After determining the business sector, orientation, goals, investment scale and preparing the necessary factors such as capital, location, facilities or equipment, investors move to the stage of business establishment from when the set goals are realized.
Following the series of articles related to investment activities in Vietnam, in this article, we provide you with an overview of the process of establishing a new investment project and an enterprise in Vietnam.
1. Right to establish and manage enterprises
Investors are organizations and individuals carrying out investment and business activities, including domestic investors, foreign investors and foreign-invested economic organizations having the right to establish and manage enterprises in Vietnam according to the provisions of the ‘Law on Enterprises’ and the ‘Law on Investment’. Here, foreign investors are individuals with foreign nationality, or an organization established under foreign jurisdiction that conducts business investment activities in Vietnam.
Foreign investors, when choosing to do business in Vietnam by establishing an enterprise should note that business establishment procedure and investment project establishment procedure should be carried out as explained below in order to do business in Vietnam.
2. Overview of investment procedures in Vietnam
Setting-up an enterprise is a registration procedure at a competent state agency, like the Department of Planning and Investment, (and the Management Board of industrial parks, export processing zones, high-tech zones, and economic zones of the respective province if the project is in industrial parks, export processing zones, or high-tech zones). This is considered as the birth registration procedure for the company, the first step for doing business in Vietnam.
An important factor for setting up a business is the issuance of an ‘Enterprise Registration Certificate’. By obtaining this certificate, the enterprise officially becomes an independent business entity, having legal rights and obligations under the relevant Vietnamese laws. Such an entity is then recognized and protected by the state and the Law.
Before registering the enterprise and applying for the enterprise registration certificate, Vietnamese Law requires foreign investors to register the investment project, obliging investors to carry out additional procedures for establishing and obtaining an Investment Registration Certificate. Only then will they be able to register their business, which will be granted an Enterprise Registration Certificate.
Accordingly, the process of establishing a foreign company usually includes 2 steps corresponding to 2 procedures (establishing an investment project and establishing an enterprise).
3. Establishing an investment project
3.1. Authority to issue Investment Registration Certificate
Management boards of industrial parks, export processing zones, hi-tech zones and economic zones are competent to grant investment registration certificates for the following investment projects:
- Investment projects on construction of infrastructure and business in industrial parks, export processing zones, high-tech zones, and functional zones in economic zones.
- Investment projects implemented in industrial parks, export processing zones, high-tech zones, and economic zones.
The investment registration agencies, specifically the Departments of Planning and Investment, have the authority to issue the investment registration certificate for investment projects outside industrial parks, export processing zones, high-tech zones, economic zones and economic zones and the following cases:
- Investment projects implemented in two or more provincial-level administrative units.
- Investment projects implemented both inside and outside industrial parks, export processing zones, high-tech zones, and economic zones.
- Investment projects in places that have not yet been established or are not under the jurisdiction of the management Board of industrial parks, export processing zones, hi-tech parks or economic zones.
3.2. Implementation procedure
The investors submit one set of applications for obtaining the Investment Registration Certificate to the investment registration agency as mentioned in Section 3.1 of this article. The dossier includes the following main documents and contents:
- A written request for implementation of an investment project which includes a commitment to bear all costs and risks if the project is not approved.
- Documents on the investor’s legal status, which may include personal legal documents for individual investors, or legal documents of the organization like Establishment decision, Certificate of business registration, and other equivalent documents as prescribed by the laws of the investor’s original country.
- Documents proving the investor’s financial capacity including at least one of the following documents: financial statements of the last two years of the investor; commitment to financial support of the parent company; financial institution’s commitment to financial support; guarantee on the financial capacity of the investor; or other documents proving the financial capacity of the investor.
- Proposal of the investment project which includes the following main contents: details of the investor; investment method; investment objective; investment scale; investment capital and capital mobilization plan; location; deadline; implementation schedule; information on the current status of land use of the project site and proposed land use demand (if any); labour demand; proposal for incentives investment; impact, socio-economic efficiency of the project; and preliminary assessment of environmental impacts (if any) complying with laws on environmental protection.
- Documents proving the right to the location of the investment project: A copy of the document on the land use right, or any other document defining the right to use the location for the implementation of the investment project such as a lease contract, venue rental agreement, ground use contract, etc.
- Other documents related to the investment project such as legally specified conditions and capacity for the investor (depending on individual cases).
The investment registration agency appraises the application and issues an Investment Registration Certificate to the investor. The processing time of this step is 15 days from the date of receiving the valid application.
However, some localities with open-door policies to attract foreign investors cut out administrative procedures, possibly reducing this time limit up to 30% (Example: In Ho Chi Minh City, the time limit for processing the application for the establishment of an investment project is 10 working days)
An investment project must satisfy the following conditions to be granted the Investment Registration Certificate:
- Must not belong to the business lines and industries banned from investment and business as prescribed in Article 6 of the ‘Law on Investment’ and international treaties on investment.
- The location site of the investment project must be determined on the basis of a valid copy of a land use right document or a valid copy of the location lease agreement or any other document defining the location’s land use right for implementing the investment projects.
- Investment projects must comply with planning regulations.
- The project must meet the market access conditions for foreign investors.
- The project must meet the conditions on investment rate on the area of land prescribed by the People’s Committee of the respective province based on the actual conditions of the locality and the same must be approved by the standing committee of the Provincial People’s Council (if any). The project must also meet the conditions regarding the amount of labour used (if any).
After reviewing and appraising the application, the competent state agencies are consulted (if any). In case the conditions mentioned in Step 2 are satisfied, the licensing agency shall issue the investment registration certificate to the investor, which must include the following main contents: name, code, information of the investor(s), area, implementation location, objectives, scale, investment capital, duration and operation progress of the investment project.
4. Company establishment
After establishing the investment project as mentioned in Section 3 and obtaining an investment registration certificate, foreign investors must conduct business as explained in this section.
Domestic investors setting-up enterprises can directly follow the following process without requiring establishing investment projects.
The investors must submit a set of applications to the business registration agency to register the enterprises and obtain the enterprise registration certificate. In the context of this article, the business registration agency is the ‘Business Registration Division’ under the ‘Department of Planning and Investment’ of the respective province. Depending on each case and the type of business that the investors choose, the composition of the application will be different. However, the application usually includes the following documents and records:
- Company establishment registration form;
- Company Charter;
- List of members or list of founding shareholders, and list of shareholders who are foreign investors (for joint stock company);
- Legal papers of individuals for individual members/shareholders and legal representatives;
- Legal documents of the organization if members/shareholders are organizations, a written document to appoint an authorized representative of the organization, and legal papers of the individual being appointed as the authorized representative of such member/shareholder;
- Investment registration certificate for foreign investors in accordance with the laws on investment;
- Some other legally required documents, with each requirement applied differently based on individal differences of each case.
Within three working days from the date of application’s receipt, the business registration agency shall consider the validity of the application and grant the enterprise registration certificate.
- In case the application is not valid, the business registration agency shall notify in writing about the contents that need to be amended or supplemented to the applicant.
- In case of refusal to register an enterprise, they shall notify in writing to the applicant and clearly state the reasons for refusal.
- In case the application is valid, the business registration agency shall approve the application, issue the enterprise registration certificate and notify the investor.
The investors shall be granted an enterprise registration certificate when they fully meet the following conditions:
- The registered business lines and trades are not banned from business investment.
- The name of the enterprise is set in accordance with the ‘Law on Enterprises’ (2020) provisions.
- Having a valid enterprise registration dossier.
- The business registration fee is fully paid in compliance with the laws on fees and charges.
The business registration agency grants the Enterprise Registration Certificate upon successful application.
This document is concurrently the tax registration certificate of the enterprise, which records the following information: name, code, head office address, charter capital of the enterprise, full name, contact address, nationality, number of legal papers of the individual/legal representative (in case of limited liability companies and joint stock companies), or general partners in case of a partnership company including: full name, contact address, nationality, number of legal papers of the individual, and name, code and address of the head office if the member is an organization for a limited liability company.
After obtaining the enterprise registration certificate, the company is recognized by Vietnamese Law and can operate its business. However, an enterprise registration certificate is not a business license. Therefore, in case a company does business or operates in the sectors that require business license(s), the company must obtain such license(s). After that, the company needs to carry out a few procedures such as contributing charter capital, opening a bank account, registering a digital signature and declaring taxes, initial labour, etc.