Chinese investors establish a 100% foreign-invested company in Vietnam

According to statistics of the Foreign Investment Agency, as March 20, 2017, China already has 1.616 unexpired projects with a total registered Foreign Direct Investment of 11,19 billion American Dollars. Therefore, China is ranked 08th out of 116 countries and territories that have investment projects in Vietnam. The fields of industry attract Chinese investors most are the processing and manufacturing;  distribution of electricity, gas, water and real-estate business. The strategic partnership between Vietnam and China develops after the cooperation agreements between China and the Association of Southeast Asian Nations (ASEAN), which Vietnam is a signatory, including:

• Agreement on Trade in Goods (effective in July 2005);
• Agreement on Trade in Services (effective in July 2007);
• Agreement on Investment (effective in February 2010).

These agreements aim to set up a free trade area between signatories, expand the market and develop the economy. However, there are still some barries to protect domestice business. For Chinese investors wishing to establish a 100% foreign-invested company in Vietnam, the first thing to notice is the legal regulations on conditions and procedures that they must follow before operating the company.

Conditions for Chinese investor to establish 100% foreign-invested company in Vietnam:

• Form of investment, scope of activities, Vietnamese partners participating in investment activities and other conditions under international treaties to which the Socialist Republic of Vietnam is a contracting party;
• Foreign investor’s charter capital: Chinese investors who wish to own the entire charter capital of the company should meet the conditions of business lines stipulated in the international commitments that Vietnam and China is a member. As a result, Chinese investors investing in company engaged in conditional business lines are required to form a joint venture with Vietnam or have a limited charter capital and have obey these regulations. Under this circumstance, Chinese investors are not able to set up 100% foreign-invested company.

Step 1: Registration for decisions on investment policies or application for Certificate of  investment registration.

Under the Law on Investment 2014, foreign investors wishing to establish a company in Vietnam must carry out procedures for decisions on investment policies from the National Assembly, the Prime Minister or the People’s Committee of province, depending on the scale and other characteristics of the project. Other projects which are not compulsory to have the decisions on investment policies, foreign investors shall apply for the Certificate of Investment Registration.

A project dossie registration for decision on investment policies from the People’s Committees of provinces consists of:

• A written request for permission for execution of the investment project;
• A copy of the ID card or passport (if the investor is an individual); a copy of the Certificate of establishment or an equivalent paper that certifies the legal status of the investor (if the investor is an organization).
• An investment proposal;
• Copies of any of the following documents: financial statements of the last two years of the investor; commitment of the parent company to provide financial support; commitment of a financial institutions to provide financial support; guarantee for investor’s financial capacity; description of investor’s financial capacity;
• Demand for land use; if the project does not use land allocated, leased out by the State, or is not permitted by the State to change land purposes, then a copy of the lease agreement or other documents certifying that the investor has the right to use the premises to execute the project shall be submitted;
• Explanation for application of technologies to the project (required in some type of company regulated by Law on Investment 2014);
• The business cooperation contract (if the project is executed under a business cooperation contract).

If the project is subject to issuance of a decision on investment policies from the Prime Minister or the National Assembly, there will be more documents required, depending on the features of the project.

If the project is subject to issuance of a decision on investment policies, the registry office shall issue the Certificate of investment registration to the investor within 05 working days from the receipt of the decision on investment policies.

If the project it not subject to issuance of a decision on investment policies, the Chinese investor shall follow the procedures below:

• The investor shall submit the documents mentioned above to the Department of Planning and Investment where company’s headquarter is located;
• Within 15 days from the receipt of sufficient documents, the the Department of Planning and Investment shall issue the Certificate of investment registration. In case of rejection, the investor must be notified in writing and provided with explanation.

Note: Chinese investors establishing a company in industrial parks, export-processing zones, hi-tech zones, and economic zones, the investment registration procedures will be done at the Management boards of that industrial parks, export-processing zones, hi-tech zones, economic zone.

For projects that are not required decisions on investment policies, Chinese investors will just apply for investment registration certificates at the Department of Planning and Investment of provinces.

Step 2: Establishing an enterprise

Application for establishing an enterprise includes:

• An application form for business registration;
• The company’s charter;
• A list of founding shareholders/members (not for single-member liability company);
• Copies of:
  • Copies of the ID card or other ID papers of founding shareholders and foreign investors being individuals;
  • Decision on Establishment, Certificate of Business registration, or an equivalent document of the organization and the letter of authorization;
  • The ID card or other ID papers of the authorized representatives of founding shareholders and foreign investors being organizations.
  • If shareholders are foreign organizations, the copy of the Certificate of Business registration or an equivalent document must be consularly legalized.
• The Certificate of Investment registration of the foreign investors.

China investors prepare the application file and submit it to the Business Registration Office of the province/city where the company is located. After 3 to 5 working days, the Business Registration Office will issue the Certificate of business registration to the investor.

For more information on the conditions and procedures for Chinese investor to establish a company in Vietnam, please contact Viet An Law Firm.

Viet An Law Firm is a liable organization providing legal consultancy and supporting services related to the fields of investment, business, intellectual property…