Establish Chinese companies in Vietnam

China is a nation having strongest influence in the world, not only in defense, culture or international relations but also economic. Regarding South-East Asia as well as Vietnam, China is affecting widely and deeply. In accordance with statistics reports from the Foreign Investment Agency, in the first quarter of 2017, new registered investment capital of Chinese investors is 823.6 million USD, making up to 10.68% of the total capital. Business sectors to which Chinese pay much attention are construction, industrial zones construction, manufacturing, export-processing and outsourcing. As South-East Asia is a strategic partner of China, on November 2002, this nation and ASEAN signed the Framework Agreement on Comprehensive Economic Co-operation, paving the way for further negotiation and signing free trade agreements, including:

• Agreement on Trade in Goods (took effects from July 2005 and amended on 2006, 2010);
• Agreement on Trade in Services (took effects from July 2007);
• Agreement on Investment (took effects from February 2010).

Free trade agreements are made for the purposes of investment promotion and establishing a transparent and effective investment regime, elimination of tariff and non-tariff barriers… However, foreign investment is a sensitive issue as it shall affect local investors and domestic production. Although the general economic trend is trade liberalization, it is hard to avoid invisible barriers when investing in a country. With many years of experiences in investment consulting, Viet An Law Firm realizes that foreign investors often get into troubles when performing investment procedures in Vietnam. In order to give Chinese investors a hand in researching information about investment in Vietnam, Viet An Law Firm collects and provides some information as follows:

Two common methods Chinese investors may choose are establishing Chinese companies in Vietnam and capital contribution/purchase shares/purchase capital contributions to Vietnamese companies. Depending on financial situation and investment purpose, Chinese investors shall consider and choose the most suitable method.

Procedures for establishment of Chinese companies in Vietnam:

Step 1: Apply for the Investment Registration Certificate

• 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 specifying: the investors, project’s objectives and scale; capital and capital rising method; location, duration and schedule of the project; labor demand;
• 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; request for investment incentives; assessment of socio-economic effects of the project;
• 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 Chinese companies 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;
• After receiving the announcement on the seal sample, the Business Registry Office shall grant the receipt to the company, post the announcement on the National Portal of Business Registration and issue the Announcement on Publication of the seal sample to the company.

Notices on foreign capital limitations and business conditions:

The question is whether or not Chinese investors can own up to 100% capital of a company. The answer is depending on investment fields, business sectors foreign investors intend to conduct. International agreements as well as local laws does not completely eliminate barriers for all sectors. Chinese investors should refer to the Schedule of Specific Commitments in Services along with the Agreement on Trade in Services between ASEAN and China.

For example, if investors intend to provide “Construction and related engineering services” (CPC 511, 512, 513, 514, 515, 516, 517, 518), they can establish 100% Chinese companies in Vietnam. However, regarding “Maritime transport services” (international transport, including passenger and freight transport with CPC 7211, 7212), Chinese investors shall establish a joint venture with Vietnamese partners. In the joint venture, foreign capital shall not exceed 51% of the total capital; if the company operates a fleet under the national flag of Vietnam, the maximum foreign capital shall not exceed 49% of the total charter. Besides that, there are several conditions have to be followed such as the number of foreign seafarer working in any ship flying the national flag of Vietnam shall not exceed 1/3 of the total employees there. When Clients provide more detailed information, Viet An Law Firm can research and give advice on investment method, foreign capital limitations and business conditions of each sector.

Besides directly establishing Chinese companies in Vietnam, the process of capital contribution/shares purchase/capital contributions purchase is simpler and save time. By that way, investors shall not apply for the Investment Registration Certificate except for register to contribute capital/purchase shares/purchase capital contributions at the Department of Planning and Investment. After being granted the approval, the company shall change shareholders, members as stipulated by the laws. However, it does not mean Chinese investors can own up to 100% of the capital in a Vietnamese company in order to convert it into a 100% Chinese company but depending on business sectors as explained above. If in the commitment packages in the Agreement on Trade in Services and the laws of Vietnam stipulate on foreign capital limitations, foreign investors shall comply with these regulations. Moreover, business conditions of each sectors must be satisfied.

Procedures for capital contribution, shares purchase capital contributions purchase:

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 and procedures related to foreign investment in Vietnam;
• Consult about procedures for Investment Registration Certificate, Business Registration Certificate and sublicenses;
• Consult about investment limitations, conditional business sectors and specific conditions of each sector when Clients provide us detailed information;
• Consult about documents, application and other papers need to be prepared to invest in Vietnam;
• Draft, submit the application and work with state-authorized agencies when Clients grant authorization;
• Consult about after-establishing issues such as: contracts, foreign employees (Chinese and other nationalities), Vietnamese employees, intellectual property, tax, accounting…

If you are looking for advice about regulations and procedures to establish Chinese companies in Vietnam as well as others issues related to enterprises and foreign investment in Vietnam, please feel free to contact Viet An Law Firm for more information!