Foreign direct investment in Vietnam is a top concern and has become an important goal in Vietnam’s socio-economic development strategy in recent years. Undeniably, since the renovation from a centrally planned economy to a market economy model, socialist-oriented, with State management and regulation, Vietnam has become a potential destination for foreign investors. Accordingly, foreign investors are also very fond of the form of investment by the establishment of a joint venture company in Vietnam to take advantage of the available strengths of partners in Vietnam and reduce risks for themselves compared to owning the entire contributed capital of the enterprise.
The following article will help readers have useful information and a preliminary view on how to establish a joint venture company in Vietnam to consider and implement.
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What is a joint venture company?
In fact, the current law does not have a specific definition of joint venture company. Referring to the Law on Investment 2005 (which expired on 1 July 2015), a joint venture company can be understood as an enterprise established in Vietnam by domestic investors and foreign investors on the basis of a joint venture contract. A joint venture company is established under the form of a limited liability company or a joint stock company and each investor will be responsible to the extent of the committed capital contributed to the legal capital of the joint venture company.
However, the Law on Investment 2020 and current implementation guidance documents have no provision on establishment of joint venture companies, but are referred to with a common name as “foreign-invested economic organisations”.[1] So the procedure for establishing a joint venture company is the procedure for applying for an Investment Registration Certificate and a Enterprise Registration Certificate.
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Procedures for establishing a joint venture company in Vietnam
Conditions for establishing a joint venture company in Vietnam
Investors shall consider the conditions below to determine if they are allowed to establish a joint venture company in their target areas:
– Regarding the list of industries: Article 15 and Section A, Appendix I of Decree 31/2021/ND-CP provides detail regulations and guidance on implementation of a number of articles of the Law on Investment 2020 listing business lines restricted from market access for foreign investors, such as goods, services on the list of goods and services in the list of goods and services subject to State monopoly in the fields of commerce, journalistic activities and news gathering activities in any form and fishing or seafood harvesting. In addition, domestic and foreign investors should pay attention to conditional business lines in Appendix IV of the Law on Investment 2020. At this case, foreign investors must meet certain conditions to operate their business in such business lines.
– Finance: Vietnamese law has no general requirements on minimum capital for joint venture companies or foreign-invested economic organisations. However, some specific industries will require investors to meet the legal capital level, for example, in the field of insurance, in case of establishing a joint venture company as a non-life insurance enterprise, this joint venture company must have a legal capital of VND300 billion or more (under Clause 1 Article 10 of Decree 12/VBHN-BTC stipulating expenditures and implement the Law on Insurance Business and the Law on amending and supplementing a number of articles of the Law on Insurance Business). In general, the financial capacity of investors must correspond to the amount of capital committed to invest in the project, i.e. investors must have the capacity to complete the committed capital contribution.
– Regarding participants: being a legal entity of Vietnam and established in accordance with the current law on enterprises in Vietnam such as the Law on Enterprise 2020. If the entity participating in the establishment of a joint venture company is a foreign-invested economic organisation, it is necessary to satisfy additional conditions in Article 23 of the Law on Investment 2020 and Chapter V of the Decree No. 31/2021/ND-CP dated 26 March 2021 provides detail regulations and guidance on implementation of a number of articles of the Law on Investment 2020.
Procedures for applying for an Investment Registration Certificate
2.2.1. Registration and application for approval of investment policies (in case the project is subject to investment policy decision)
Articles 30, 31 and 32 of the Law on Investment 2020 stipulate types of investment projects that must be approved by competent authorities. If the project is subject to an application for approval of investment policies, investors must apply for approval of investment policies from the National Assembly, the Prime Minister or provincial People’s Committee authorities. The composition of an application for appraisal of an application for approval of investment policies is specified in Article 33 of the Law on Investment 2020 and Article 31 of Decree 31/2021/ND-CP. Regarding the order and procedures for approval of investment policies, within the prescribed time limit from the date of receipt of complete dossiers, competent authorities will appraise dossiers. After that, the competent authority will issue a decision approving the investment policy after considering the application is valid.
2.2.2. Carry out procedures for issuance of the Investment Registration Certificate
If the investor is a foreign investor, after satisfying all the conditions for the foreign investor to be allowed to invest in Vietnam, the foreign investor must carry out procedures for applying for an Investment Registration Certificate. Clause 1, Article 37 of the Law on Investment 2020 specifies the cases in which procedures must be carried out for application for an Investment Registration Certificate, including investment projects of foreign investors.
Under Articles 35 and 36 of Decree 31/2021/ND-CP, for an investment project that has been approved for investment policies, the investment registration authorities must issue an Investment Registration Certificate within 05 working days from the date of receipt of the approval of the application for an Investment Registration Certificate.
For projects that are not eligible for the issuance of an Investment Registration Certificate but investors still wish to apply for an Investment Registration Certificate, investors may submit required documents to the investment registration authorities to be granted an Investment Registration Certificate within 05 working days from the date of receipt of the application.
It is worth noting that the procedure for applying for issuance of an Investment Registration Certificate may take longer than expected because it depends on many objective factors.
Carry out procedures for issuance of the Enterprise Registration Certificate
According to Vietnamese law, joint venture models all lead to the establishment of enterprises to carry out business activities. Enterprises can apply the following types of businesses: Joint stock company, Limited liability company with two or more members or a partnership in case the parties to the joint venture are only individuals. Each party is responsible for their respective capital contribution to the company.
After receiving the Investment Registration Certificate, investors can continue the procedures for establishing a joint venture company. Investors will consider and select the type of enterprise that suits the business objectives and provisions of Vietnamese law including a joint stock company, a limited liability company with two or more members or a partnership. To be granted an Enterprise Registration Certificate, investors shall carry out business registration procedures. The procedures for business registration is detailed in Decree 01/2021/ND-CP. Base on the type of enterprise selected, investors may carry out appropriate enterprise registration procedures as prescribed by law. After submitting the application for enterprise registration at the Business Registration Office where the enterprise’ headquarter I located and the application is considered to meet the prescribed conditions under Clause 2 Article 32 of Decree 01/2021/ND-CP, the application will be accepted and processed. Within 03 working days from the date of receipt of a valid dossier, the Business Registration Office will issue an Enterprise Registration Certificate if the joint venture enterprise fully meets the conditions specified in Clause 1, Article 27 of the Law on Enterprise 2020.
Above is an overview content related to Consulting services on procedures for establishing a joint venture company in Vietnam that Phuoc & Partners share with readers. If you encounter any difficulties related to the legal field, please contact us. Phuoc & Partners is a law firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Da Nang. Phuoc & Partners is also considered one of the law firms with a team of staff specialising in the leading legal field in Vietnam and whose practice areas are rated top in the legal market such as Labor and Employment, Taxation, Mergers and Acquisitions, Litigation. We are confident that we are one of the Law Firms providing the best legal services to our customers.
[1] Article 3.22 of the Investment law 2020
