7- INITIAL PROCEDURES TO INVEST IN VIETNAM

Vietnam’s Law on Investment procedures for foreign investors is strictly regulated and updated, in line with the actual business context of the market, reformed towards simplification, and developed to form new policies that attract foreign investors and create favorable conditions for foreign investors to invest in Vietnam.

The basic procedures include:

• Approving investment guidelines and selecting the investor to implement the project (if any).
• Applying for issuing Investment Registration Certificates, issuing/changing some types of certificates related to enterprises, branches, representative offices, executive offices in the BCC, franchises and technology transfer.
• Applying for business licenses if investment activities fall in conditional business lines.
• In addition, there are some other procedures such as: establishing e-commerce website, registering trademark, etc.

1. Approving investment guidelines and selecting the investor to implement the project
   a. Approving investment guidelines

Vietnam is one of the developing countries with rapid growth and political stability. The Government is implementing and completing infrastructure projects in the process, and at the same time expanding and re-planning residential areas and new urban areas. These developments have placed high requirements on the quality and standard of construction, involving international expertise, as the need for cooperation and investment joint ventures with foreign investors is becoming essential.

“Approving investment guidelines” means a competent authority approving the objectives, location, scale, schedule and duration of a project; the investor or form of selection of investor and special mechanisms or special policies (if any) to execute an investment project.

The application for investment policy approval ensures the legality of the projects when operating; at the same time, ensuring the State’s management and supervision over important projects that have major influence on the country’s socio-economic development.

Article 30, Article 31, and Article 32 of the 2020 Law on Investment stipulate that the application for approval of the investment guidelines shall be settled by the National Assembly or the Prime Minister, or the Provincial People’s Committee depending on the type of project. Most projects that need approval for investment plan are those in such business lines as electricity, oil and gas, telecommunications, land, construction, migration, and resettlement.

      b. Selecting the investor to implement the project

Firstly, holding land use right auction in accordance with regulations of law on land.

Secondly, bidding to select the investor in accordance with regulations of law on bidding.

The investor selection mentioned in the first and second methods above shall be adopted after the investment guidelines are approved, except for investment projects not subject to approval for investment guidelines.

Thirdly, approving the investor in the following cases:

• In case a land use right auction is held but only one person registers for participation in the auction or the auction is unsuccessful in accordance with regulations of law on land or if bidding is conducted to select investors
  but only one investor registers for participation in the bidding in accordance with regulations of law on bidding.
• For an investment project subject to approval for investment guidelines, the competent authority shall grant approval for both investment guidelines and investor without holding a land use right auction or bidding to select investor in the following cases:
  • The investor has the land use rights, except for the case which the State expropriates land for national defense and security purposes or for socio- economic development in the national or public interest in accordance with
    regulations of law on land.
  • The investor receives the agricultural land use rights, receives the agricultural land use rights as contributed capital or leases the agricultural land use rights to execute an investment project on non-agricultural production or business and the land is not subject to land expropriation by the State in accordance with regulations of law on land.
  • The investor executes the investment project in an industrial park or hi-tech zone.
  • Other cases not subject to an auction or bidding in accordance with regulations of law.

(Clause 1, Article 29 of the 2020 Law on Investment)

2. Issuance of Investment Registration Certificate

Investment Registration Certificate is a paper or electronic document recording the investor’s registration information about an investment project.

After applying for approval of investment guidelines, the Investment Registration Certificate is a mandatory legal document for foreign investors or foreign-invested organizations when conducting investment and business in Vietnam.

Investment Registration Certificate is considered as a prerequisite for foreign investors to enter the Vietnamese market.

• Cases in which the investment registration certificate is required:
• Investment projects of foreign investors.
• Investment projects of the business organizations satisfying the conditions and conduct investment procedures following regulations for foreign investors when establishing a business organization, when making investment by contributing capital, purchasing shares or purchasing stakes of a business organization or when making investment under a business cooperation contract in one of the following cases:
• From 51% of its charter capital or more is held by a foreign investor(s), or the majority of the general partners are foreigners if the business organization is a partnership.
• From 51% of its charter capital or more is held by a business organization(s) mentioned in Point a of this Clause.
• From 51% of its charter capital or more is held by a foreign investor(s) and a business organization(s) (get a foreign investor(s) holds from 51 % of its charter capital or more or the majority of the general partners are foreigners if the business organization is a partnership).

(Clause 1, Article 37 of the 2020 Law on Investment)

• The authority to issue Investment Registration Certificate:
• • Management boards of industrial parks, export-processing zones, hi-tech zones and economic zones.
  • Departments of Planning and Investment.

3. Applying for issuing/changing some certificates related to enterprises, branches, representative offices, executive offices in BBC, franchises and technology
   transfer
   a. Issuance/change of the Enterprise Registration Certificate

An enterprise registration certificate is a paper or electronic document that records information on business registration that the business registration authority issues
to an enterprise.

• Applying for an Enterprise Registration Certificate is a mandatory procedure when a foreign investor invests in Vietnam in the form of establishing economic organizations or contributing capital, buying shares/ stakes leading to the establishment of economic organizations being foreign-invested enterprises.

This is a procedure that is considered to be quite simple to carry out. Depending on the type of enterprise that foreign investors establish or contribute capital, purchase shares/stakes to become a single-member limited liability company/multi-member limited liability company/joint-stock company/ partnership with different requirements in
the application for the Business Registration Certificate.

Investors that conduct the procedures for capital contribution, share purchase, and stake purchase leading to the transformation from a private enterprise into a
partnership/limited liability company/joint stock company (Article 26 Decree No. 01/2021/ND-CP) shall conduct the procedures to converse the type of enterprise after
procedures for registration of capital contribution or purchase of shares/stakes in certain cases (Article 26 of the Law on Investment 2020):

• The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business organization conducting business in the
  restricted business lines.
• The capital contribution or purchase of shares or stakes results in a foreign investor or business organization holding over 50% of the charter capital of the business organization in the following cases: The holding of charter capital by the foreign investor is increased from less than or equal to 50% to over 50%; the holding of charter capital
  by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business organization.
• The foreign investor that contributes capital, purchases shares or stakes of a business organization has a certificate of rights to use land on an island or in a border or coastal commune; in a coastal commune; in another area that affects national defense and security.

– Change of information

An enterprise registration certificate changes in one of the following cases:

• The enterprise’s name and business code.
• The enterprise’s headquarters address.
• Full name, signature, mailing address, nationality and legal document number of the legal representative (for limited liability companies and joint stock companies), each partner (for partnerships), the owner (for sole proprietorships). Full name, mailing address, nationality and legal document number of each member that is an individual; name, business code and headquarters address of each member that is an organization (for limited liability companies).
• The charter capital or investment capital if the enterprise is a sole proprietorship (conducting after registration of capital contribution or purchase of shares/stakes).

(Articles 28 and 30 of the 2020 Law on Enterprises)

 

 – Notification of changes to information

The enterprise shall notify the business registration authority of any change to:

• • The enterprise’s business lines.
  • The founding shareholders and foreign shareholders for joint stock companies, except listed companies.
  • Other content of the enterprise registration application.

(Article 31 of the Law on Enterprise 2020)

 

b. Issuance of Certificate of registration of Executive office establishment for foreign investors under BBC

BCC is a contract signed between investors for business cooperation, profit sharing, and product distribution as prescribed by law without establishing an economic organization.

• Investors can choose to register for the establishment of an executive office to implement the project under the BCC.
• Accordingly, the executive office owes its stamp and is entitled to recruit employees and operate a business within the scope of work prescribed in the BCC.

It is a possible solution to BCCs in which the cooperating parties do not want to establish a new economic organization.

Location: decided by the foreign investor in the BCC according to the contract requirements.

Rights: have a stamp; open accounts, recruit employees, sign contracts and conduct business activities within the scope of rights and obligations prescribed in the BCC
and the Certificate of registration of Executive office establishment.

c. Issuance of Certificate of registration of Branch/Representative office establishment of foreign investor

Branch: In cases where a foreign trader already has its headquarters in another country and now wishes to expand business into a new market, establishing a branch is often chosen. A branch is allowed to operate under conditions similar to the parent company, obtain its own corporate seal, and sign economic contracts on behalf of the parent, thereby ensuring a certain level of independence in business activities.

Requirements for Establishment of branches:

• The foreign investor is incorporated and registers for doing business in accordance with provisions of laws of countries or territories being parties to treaties to which
  Vietnam is a signatory or is recognized by the aforesaid countries or territories.
• The foreign investor has come into operation for at least 05 year from the date of establishment or registration.
• The Certificate of Business registration or equivalent document is valid for at least 01 more year from the date of submission of the application.
• The scope of operation of the branch is conformable with Vietnam’s Commitments to market access stipulated in treaties to which Vietnam is a signatory shall be consistent
  with lines of business of the foreign investor.
• In case the scope of operation of the branch is inconsistent with Vietnam’s commitments or the foreign investor does not belong to a country or territory participating in an international treaty to which Vietnam is a contracting party, the minister of specialized management must approve the establishment of the branch.

(Article 8 Decree No. 07/2016/ND-CP)

Representative office: The establishment of a representative office in Vietnam is the optimal solution when investors want a dependent unit to represent the company in promoting relationships, introducing products and services to customers but not intended for direct profit.

Requirements for Establishment of representative offices:

• The foreign company is incorporated and registers for doing business in accordance with provisions of laws of countries or territories being parties to treaties to which Vietnam is a signatory or is recognized by the aforesaid countries or territories.
• The foreign company has come into operation for at least 01 year from the date of establishment or registration.
• The Certificate of Business Registration is valid for at least 01 year, from the date of submission of the application In Vietnam.
• The scope of operation of the representative office: market research, trade promotion in Vietnam.
• In case the scope of operation of the representative office is inconsistent with Vietnam’s Commitments or the foreign investor is not located in the country or territory being party to treaties to which Vietnam is a signatory, the representative office can be established only if relevant Ministers, Heads of ministerial agencies (hereinafter referred to as “relevant Ministers”) have given approval for establishment of the representative office.

(Article 7 Decree No. 07/2016/ND-CP)

Effective periods of Licenses for Establishment of branches/representative offices shall be valid for 05 years but not exceeding the remaining effective period of the Certificate of Business Registration or the equivalent (for documents having expiry date). The periods of the extended License for Establishment of branches/representative offices shall be equal to that of the current license, and the periods of the extended License for Establishment of branches/representative offices shall be extended.

(Article 9 Decree No. 07/2016/ND-CP)