment of the parent company or financial institutions; guarantee for investors’ financial capacity, description of investors’ financial capacity;
• Land use demand. If the project does not use land allocated or leased by the State or does not require the State to change land use purpose, the copies of the lease agreement or equivalent papers proving that investors have rights to use the location shall be submitted;
• If the project use any technology in the List of technologies restricted from transfer, investors have to submit the explanation on technology transfer.

Submit the application at: The Department of Planning and Investment.

The process: Within 15 days from the receipt date of the valid application, the Department of Planning and Investment will grant the Investment Registration Certificate to foreign investors. If the Department of Planning and Investment refuse to grant, they will respond in notices and explain the reasons.

Step 2: Establish a foreign-owned road cargo transport company in Vietnam

Apply for the Business Registration Certificate:

An application includes:

• A written request for business registration;
• The Articles of Associates;
• The list of members of the multi-member limited liability company or the list of partners of partnership;
• Notarized copies of ID or valid passport of each individual member; notarized copies of the Business Registration Certificate/Establishment Certificate of each organization member; notarized copies of ID or valid passport of each legal representative of each organization;
• Power of attorney (Clients grant to Viet An);
• Certificate of Investment Registration of foreign investors.

Submission place: The Department of Planning and Investment.

Duration: 03 – 06 working days.

Announce the business registration contents:

• Business registration information must be announced publicly on the National Portal of Business Registration within 30 days from the date of issuance of the Business Registration Certificate. The contents of the announcement are all the information stated in the Business Registration Certificate.
• Notice: In accordance with Clause 1 Article 26 of the Decree 50/2016/NĐ-CP, if the company does not announce or lately announce the business registration information on National Portal of Business Registration, they are fined an amount of money from 1.000.000 VND to 2.000.000 VND.

Engrave the seal and publish the seal sample:

• The company can authorized Viet An Law Firm or can engrave the seal by itself then announce the seal sample to the Department of Planning and Investment. The company is allowed to decide about the appearance, quantity and the contents of the deal but it must contain the name and the code of the company.

Step 3: Apply for the Automobile transport license (generally called as Business License)

An application for the Business License includes:

• A written request for Business License (using the form at Annex 1 – Circular No. 63/2014/TT-BGTVT);
• Notarized copy or copy enclosed with original of the Business Registration Certificate;
• Notarized copy or copy enclosed with original of the certificates of the direct transportation managers;
• Automobile transport business plan (using the form at Annex 3 – Circular No. 63/2014/TT-BGTVT);
• Establishment Decision and regulations on functions and duties of the management division; monitoring of conditions on traffic safety (for company transporting cargo by containers).

Submission place: The Department of Transport where the head office of the company locates.

The process:

• Within 05 working days from the date of receipt of the valid application, the Department of Transport shall assess and issue the Business License and approve the attached business plan. If the Department of Transport refuse to grant the Business License, a written notice providing explanation will be issued.
• If the application need to be adjusted or supplemented, the Department of Transport shall directly answer or grant a written answer within 03 working days from the date of receipt.

The Business License is valid in 07 years and shall be re-issued if it expired or is lost, damaged or the owner wish to adjust the information.

Option 2: Foreign investors contribute capital, purchase shares, purchase capital contributions in Vietnamese road cargo transport company.

If foreign investors choose this option, they do not have to apply for the Investment Certificate as well as the Vietnamese company has already been granted the Business License to be operated. This can help foreign investors save time and money as long as they comply with the limitation on foreign capital to get the approval by the Department of Planning and Investment.

Step 1: Foreign investors register to contribute capital, purchase shares/capital contributions to the company

Application includes:

• Application for capital contribution, shares/capital contributions purchase indicating: the information of the target company, the foreign capital contribution after completing the procedures;
• Copies of the ID or passport of each individual investor; copies of Establishment Certificate or equivalent papers confirming the legal status of each investor who is an organization.

Submission place: The Department of Planning and Investment.

The process: If the capital contribution, shares purchase, capital contribution purchase of foreign investors comply with the regulations on investment forms and foreign capital contribution, within 15 days from the date of receipt of the valid application, the Department of Planning and Investment will grant a written announcement. If the application does not satisfies conditions, the Department of Planning and Investment will grant a written announcement providing reasons and explanation.

Step 2: Transfer the shares, capital contributions and change the shareholders or members of the company

Foreign investment services in Viet An Law Firm:

• Consult about regulations on foreign investment in Vietnam;
• Consult about process and procedures relating to foreign investment in Vietnam;
• Consult about conditions of each conditional business sector according to the laws;
• Consult and draft the application for Investment Registration Certificate; Business Registration Certificate and sublicenses for foreign investors;
• Consult about after-establishing issues: contracts, tax, labor, social insurance…

If Clients need legal advice about regulations and procedures to establish foreign-owned cargo transport companies in Vietnam as well as other legal issues relating to foreign investment, please feel free to contact Viet An Law Firm to have more details!