Establish Korean company in Vietnam

According to Foreign Investment Agency (FIA), in the first 4 months of 2017, Korean investment capital in Vietnam is 4.05 billion USD, making up 38.25% of total registered investment capital, ranked first in Vietnam. Besides more-than-20-year bilateral trade relation of Vietnam and Korea, the Vietnam – Korea Free Trade Agreement (VKFTA) which took effects from December 20^th, 2015 is considered as a strong leverage supporting Korea investment trend in Vietnam. Other factors such as growing economy and population, geographical location and investment incentives as well as Korean culture are those creating golden opportunity for Korean investors. Korean investment in Vietnam is wide which ranges from manufacturing to services.

However, Korean investors and others have to face procedures, a complicated issue when investing in Vietnam. Viet An Law Firm has many years of experiences in foreign investment and enterprises consultancy for Korean investors and we understand your troubles. In order to help our Clients have a general view, Viet An Law Firm collects and provides some basic information related to establishment of Korean companies in Vietnam as follows:

• Vietnam – Korea Free Trade Agreement (VKFTA);
• The Law on Investment 2014;
• The Law on Enterprises 2014.

Besides that, depending on specific business sectors, investors should refer to specialized laws and sub-laws.

Procedures for establishment of Korean companies in Vietnam include:

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 Korean 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;
• 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.

Some issues to pay attention:

Korean investors can own 100% capital or not depending on the business sectors.

For example, motion pictures production (CPC 96112), as listed in Annex 8-D VKFTA, Korean investors shall have to:

• Sign Business Corporation Contracts with Vietnamese partners;
• Establish joint-venture with Vietnamese partners and Korean investors’ capital shall not exceed 51% of the charter capital.

(Vietnamese partners were granted license for motion pictures production in Vietnam)

Therefore, in this case, Korean investors shall not establish 100% Korean company to produce motion pictures.

Regarding retailing, an investment filed which is controlled by Korean companies in Vietnam, as stipulated in VKFTA, Korean investors are entitled to establish 100% Korean companies in Vietnam to provide commission agents’ services, wholesale trade services and retailing services for all products made in Vietnam and legally imported to Vietnam.

Besides that, other issues many Korean investors are concerning about are sub-licenses and business conditions stipulated in specialized laws. For example, regarding goods distribution in Vietnam, foreign companies shall have the Business License issued by the Department of Industry and Trade. Or regarding commercial franchise (CPC 8929), a potential field being invested by many Korean investors, especially in food and beverage industry, Korean franchisor shall register for commercial franchise activities with the Ministry of Industry and Trade.

Depending on detailed information about business sectors and plans our Clients provide, Viet An Law Firm shall suggest and give advice suitable for each Client.

Another method Korean investors may choose is to contribute capital, purchase shares, purchase capital contributions to legally operated companies Vietnam. This method is simpler and save more time as no application for Investment Registration Certificate. However, Korean investors shall comply with the regulations on foreign capital and business conditions of each sector. If foreigners are not allowed to own up to 100% or shall follow a maximum proportion of foreign capital, Korean investors should consider before conducting their business.

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: process, procedures, application, documents, business sectors, conditions of each sector, investment incentives for Korean investors and other foreign investors;
• Draft and submit the application and deal with state-agencies when authorized by Clients;
• Consult about after-establishing issues: tax, accounting, Vietnamese employees, foreign employees, contracts, intellectual property…

Clients seeking for legal advice on procedures and regulations to establish Korean company in Vietnam, please feel free to contact Viet An Law Firm for more information!