Set up a wood processing foreign capital company in Vietnam

(except for projects using imported timber)

Wooden furniture, handicraft furniture and construction products are a group of strongly consumed wood products. Therefore, many foreign investors have been interested and proceeded to invest in this field. With such high demand, it creates a great motivation for wood processing enterprises to develop not only the domestic market but also meet export processing. For the purpose of helping foreign investors to set up a company in Vietnam,  Viet An Law Firm would like to provide preliminary advice as follows:

Legal basis

• Vietnam’s schedule of commitments in the WTO
• Vietnamese-Japanese BIT;
• Investment Law 2020;
• Enterprise Law 2020

Investment conditions

Wood processing is an industry that has not been specified in Vietnam’s Schedule of commitments in the WTO.

At the Agreement on Freedom, Promotion and Protection of Investment Vietnam – Japan (BIT Vietnam – Japan), there was an agreement. However, investment projects in this field require the development of domestic raw materials. This restriction shall be removed for Japanese investors and investors no later than the date on which investors and investors of any third country are entitled to remove this restriction, or the date on which Vietnam’s commitment to any third country in this regard takes effect,  based on which comes first.

Vietnamese law: No investment conditions applicable to foreign investors

To make investments in the wood processing sector in Vietnam, foreign investors have two choices:

• Establishment of foreign capital economic organizations;
• Capital contribution, purchase of shares, capital contribution to economic organizations engaged in wood processing business.

Option 1: Set up a foreign capital economic organization

Step 1: Investors apply for an Investment Registration Certificate

Dossier to issue Investment Registration Certificate

• A written request for implementation of an investment project;
• Documents on the legal status of the investor: a copy of the identity card or identity card or passport (if an individual); a copy of the certificate of incorporation or equivalent document and the passport of the capital manager (if it is an organization);
• An investment project proposal includes the following contents: investors implementing the project, objectives, scale and investment capital, capital mobilization plan, location, duration, investment progress, labor demand, proposal for investment incentives, impact assessment, socio-economic efficiency of the project;
• Documents proving the financial capacity of the investor include at least one of the following documents: financial statements of the last 02 years of the investor; commitment to financial support of the parent company; commitment to financial support of the financial institution; guarantee on the financial capacity of the investor; other documents proving the financial capacity of the investor;
• An investment project proposal includes the following principal contents: investor or investor selection form, investment objectives, investment scale, investment capital and capital mobilization plan, location, duration, implementation progress, information on the current status of land use at the project site and land use demand proposal (if any), demand for labor, proposal for investment incentives, impacts, socio-economic efficiency of the project, preliminary environmental impact assessment (if any) in accordance with the law on environmental protection.

Where the law on construction provides for the preparation of a pre-feasibility study report, the investor may submit the pre-feasibility study report instead of the investment project proposal;

• In case the investment project does not request the State to allocate land, lease land, permit change of land use purpose, submit copies of land use right papers or other documents determining the right to use the location for the implementation of the investment project;
• Contents of explanation of technologies used in investment projects, for projects subject to appraisal and collection of opinions on technologies in accordance with the law on technology transfer;
• Other documents related to the investment project, requirements on conditions and capacity of the investor as prescribed by law (if any);
• Power of attorney for Viet An Law.

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

Order of processing: Within 15 days from the date of receipt of a complete and valid dossier, the Department of Planning and Investment will issue an Investment Registration Certificate to the foreign investor. In case of refusal to grant a grant, the Department of Planning and Investment will reply in writing clearly stating the reason.

Step 2: Set up a foreign capital wood processing company in Vietnam

Business establishment documents

• Application for registration of the enterprise;
• The company’s charter;
• List of founding shareholders and shareholders being foreign investors (if they are joint-stock company); List of members (if it is a two-member limited liability company);
• Certified copy of identity card or citizen identification card or passport (if an individual); establishment decision, enterprise registration certificate or equivalent document and citizen identity card or identity card or passport with written authorization for the capital manager in Vietnam (if it is an organization);
• A certified copy of the granted Investment Registration Certificate;
• Power of attorney for Viet An Law Firm;

Place of application: Department of Planning and Investment where the enterprise is headquartered.

Duration: 03 – 06 working days.

Disclosure of contents of business registration information

• After being granted the Business Registration Certificate, an enterprise must publicly announce it on the National Business Registration Portal and pay fees as prescribed by law. The contents of the announcement include the contents of the Business Registration Certificate and the following information:
• Business lines;
• List of founding shareholders; list of shareholders being foreign investors, for joint-stock company (if any).
• Publication fee: The request for publication of enterprise registration contents and payment of fees for disclosure of enterprise registration contents shall be made at the time the enterprise submits the enterprise registration dossier. In case an enterprise is not granted enterprise registration, the enterprise will be refunded the fee for announcing enterprise registration contents.

The announced fee is VND 100,000 as prescribed in Circular 47/2019/TT-BCT.

Mark of the business

• A seal includes a seal made at a seal engraving establishment or a seal in the form of a digital signature in accordance with the law on e-transactions.
• The enterprise decides on the type of seal, quantity, form and content of the seal of the enterprise, branches, representative offices and other units of the enterprise.
• The management and retention of the seal shall comply with the provisions of the company’s charter or regulations promulgated by the enterprise, branch, representative office or other unit of the enterprise bearing the seal. Enterprises use seals in transactions in accordance with the provisions of law.

Option 2: Capital contribution, share purchase, capital contribution to wood processing business economic organizations

This method will help investors save more time and costs by not having to apply for an Investment Registration Certificate. However, investors must ensure the proportion of capital contributed by foreign investors in accordance with regulations. If choosing this method, investors only need to carry out procedures for registration of capital contribution, purchase of shares and contributed capital at the Department of Planning and Investment. In addition, for activities that foreign investors are not allowed to perform, it is necessary to consider and carry out procedures for reducing industries.

Step 1: Foreign investors register for capital contribution, purchase of shares and contributed capital to Vietnamese company

Dossiers of registration of capital contribution, share purchase, capital contribution to economic organizations

• A document of registration of capital contribution, share purchase or purchase of contributed capital includes the following contents: information on enterprise registration of economic organizations to which foreign investors plan to contribute capital, purchase shares or purchase contributed capital; business lines; list of owners, members, founding shareholders, list of owners, members, shareholders being foreign investors (if any); the percentage of ownership of charter capital of foreign investors before and after capital contribution, share purchase or purchase of contributed capital to economic organizations; expected transaction value of contracts for capital contribution, share purchase, purchase of contributed capital; information on investment projects of economic organizations (if any);
• Copies of legal papers of individuals, organizations contributing capital, buying shares, purchasing contributed capital and economic organizations with foreign investors contributing capital, buying shares or purchasing contributed capital: Passport (if an individual); Business license or equivalent document and passport of the person authorized to manage the capital portion in Vietnam (if it is an organization);
• A written agreement in principle on capital contribution, share purchase or purchase of contributed capital between foreign investors and economic organizations in which foreign investors contribute capital, purchase shares, purchase contributed capital or between foreign investors and shareholders or members of such economic organizations;
• A copy of the land use right certificate of an economic organization in which foreign investors contribute capital, purchase shares or purchase contributed capital if such economic organization has a land use right certificate in islands, communes, wards, border towns and coastal communes, wards and townships; other areas affecting national defense and security, except economic organizations implementing investment projects in industrial parks, export processing zones, hi-tech parks or economic zones established under the Government’s regulations.
• Power of attorney for Viet An Law.

Place of application: Department of Planning and Investment where the economic organization is headquartered.

Order and procedures: If the capital  contribution, share purchase or capital contribution of foreign investors satisfies the conditions on ownership ratio and investment form in accordance with the Schedule of commitments and Vietnamese law, within 15 days from the date of receipt of complete dossiers,  The Department of Planning and Investment will notify in writing. In case the application does not meet the conditions, the Department of Planning and Investment will notify in writing clearly stating the reason.

Step 2: Carry out procedures for transferring shares, contributed capital and changing shareholders, members and owners

Some questions related to the dossier to set up a foreign capital company

What types of company can foreign investors set up to process wood in Vietnam?

Investors may choose one of the following types:

• One-member limited liability company
• Limited liability company with two or more members;
• Joint stock company.

Can foreign investors invest 100% capital to do wood processing business in Vietnam?

Investors are entitled to invest 100% capital to do wood processing business in Vietnam.

Services of setting up foreign capital company of Viet An Law Firm

• Advising on conditions for establishing a foreign capital company: capital contribution ratio of foreign investors in Vietnam; business conditions for trades; project implementation location; note the procedures before and after the establishment of a foreign capital company;
• Advising on choosing the right type of company for investors: Limited company or joint stock company;
• Advising on opening a capital transfer account, capital contribution duration;
• Consulting and guiding investors to prepare necessary documents to establish a foreign capital company;
• Advising and drafting company establishment documents for investors;
• Representing investors to work with competent state agencies of Vietnam in the process of carrying out company establishment procedures for investors (Application for Investment Registration Certificate, Business Registration Certificate, Business License,  License according to specialized requirements,  make legal entity seals, procedures after company establishment,…;
• Comprehensive, regular consultancy, accounting services, tax law package of activities arising in the process of conducting business in Vietnam for investors.