VIETNAM COMPANY FORMATION

Vietnam company formation is a form of investment in which a foreign investor is permitted to execute an investment project through the setting up a 100% foreign owned company in Vietnam. The investment attraction is being considered attractive in Vietnam such as investing in Hanoi, investing in Ho Chi Minh City, Binh Duong, Dong Nai, Bac Giang, Bac Ninh, Thai Nguyen, Da Nang, Quang Ngai. .... with many different fields. LHD Law Firm is proud of being the leading investment consulting firm in Vietnam with 16,800 clients and more than 10 years of experience in the field of investment consulting in Vietnam.

From 1 July 2006, the Unified Law on Enterprises 2005 ('ULE') and Common Law on Investment 2005 ('CLI') replaces the Law on Foreign Investment in Vietnam ('FIL') and governing the foreign direct (and indirect) investment in Vietnam. To bring the twin laws into practice, about 7 Government decrees and a greater number of lower level legal documents will be soon issued, covering all aspects of the entire process from the business registration to the business operations.

A. Foreign Direct Investment
 
5.1 Legislation
From 1 July 2006, the Unified Law on Enterprises 2005 ("ULE") and Common Law on Investment 2005 ("CLI") replaces the Law on Foreign Investment in Vietnam ("FIL") and governing the foreign direct (and indirect) investment in Vietnam. To bring the twin laws into practice, about 7 Government decrees and a greater number of lower level legal documents will be soon issued, covering all aspects of the entire process from the business registration to the business operations.
Like the FIL, the ULE and CLI continuously confirm to guarantee the legal capital and assets of foreign investors, and allows foreigners to invest in most sectors of the economy, particularly in sectors of export-oriented, agricultural activities, new materials, high technology, development research, environment protection, and others of similar nature.

5.2 Vehicles of Foreign Direct Investment
Under the ULE and CLI, foreign investors are entitled to select one of the following vehicles or forms for their investment in Vietnam:

(i) Business Co-operation Contract ("BCC");
(ii) Limited Liability Company, with One or More Members ("LLC");
(iii) Joint Stock Company ("JSC");
(iv) BOT;
(v) BTO; and
(vi) BT

It is worthy of note that for any new establishment of LLC or JSC, it is required to attached the establishment to an investment project. In this case, an investment registration certificate shall be issued to the newly established LLC or JSC, which serve at the same time as the business registration certificate of the LLC or JSC.
Details concerning each vehicle are described hereunder.

(i) BCC
BCC is a partnership signed by two or more parties with the objective of conducting jointly one or more business operations in Vietnam, on the basis of mutual allocation or responsibilities and sharing of profits or losses, without creating or forming a legal entity in Vietnam.
As BCC is not a separate legal entity, the contractual rights and obligations of the parties must be shared. To co-ordinate the daily operation of a BCC, a co-ordination board can be set up when necessary, with presence of the equal nominees from the parties.

(ii) LLC
LLC is established by a single investor or pursuant to a joint venture contract signed by one or more investors, either Vietnamese investors and one or more foreign investors; or between foreign investors, individually or institutionally, for the purpose of carrying out business activities in Vietnam. The difference of the LLC compared with the JSC is that the LLC is not permitted to issue shares, and the number of investors, regardless individual or institutional, is not allowed to be excessive of 50.
Unlike the FIL, the ULE and CLI introduce the term of "charter capital" for replacement of the confused "legal capital", and do not require the ratio between the charter capital of the LLC per the invested capital of their investment project being at least 30%. It seems that foreign investors will have more choice in making their contributions to the charter capital in cash or in kinds compared with the FIL, and that there is no floor limits of the foreign investors in the charter capital of the LLC (pursuant to the FIL, the contribution by the foreign investors is required to be at least 30% of the company’s charter capital.
Unlike the FIL where the JVC or FOC is managed by the Board of Management ("BOM"), and members are nominated by the parties in proportion to their contributions, under the ULE and CLI, the LLC shall be managed by the Member Council, then the BOM if the number of investors in the LLC requires so. The general director shall be responsible before the BOM and Member Council, for the day-to-day management and business of the LLC. No specific regulations on the nationality of the general director and the first deputy general director in the LLC are provided, and the unanimous agreement/ voting on some matters of the LLC (i.e. revising the charter, appointing the general director, etc.) shall be no longer valid. Instead of those, the voting principles by majority of 65% and/ or 75% shall be applicable in the Member Council.

(iii) JSC
JSC is a company established by at least 3 investors, regardless individual or institutional, local or foreign. Differing from the LLC, JSC can issue shares to the publics. JSC is a kind of limited liability company, and has the legal person status in accordance with the laws of Vietnam.
Like LLC, the specific requirements of the ratio of the charter capital of the JSC per the invested capital for the investment projects by the JSC (i.e. 30%) and the same of the contributions by the foreign investors in charter capital (i.e. 30%), shall be no longer valid.
Similarly the LLC, the highest management authority of a JSC is the general shareholder meeting, which decide all the most principal matters of the company. The BOM is responsible for implementation of the general shareholder meeting between the two meetings. The general director is responsible to the general shareholder meeting and BOM for the day-to-day management and business of the JSC. Assisting the general shareholder meeting in supervising the performance of the BOM, general director and other the management positions is the Board of Supervision.
Finally, voting principles by majority of 65% and/or 75% shall applicable in the general shareholder meeting in JSC.

(iv) BOT, BTO and BT
Compared to the said vehicles, regulations covering BOT, BTO and BT are quite few, causing difficulties for implementing.
A written contract which must be signed by foreign investor(s) and an authorized agency, constitutes the principal legal basis for implementing a BOT, BTO or BT project. It differs from BOT to BTO in the right to commercial exploitation of the completed project for getting back investments. This right is realized for a fixed time before transferring to the State of Vietnam in the case of BOT, but in the case of BTO, it follows after transferring. As for BT, foreign investor(s) must hand over the project to the State of Vietnam upon its completion, and instead of commercial exploitation like the case of BOT and BTO, foreign investor(s) is/are provided with opportunities to carry out other projects to get back investments.
In all and every case, a LLC or JSC can be established by foreign investor(s) to carry out the project, in accordance with applicable procedures as described hereof.

5.3 Project Classification and Licensing Agencies
Unlike the FIL, the projects under the CLI are classified into two groups, requesting the registration procedures and appraisal procedures. More decentralized, all projects (except BOT, BTO and BT projects to which MPI will issue the Investment certificates) are approved and licensed by city/province-level people's committees with respect to projects outside EPZs and IZs, and city/province-level administration boards of EPZs and IZs with respect to projects inside EPZs and IZs.

5.4 Application Document Requirement
An application/ registration file for submission to investment registration agencies, under the CLI, normally includes:

(i)Application for investment certificate;
(ii)BCC or JV contract, as the case may be
(iii)Charter of LLC or JSC, as the case may be
(iv)Technical-economic explanation or feasibility study for a BCC, LLC or JSC;
(v)Statements certifying the legal status and financial capacity of investors;and
(vi)Explanation on satisfaction of WTO's requirements.

Vietnamese language is lawfully required, but a widely-used foreign language may also be accompanied, for instance, English. In principle, the two languages have equal legal weight in determining the parties' intentions, but in case of discrepancies, the Vietnamese shall prevail.

5.5 Licensing Procedures and Timing

All the new establishment of LLCs, JSCs, BCCs, BOTs, BTOs and BTs are required to get investment certificate. The licensing procedures and timing for obtaining the certificates are in the same and described hereunder.
With respect to projects subject to the investment appraisal procedures, the time limit for issuance of an investment registration certificate shall be normally within 30 days from its receipt of the satisfactory files, and in special cases the time can be extended but not exceeding 45 days.
With respect to projects subject to the investment registration procedures, the investment certificates shall be issued within 30 days from the receipt of the satisfactory file.
Setup fdi company in vietnam
 
B. LHD Law Firm
 
LHD Law Firm was founded in 2006 on the basis of a combination of the young team of dedicated law collective work of lawyers, experts have more seniority in the field of consultancy Community legal foreign investors in Vietnam and now in
water. Staff of the company was rated very professional. We are very self trench when working with large corporations in the world and the leading company in Vi et Nam. Experienced, knowledgeable Vietnam law, a deep understanding of style
customs, culture, and people of Vietnam, capture customer psychology, foreign language proficiency is the key to success in almost ten years LHD and future l anybody.

LHD law Firm is a leading commercial law firm in Vietnam providing business legal services, investment consulting, and other business support service (company formation, license arrangement, commercial agreements, mergers and acquisitions, shareholder arrangements and disputes, work permit, employment contracts, tax, consulting and financial advisory and executive search services.

C. Client's 
TOYOTA; WACOAL, DELOITE; DLH; SHISEIDO; FOS; DLT; YAMAZEN; SANKOUGIKEN; DIEMSANG; IFO; ALTECH; TRIUMPH; SOMETHINGHOLDINGS …
 
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vietnam company formation
D. NEW LAW 2015 

With an aim to aiding foreign investors in overcoming bureaucratic bottleneck and allowing Vietnam to quickly open and integrate its market into the global market, Vietnamese government has issued new Law on Investment and Law on Enterprises, which are expected to take effect in July 2015. The article will highlight some key changes in these amendments.

A. Law on Investment.

1. A better definition of a foreign investor: The 2014 Law introduces a simpler and clearer definition of foreign investor and also clarifies the differences between “foreign investor” and “foreign-invested economic organization” which replaces the term “foreign-invested enterprise” in the 2005 Law.

– A foreign investor is now defined as an individual holding a foreign nationality or an organization established under foreign laws and making business in Vietnam.

– A foreign-invested economic organization (FIEO) is broadly defined as an economic entity which has any member or shareholder is a foreign investor.

Under the 2014 Law, an FIEO shall be subject to more stringent licensing requirements and other restrictions applicable to foreign investors if:

(i) 51% or more of its charter capital (i.e. share capital) is held by foreign investors; or the majority of the general partners are foreigners if the business organization is a partnership;

(ii) 51% or more of its charter capital is held by an economic organization under paragraph (i) above; or

(iii) 51% or more of its charter capital is held by a foreign investor and an economic organization under

paragraph (i) above.

2. New classification of investment types: Investment in Vietnam is no longer classified into direct or indirect investment, but depends on either of the following forms:

(i) Establishment of an economic organization for an investment project;

(ii) Capital contribution, purchase of shares or contributed capital in an economic entity.

(iii) Investment under cooperation contract (Public-Private Partnership; Business Cooperation Contract).

3. Relaxation of licensing requirements: Under the 2014 Law, an Investment Certificate (IC) has been replaced by an Investment Registration Certificate (IRC), and an FIEO is only required to obtain an IRC if it falls into one of the three circumstances stated above.

The application process is now a two-stage process, with the time period to complete the licensing process reduced to 15 days:

(i) Obtain IRC;

(ii) Obtain Enterprise Registration Certificate (ERC))

However, for M&A activities, unless the foreign investors invest in a conditional investment project, the M&A activity may be conducted solely under the Enterprise Law. As such, the requirement to obtain an IC to close an M&A deal, the most troublesome condition under the current law, is abolished.

4. Opening up of investment sectors: The number of prohibited business activities is reduced from 51 to 6 activities, and the number of conditional business activities also decreases from 386 to 267 activities. Notably, the 2014 Investment Law takes an initiative approach that allows investors to do investment and business activities in fields not prohibited by the 2014 Investment Law.

5. Dispute settlement: Under the new law, only foreign investors or FIEO with 51% or more of chartered capital can choose foreign arbitration and/or international arbitration to settle their dispute over business investment.

6. Transitional provision: Any investor who was granted IC before July 1st 2015 may keep executing their investment project without the need of registering for a new IRC. However, a new IRC shall be granted if requested by the investor.

B. Law on Enterprises.

1. New definition of foreign investors’ holding: the 2014 Law defines foreign investors’ holding as the total holding of voting capital of all foreign investors in a Vietnamese company, instead of total holding of charter capital specified under the 2005 law.

2. Simplification of license requirements: The new law removes the scope of business activities of an enterprise and the list of founding shareholders of a joint stock company (JSC) from the ERC. The business activities of enterprises will be posted on the National Business Registration Portal. If an enterprise changes its business activities, founding shareholders or foreign shareholders, it must notify the corporate registration authority to update its corporate registration records, but does not need to register for an update of its ERC as required under current laws.

3. Enterprise’s seal: Under the new law, an enterprise is entitled to decide the form, quantity and contents of its seal. The management, usage and retention of the seal must be stated in the company’s charter. Before using the seal, an enterprise must send the seal design to the business registration authority to be posted on the National Business Registration Portal.

4. More than one legal representative permitted: The 2014 Law allows a JSC or limited liability company (LLC) to have more than one legal representative and only one of them is required to reside in Vietnam. If a JSC has more than one legal representative, the chairman and the general director must both be legal representatives.

5. Change of requirements on charter capital of LLC.

Under the 2005 Law on Enterprises, a one-member LLC is not permitted to reduce its charter capital. The New Law now permits a one-member LLC to reduce its charter capital in certain circumstances. Additionally, full payment of the registered charter capital of an LLC must be made within 90 days of the issuance of the ERC (in contrast to the 36 months’ period under the old Law on Enterprises) or the actually paid charter capital must be registered as adjusted charter capital.

 

6. Lower quorum and voting thresholds: In multi-member LLCs, the quorum of the meeting of the Board of members and the voting threshold for circular resolutions are reduced to 65% of the charter capital from the current 75% requirement.

In JSCs, the quorum of the general meeting of shareholders (GMS) and voting threshold for circular resolutions of shareholders is reduced to 51% of the voting shares from the current 65% and 75% requirement respectively. At a GMS, the voting threshold is reduced to 51% of the voting shares of attending shareholders from the current 65% for ordinary matters and to 65% of the voting shares from the current 75% for reserved matters.

7. New definition of State-owned Enterprises (SOE): The new Law defines an SOE to be an enterprise wholly owned by the State, thus, allowing former SOEs to operate as private or JSCs subject to new rights and obligations.

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