Required certificates for setting up a newly established company
A foreign investor who wants a direct presence in Vietnam but does not want to inherit an existing business (and the liabilities that go along with that) can set up a new company in the country, whether as a wholly-owned subsidiary or as a joint venture with a foreign or Vietnamese partner(s).
To do this, the foreign investor must register an ‘investment project’ with the authorities, which is defined as ‘a set of proposals for the expenditure of medium and long-term capital in order to carry out investment activities in a specific geographical area and for a specified duration’ under Article 3.4 of the 2020 Law on Investment. Under Vietnamese law, it is not possible for a foreign investor to set up a shelf company. As such, in order to set up the company, the investor must have a specific investment project by way of proving the financial capacity, investment objectives, investment scale, investment location, etc. with the Vietnamese authorities for their approval.
The investor also needs to register ‘investment capital’ of the project, being the total cost of implementing the project. This ‘investment capital’ is recorded on the Investment Registration Certificate and made up of charter capital (i.e., equity) and loan capital. Charter capital must be contributed by the investor within 90 days upon incorporation of the company. To deal with this requirement, it is possible for the investor to register a lower amount of charter capital at the company establishment and gradually increase it as required and in line with business demands during project implementation.
Under the 2020 Law on Investment, approval of the investment project is usually given in the form of an Investment Registration Certificate (IRC). The IRC will set out the relevant information of the project (e.g., information on the investor, scope and objectives of the investment project and investment capital). Once the IRC is issued, the investor will then need to apply for an Enterprise Registration Certificate (ERC) to establish company that will implement the approved investment project. The ERC serves as the certificate of incorporation of the company and will set out the corporate information of the company (e.g., name, address, the legal representative and charter capital of the company).
Conditional investment sectors
Under the 2020 Law on Investment and the 2020 Law on Enterprises, in general, foreign investors can establish a company to do business in any sector not prohibited for investment by law. In respect of conditional investment sectors set out in the 2020 Law on Investment, foreign investors must satisfy the conditions on market opening as prescribed under the international market access commitments of Vietnam (including Vietnam’s commitments to the World Trade Organization) or under local Vietnamese regulations in such sectors. Under Article 7.6 of the 2020 Law on Investment, these investment conditions are in the form of sub-licenses, certificates, degrees, written confirmation or written approval, and other requirements that must be satisfied by individuals and business organizations to conduct business investment activities without obtaining written confirmation from a competent authority.
In general, manufacturing activity is not subject to restriction on market opening for foreign investment (so long as the manufacturing activity complies with the general Vietnamese law on environmental protection and investment plan). For services, Vietnam has only opened the market for foreign investment in certain service sectors that Vietnam committed to under international treaties to which it is a party or under specific local Vietnamese law. If the services are not specifically listed in the list of business/services that Vietnam has committed to open its market to foreign investors and there is no specific regulation for foreign investment in those sectors under the law of Vietnam, approval for foreign investment in those sectors is at the discretion of the licensing authorities.
In-principle approval, consultation of opinion of central authorities and sub-license requirements
Certain categories of investment projects require in-principle approval from the relevant government authority (e.g., the Prime Minister or the local People’s Committee) before the IRC is issued. Obtaining an IRC in these cases can take significant time, adding at least one or two months (or much longer in the case Prime Minister’s in-principle approval is required) to the normal process. In general, the provincial investment licensing body (i.e., the Department of Planning and Investment or the Industrial Zone Authority where the project is located) can make a decision and issue the IRC by itself.
By law, the statutory time limits for the licensing authority to issue the IRC and ERC are 15 days and three business days respectively, counting from the date of receipt of the complete application file. However, in practice the licensing process normally takes longer than such statutory time due to requests for more information/documentation from the authorities.
In respect of some highly regulated conditional sectors, apart from the IRC and the ERC requirements as discussed above, a Vietnamese company must obtain a sub-license from the relevant authorities in charge of those sectors before it can start the operations, such as foreign invested companies providing retail services.