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When Is A Sub-License Is Required ?

When Is A Sub-License Is Required ?When Is A Sub-License Is Required

“After completing the procedures for establishing the enterprise and investment project, the company is recognized as an independent business entity and possesses the rights and obligations prescribed by law and is allowed to operate in the registered fields. However, although the company has the right to do business in the fields that are not prohibited by law, some industries require specific conditions prescribed by law to apply for licenses and certifications related to their conditional business lines. In this article, we shall explain what a sub-license means and when it is needed.”

  1. What does a sub-license’s mean?

  • Definition

Currently, Vietnamese law does not exclusively define “sub-license”. However, in ordinary business and investment activities, sub-license is understood as a general documents such as certificate, business licenses, etc.,  to record that the enterprise has met the specific conditions and is eligible to conduct business in that sector.

  • Types of sub-license

Sub-licenses are expressed in various terminologies, including but not limited to license, certificate, written confirmation, approval, decision, etc.

Example:

    • Security Services business – Certificate of satisfaction of security and order conditions
    • International travel service business – International travel business license
    • Restaurant business – Minutes of fire prevention inspection
    • Manufacture of cosmetics – Announcement of product registration circulation
    • Kindergarten – Decision to allow the establishment of a school
  1. When is a sub-license needed ?

According to the law on investment, for conditional business lines, investors must satisfy the conditions laid down by law. As mentioned in section 1.1, conditional investment and business lines are industries and trading sectors the investment in which must satisfy necessary conditions for reasons of national defense , national security, social order and safety, social ethics, and community health. Investors are entitled to conduct business in the conditional investment and business lines specified in Appendix IV of the law on investment once they fully meet the conditions and ensure compliance with the same during their operation in business.

However, please note that not all conditional business lines are required to have a sub-license. The law on investment stipulates that investors who meet the conditions for business investment are granted documents through the forms mentioned in Section 1.2 or are entitled to conduct business activities when they meet such requirements for doing business without having to be certified in writing by a competent authority. Thus, those operating in conditional business lines need to apply for sub-license. Special laws require companies operating in those fields to carry out licensing procedures with written forms for obtaining documents mentioned in 1.2 0f this article.

  1. Competence, application, processing time and results of the application

  • Competence

According to Clause 8, Article 7 of Decree 01/2021, the state manages foreign investment in conditional business lines, and inspects the compliance of enterprises with business conditions under the competence of specialized agencies in accordance with special laws.

Accordingly, each business line will be under the management of one, or several different competent state agencies. Therefore, monitoring compliance with business conditions, examination of applications and approval for each type of sub-license will be done by difference agencies. Hence each sub-license is issued by a different authority depending upon its field of management.

Example:

    • International travel business license – issued by the ‘Department of Culture, Sports and Tourism’
    • License to manufacture veterinary drugs – issued by the ‘Department of Animal Health, Ministry of Health’
    • Wholesale and retail alcohol license – issued by the ‘Department of Industry and Trade’
    • Vocational training license – issued by the ‘Department of Labor, War, Invalids and Social Affairs’
  • Application

As mentioned above, each business line comes under the management of different agency. Similarly, the conditions to be met for each business line are different. Therefore, the applications for different sub-licenses are also different.

However, an application for sub-license in Vietnam usually includes the following basic documents:

    • Enterprise registration certificate and Investment registration certificate (if any).
    • A written request for a sub-license. This document usually follows the form specified in Decrees, Circulars, and guidelines issued for such conditional business field.
    • A written explanation on the satisfaction of business conditions in such conditional business lines. This document should be in the form of an explanatory statement or a project.
    • Personal papers of managers and participants in conditional business activities, such as criminal records, degrees, health certificates, etc.
    • Documents proving that the entity is meeting the conditions, such as: Certificate of capital contribution, confirmation of deposit, minutes of acceptance, etc.
    • Other documents as prescribed by relevant laws.
  • Timelines

The timeline to get a sub-license depends on many factors. It could take a few days or up to several months, and even a year. In addition to factors directly related to the process like appraisal of documents, and state agencies’ procedures, other factors could also affect the application for a sub-license. These factors include validity and completeness of the documents provided, whether fulfillment of conditions for the occupation applying for a license is guaranteed or not, labor related documents and fulfillment of other conditions in accordance with the provisions of law.

Here are some examples of the expected time for actual sublicensing:

    • Wholesale alcohol license – 10 working days.
    • License to operate labor export services – 4 to 6 months.
    • Certificate of business eligibility of film production enterprise – 30 days.
    • Certificate of eligibility for food hygiene and safety – 15 working days.
  • Result

When all conditions for operation in the conditional business lines are met, the company is granted a sub-license in the forms mentioned in Section 1.2 of this article. The company will have the right to operate in such conditional business lines from the date of issuance of the sub-license or for the time specified in the sub-license. During operation, the company must pay attention to the additional regulations specified in Section 4 of this article and ensure that the conditions are met throughout the operation.

  1. Additional regulations on sub-licenses and operation in conditional business lines

    • Sub-licenses usually have a limited term. The company is only allowed to operate for this duration. When the sub-license expires, the company may continue operating in conditional business by applying for an extension or renewal or re-issuance of the sub-license.
    • Failure to fully meet the conditions in the course of operation is prohibited as prescribed in Clause 6, Article 16 of the law on enterprises. In case of such violation, the company may be suspended or terminated from conditional business lines and face sanctions from the administration agencies.
    • The Company might also have to apply for a separate sub-license for its branch or business location operating in the conditional business lines.
    • Besides sub-license, there may be other requirements that the company must meet to operate in conditional business without the written confirmation from the competent state agency. Therefore, companies should meet the conditions throughout the course of operation. In addition to specialized laws, there may be other conditions scattered across multiple Circulars and Decrees. In case the company does not have enough experience and legal knowledge in its business lines, the company should consult with a professional lawyer or consulting units for advice before selecting, registering and operating in the conditional business lines to ensure compliance with the provisions of the law.

Hence, clients and companies operating in conditional business fields may refer to the above regulations and procedures related to sub-licensing.

Time of writing: 11 October 2021

The article is based on the current law at the time of recording as above and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases that the reader wants to apply. Therefore, the article is for reference only.

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