Establish foreign-owned construction company in Vietnam

Currently, the demand for construction services in Viet Nam is very large due to recent years, the real estate market is progressing quite well, especially in big cities as Ho Chi Minh City, Ha Noi, Binh Duong, Da Nang… Plenty of constructions company with foreign capital gained great success and built a reputation in Viet Nam due to their high level of expertise and effective solutions during the construction and finishing stages of construction. And now, restrictions on foreign investment in the field of construction work are no longer available; at the same time, the demand for construction is still large, so this is a golden opportunity for foreign investors who wish to establish a company in Vietnam. To assist our Clients more favorable to research and prepare, Viet An Law Firm will summarize and provide some information as follows:

Legal documents

• The Schedule of Specific Commitments in Services of Vietnam in WTO
• The Law on Investment 2020;
• The Law on Enterprise 2020;
• The Construction Law 2014 and The Revised Construction Law 2020;
• Decree No 15/2021/NĐ-CP stipulated elaborating certain regulations on management of construction projects

As stipulated in The Schedule of Specific Commitments in Services of Vietnam in WTO, construction services include:

• Construction work for building (CPC 512);
• Construction work for civil engineering (CPC 513);
• Installation and assembly work (CPC 514,516);
• Building completion and finishing work (CPC 517);
• Other Construction (CPC 511, 515, 518).

As stipulated in Clause 21 Article 3 The Construction Law 2014, constructions activities include: “construction planning, formulation of an investment project to construct a work, construction survey, construction design, construction, construction supervision, project management, selection of contractors, pre-acceptance test, handover of the work for exploitation or use, its warranty and maintenance and other activities related to its construction.”

Currently, the laws of Viet Nam, as well as The Schedule of Specific Commitments in Services of Vietnam in WTO, are no longer binding on the form of investment or capital contribution to foreign investors. Foreign Investors can be established construction companies with foreign capital in Viet Nam to provide construction services with a capital ownership ratio of up to 100% of charter capital. However, to invest in this field, the foreign investors have to an organization (company)

There are two methods of carrying out investment procedures as follows:

• Establishing a foreign-invested economic organization in Vietnam
• Contribute capital, purchase shares, or capital portions to economic organizations

First method: Establishing a construction company with foreign capital in Viet Nam

Step 1: Investor applying for the investment registration certificate

The documents include

• An application form for execution of the investment project;
• A document about the investor’s legal status: a copy of the identity card or id card or passport (if it is an individual); a copy of the establishment certificate or equivalent document and passport of the capital manager (if it is an organization);
• The investment project proposal includes the following contents: investor implementing the project, objectives, scale and investment capital, capital mobilization plan, location, duration, investment schedule, and demand for investment projects. labor, propose investment incentives, assess the impact and socio-economic efficiency of the project;
• Documents proving the financial capacity of the investor including at least one of the following documents: the investor’s financial statements for the last two years; commitment of a parent company to provide financial support; commitment of a financial institution to provide financial support; guarantee for the investor’s financial capacity; other document proving the investor’s financial capacity;
• Proposal of investment project includes the following main contents: investor or form of investor selection, investment objectives, investment scale, investment capital and plan for capital mobilization, location, duration, implementation schedule, information on the current status of land use at the project location and proposal of land use demand (if any), labor needs, proposals for the enjoyment of investment incentives, impacts, socio-economic efficiency of the project, preliminary assessment of environmental impacts (if any) under the law on environmental protection

In case the law on construction provides for the making of pre-feasibility study reports, investors may submit pre-feasibility study reports in place of investment project proposals;

• In case the investment project does not request the State to assign or lease land or permit the change of land use purposes, it shall submit a copy of the land use right papers or other documents defining the right to use the location for the implementation of the investment project;
• Contents of explanations on technologies used in investment projects for projects subject to appraisal and consultation on technologies under the law on technology transfer
• Other documents related to investment projects, requirements on conditions and capacity of investors as prescribed by law (if any);
• Authorization Letter for Viet An

Place of application: Department of Planning and Investment where the head office is expected to be located.

Processing sequence: Within 15 days from the date of receiving the complete and valid documents, the Department of Planning and Investment will issue the Investment Registration Certificate to the foreign investor. In case of refusal to issue, the Department of Planning and Investment shall reply in writing and clearly state the reason.

Step 2: Establishing a construction company with foreign capital in Viet Nam

Procedures and documents to establish a company

Apply for a Business Registration Certificate

Business establishment documents include:

• The enterprise registration application form.
• The Company’s Charter;
• The list of founding shareholders; the list of shareholders that are foreign investors. (if it is a joint-stock company); The list of members (if it is a two-member limited liability company);
• Certified copy of identity card or citizen’s identity card or passport  (if personal); to  decide  on  the establishment and certification of enterprise  registration  or equivalent documents and citizen identification cards or   identity cards or  passports enclosed with written authorization for capital managers in Vietnam (if it’s an organization);
• Certified copy of the granted investment registration certificate;
• Authorization Letter for Viet An Law Firm;

Place of application: Department of Planning and Investment where the enterprise headquarter is located

Duration: 03 – 06 working days.

Publication of contents of business registration information

• Enterprises after being granted the Enterprise Registration Certificate must publicly announce on the National Business Registration Portal and pay fees under the provisions of law. The contents of the announcement include the contents of the Enterprise Registration Certificate and the following information:
• Business sectors and trades;
• List of founding shareholders; list of shareholders being foreign investors of joint-stock companies (if any).
• Publication fee: The request for publication of the enterprise registration contents and payment of the fee for announcing the enterprise registration contents shall be made at the time the enterprise submits the enterprise registration documents. In case the enterprise is not granted enterprise registration, the enterprise will be refunded the fee for announcing the enterprise registration contents.
• The declared fee is VND 100,000 as prescribed in Circular 47/2019/TT-BCT.

Business seal

• Seals include seals made at establishments engraving seals or seals in the form of digital signatures following the law on e-transactions.
• The enterprise decides on the type, quantity, form, and contents of the seal of the enterprise, its branches, representative offices, and other units.

The management and retention of seals shall comply with the provisions of the company’s Charter or regulations promulgated by enterprises, branches, representative offices, or other units of enterprises with seals. Enterprises use seals in transactions as prescribed by law.

Step 3: Issuance of the certificate of capacity of the construction organization

Documents to apply for the Certificate of Competency of a work construction organization includes:

• An application for a certificate of competence (Viet An will draft)
• Notarized copy of business registration certificate or decision on the establishment of the organization (Clients will provide)
• Eligibility certificate issued by a competent authority, in the case of applying for adjustments to the eligibility certificate rank: Notarized copy (Clients will provide)
• A list of key individuals, employees, and technical workers involved and declaration of the organization’s construction experience together with diplomas, certificates, and labor contracts of key individuals. key, technical workers related to the content of the application for the certificate of competence (Clients provide and Viet An Law Firm will draft); Attach prepare 01 notarized copy (university degree and certificate: notarized copy)
• Contract and record on commissioning of completed typical tasks (for construction survey organizations, construction planning design organizations, construction design (assessment) organizations, construction project management consultancies, construction supervision consulting organizations of Rank I or Rank II);
• Contract and record on commissioning of completed work items, works, or parts of works (in case of specialized construction) as done in conformity with the declaration (for Rank-I or Rank-II construction organizations);

Place of application:

• Ministry of Construction: for Class, I certificates;
• Department of Construction: for class II certificates;

Second method: Contributing capital, buying shares, contributed capital in Vietnamese construction companies

Implementing investment procedures in this way helps investors save time, effort, and costs because they do not have to apply for an Investment Registration Certificate, but only need to register for capital contribution, purchase of shares, capital portion contributed in a Vietnamese construction company. When receiving approval to allow capital contribution, purchase of shares, contributed capital from the Department of Planning and Investment, it is only necessary to carry out the procedures for converting shareholders or members. In addition, the Vietnamese construction company already has the Certificate of Competency of the construction organization. Only when foreign investors want to carry out larger projects, they need to carry out the procedure for re-issuance of this certificate to suit their business activities.

Step 1: Foreign investors register capital contribution, share purchase, capital contribution to economic organizations

Documents for foreign investors to purchase contributed capital

• A registration form for capital contribution/purchase of shares/stakes, which contains: enterprise registration information of the business organization to which the foreign investors expects to contribute capital or whose shares/stakes are expected to be purchased by the foreign investors; business lines; list of owners, members and founding shareholders, list of owners, members and founding shareholders that are foreign investors (if any); holding of charter capital by foreign investors before and after the capital contribution/purchase of shares/stakes in the business organization; expected transaction value of the contract for capital contribution/purchase of shares/stakes; information about the business organization’s investment project (if any);
• Copies of legal documents of the individual or organization that contributes capital or purchases shares/stakes and of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors;
• A principal agreement on capital contribution or purchase of shares/stakes between the foreign investors and the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors or between the foreign investors and the shareholders or members of such business organization
• A copy of the certificate of land use rights of the business organization to which foreign investors contribute capital or whose shares/stakes are purchased by foreign investors if such economic organization has a land use right certificate in islands, communes, wards, border towns, and coastal communes, wards or townships; other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial zones, export processing zones, high-tech parks or economic zones established under the Government’s regulations.
• Authorization Letter for Viet An Law

Place of application

Department of Planning and Investment where the economic organization is headquartered

Sequence and procedures

If the capital contribution, purchase of shares, or contributed capital of foreign investors meet the conditions on the rate of ownership and form of investment following the Schedule of commitments and laws of Vietnam, within 15 days from the date of receiving the complete documents, the Department of Planning and Investment will be notified in writing. In case the application does not meet the conditions, the Department of Planning and Investment shall notify in writing and clearly state the reason.

Step 2: Carry out procedures for transfer of shares, contributed capital, and change of shareholders, members, owners.

Some questions related to the application for the establishment of a construction company with foreign capital operating in the construction field

Can individual investors establish a construction company?

As stipulated in The Schedule of Specific Commitments in Services of Vietnam in WTO, the investors have to be juridical persons of a WTO member or an ASEAN member state…

What types of companies are allowed for foreign investors to do construction business in Vietnam?

Depending on the number of members and the type of services the investor is selected one of the following types:

• One Member Limited Liability Company;
• Two or more Members Limited Liability Company;
• Joint-stock company.

How much capital can foreign investor ownership of a company to do construction business?

As stipulated in The Schedule of Specific Commitments in Services of Vietnam in WTO, construction activities do not limit the capital contribution ratio of foreign investors. Therefore, it is possible to establish a company with 1%-100% foreign capital.

 Viet An Law Firm Legal Service:

Viet An law firm provides the legal service for clients to register a company in Vietnam in the business sector of construction as follows:

• Advising on conditions for the establishment of foreign-invested capital companies: capital contribution ratio of foreign investors in Vietnam; business conditions of trades; the location of the project; note the procedures before and after the establishment of a foreign-invested company;
• Consultancy on choosing the appropriate type of company for investors: Limited Liability Company or Joint Stock Company;
• Advising on opening capital transfer accounts, capital contribution duration;
• Advising investors on the preparation of necessary documents for the establishment of foreign-invested companies;
• Advising and drafting company establishment documents for investors;
• Representatives of investors working with competent Vietnamese state agencies in the process of carrying out procedures for the establishment of companies for investors (Apply for investment registration certificates, enterprise registration certificates, business licenses, licenses according to specialized requirements, making legal marks and procedures after the establishment of an enterprise,…;
• Comprehensive, regular consultancy, accounting services, tax law package activities in the process of doing business in Vietnam for investors.