Vietnam is facing golden opportunities in attracting foreign investment and economic development. In 2024, with the continuous improvement of the investment environment and policies to support businesses, the establishment of a foreign joint venture company is gradually becoming a prominent trend. This is not only an opportunity for domestic companies to access advanced technology and abundant capital, but it also opens the path for sustainable development and improves competitiveness in the international market. This cooperation promises to bring great benefits, while also creating new challenges that require careful preparation and reasonable strategies from Vietnamese companies. Therefore, to understand more about the foreign joint venture company, the following article will clarify the issues related to “what procedures are needed to establish a foreign joint venture company in 2024?”.
I) Overview of Joint Venture Company
Concept of Joint Venture Company
Currently, Vietnamese law has not yet defined the concept of a joint venture company. It can be understood that a joint venture company is not a type of enterprise but rather a term used to refer to businesses established in Vietnam through the cooperation of two or more parties. The current legal regulations state that a joint venture between enterprises involves two or more businesses contributing a portion of their assets, rights, obligations, and lawful interests to form a new enterprise[1]. Accordingly, a foreign joint venture can be understood as the collaboration between Vietnamese individuals/organisations and foreign individuals/organisations to establish a new company based on a joint venture contract.
Forms of the Foreign Joint Venture Companies
Because a foreign joint venture company is formed based on cooperation between two or more parties, a foreign joint venture company can be established in the form of a limited liability company with two or more members or a joint stock company. These types of enterprises all have legal status, have their own seals, have their own assets, and are responsible with their assets for debts and other financial obligations of the enterprise. For example: A joint venture bank is established or organised in the form of a limited liability company with two or more members but not more than 5 members. In which, a member and related persons are not allowed to own more than 50% of the charter capital[2].
Features of the Foreign Joint Venture Companies
Nowadays, foreign direct investment is becoming increasingly important for Vietnam’s market economy. This not only helps to provide capital but also brings advanced technology and modern techniques, especially business management and operation experience from international partners. These are key factors to help Vietnamese companies improve their competitiveness and dominate the market. For the above reasons, the establishment of a joint venture company has the following characteristics:
- The most core characteristics of joint venture company is the coordination of production and business investment capital contribution of foreign investors and Vietnamese investors.
- The capital contribution rate of each party will determine the level of participation in business management, the percentage of profits to be enjoyed as well as the risks that each party participating in the joint venture must bear.
- Joint venture company have legal status in accordance with Vietnamese law.
- Joint venture partners are domestic or foreign enterprises.
- Joint Venture Company was established as an independent company.
II) Procedure Establishment of the Foreign Joint Venture Companies
Forms of the foreign joint venture company
Based on the socio-economic development strategy and orientation of the entire economy, the Government strongly encourages the attraction of foreign direct investment through the form of investment in the establishment of economic organisations.
For this form of direct investment, both foreign and Vietnamese parties jointly submit applications for the establishment of the company. This is a clear legal form, partners contribute capital to put the project into operation, procedures are in accordance with the legal process and ensure legal safety. However, the limitation of this form of direct investment is the contradiction in the administration and management of the enterprise due to the differences in politics, customs, traditions, culture and language among its partners. In addition, the joint venture party in the host country may fall into a downward spiral due to the low capital contribution rate, weak capacity and management level.
Procedure for establishment the foreign joint venture companies
The establishment of a foreign joint venture company can be through the procedures for establishing a joint venture company (the joint venture company will be granted an investment registration certificate first and then carry out the procedures for applying for an enterprise registration certificate) as follows:
Step 1: Applying for an investment registration certificate for the foreign joint venture companies, after completing the preparation of the dossier, the investor shall submit directly to the Investment Division – Department of Planning and Investment (or the Management Board of provincial/municipal industrial parks if the foreign joint venture companies located in the industrial park) where the operational headquarters of the foreign joint venture companies. The dossier must be in accordance with the provisions of law[3]comprise:
(+) Application for implementation of the investment project;
(+) Proposal of investment project;
(+) A copy of the land/office lease contract for the company’s headquarters;
(+) Valid copies of legal documents signed by Vietnamese investors and foreign investors;
(+) Documents proving the financial ability of the investor;
(+) Other documents that are relevant or required to be provided.
Within 15 working days from the date of receipt of a complete and valid dossier, the Investment Division will issue an investment registration certificate to the joint venture company.
Step 2: Apply for an enterprise registration certificate for the foreign joint venture companies. The company establishment dossier is specified in Decree 01/2021/ND-CP, including:
(+) An application for enterprise establishment registration;
(+) Charter;
(+) List of members (for limited liability companies with two or more members) or list of founding shareholders and list of shareholders being foreigners (for joint-stock companies);
(+) Copy of CCCD/ID card/passport of the legal representative/investor who contributes capital is an individual;
(+) A copy of the business registration license/establishment decision of the investor being an organisation;
(+) A document appointing a representative to authorise the management of the organisation’s contributed capital;
(+) ID card/ID card/passport of the representative.
After 3 working days from the date of receipt of a complete and valid company establishment dossier, the Business Registration Office will issue an enterprise registration certificate to the foreign joint venture companies.
The above is an overview of what procedures are needed for the establishment of a foreign joint venture company in 2024? that Phuoc and 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 leading team of staff in the legal field in Vietnam. practice fields are rated as the top in the legal market such as Labour and Employment, Tax, Mergers and Acquisitions, Litigation. We are confident to be one of the law firms providing the best legal services to our clients.
[1] Article 29.5 of the Competition Law 2018
[2] Circular 13/2023/TT-NHNN
[3] Law on Investment 2020
