Tiếng Việt
English
Korean
Chinese
Up to now, South Korea is still the partner with the highest number of investors that interested and made new investment decisions in Vietnam, more than 9,000 operating enterprises. And certainly, the number of Korean FDI enterprises in Vietnam tends to increase. Therefore, many Korean investors have come to OTIS LAWYERS and used the consulting service on establishing FDI enterprises in Vietnam to be able to choose the right type of enterprise registration and avoid risks.(Establish FDI enterprises in Vietnam)
The common story of many Korean clients: Establish FDI enterprises in Vietnam
Many South Korean investors hesitate to choose the investment plan to establish FDI enterprises in Vietnam.
Just like many other clients, Mr. Park (56 years old) learned and used the company's services through the introduction of a South Korean friend who used OTIS's consulting services. Through the exchange, OTIS known that Mr. Park is planning to establish a company in Hanoi, Vietnam and is considering investment options: establishing a company with 100% FDI capital; establish a company borrowing a name (using Vietnamese people's name to establish a company with 100% Vietnamese capital) and establishing a company under the name of Vietnamese and South Koreans.
Advantages and disadvantages comparison among 100% FDI companies, borrowed companies and joint venture companies
Understanding the client’s wishes and in order to provide an overview and evaluate the advantages and disadvantages of each investment option, OTIS conducted a direct exchange through the company's interpreter and then sent a consulting letter to Mr. Park on the following basic contents:
| Criteria | 100% FDI enterprises | Vietnamese enterprises (borrowing name) | Vietnamese enterprises (joint name) | ||
| Establishment Procedure | The procedure is more complicated, time consuming and costly In addition, there are restrictions on business investment lines and investment forms. Specifically, in some fields, it is not possible to establish a company with 100% foreign capital, but must conduct a joint venture with a domestic entity. | The procedure is simpler, time-saving and inexpensive. Not restricted in many industries as for foreign investors (except for industries banned under Article 6, Annex I, Annex II, Annex III, Law on Investment 2020)
| Complicated, time-consuming and costly procedures, similar to 100% FDI enterprises Although the field, business lines can be more open (for industries that are not allowed 100% FDI investment). But in many fields, the rate of ownership of contributed capital by foreign investors is still limited. | ||
| Business Management | Investors have the right to independently decide all issues of the enterprise. | The investor only plays an indirect management role through a legal representative. Because on paper, the investor is not the owner of the business. Therefore, if there is a dispute, the investor can be replaced. | Investors have the right to directly manage and operate the enterprise. However, it is not possible to make all decisions about the company's issues | ||
| Cash flow management | Foreign investors are legally allowed to remit profits back home country. (after fulfilling all financial obligations as prescribed by Vietnamese law) | When the business is profitable, the investor cannot transfer that profit abroad. | Investors are allowed to remit profits corresponding to the percentage of contributed capital in the joint venture (after fulfilling all financial obligations as prescribed by Vietnamese law). | ||
| Legality | a legal form of investment, regulated and protected by Vietnamese law | An act that is not allowed by Vietnamese law and can be administratively fined. | A legal form of investment, the investments of foreign investors will be protected | ||
Consulting on legal risks that may occur when foreign investors ask a Vietnamese to set up an enterprise by his/her name
According to the provisions of Clause 4, Article 16 of the Enterprise Law 2020, the "untruthful and inaccurate declaration of the contents of the enterprise registration dossier and the contents of the application for registration of changes in enterprise registration contents" is a prohibited act. Thus, according to Vietnamese law, it is a fraud act in business registration that some investor borrows another person's name to establish a company with 100% Vietnamese capital contribution in order to do business in restricted business line with foreign investors, or enjoy other preferential regimes. And the company may be fined from 10-15 million and has to change and re-notify business information. More seriously, the company may be forced to close if the state agency finds out.
Not only are they unable to directly manage the business, have no ownership rights, and are not protected by law, foreign investors are also unable to transfer profits from the borrowing company to their home country.
Obviously, at present, Vietnam has opened up very wide and unrestricted to foreign investors in many fields and business lines because of the introduction of many free trade agreements (FTAs). Park's case is the same, after studying the details of the Vietnam - Korea Free Trade Agreement (VKFTA), OTIS found out about business lines that Mr. Park intends to register for are not restricted in business establishment forms. Therefore, OTIS hope that he can carefully consider the benefits and risks to make the right investment decision.
Consulting service of OTIS on procedures for establishing foreign-invested enterprises (establish FDI enterprises in Vietnam)
After considering the useful consultation of OTIS, Mr. Park decided to enter into a joint venture with a Vietnamese friend in the form of a limited company with 2 members or more. In general, the procedures for establishing a 100% FDI enterprise and establishing a foreign-invested joint venture company are the same.
Currently, the establishment of foreign-invested enterprises is governed by Law on Investment 2020, Law on Enterprise 2020, and detailed guiding decrees and circulars. According to current regulations, to establish a foreign-invested legal entity in Vietnam, investors will need to perform the following basic procedures:
– Apply for an Investment Registration certificate (IRC)
– Apply for an Enterprise Registration Certificate (ERC)
After signing the service contract with Mr. Park, the company received the authorization and immediately carried out the procedures to apply for IRC and ERC for the client.
In general, clients come to OTIS for carrying out this procedure, they only need to provide basic documents such as:
(1) For individual investors
– Notarized copy of the entire passport (for foreign investors); notarized copy of ID card/Citizen identification card/passport (for Vietnamese investors participating in the project);
– Confirmation of the bank account balance of each investor corresponding to the expected investment capital in Vietnam (original if issued in Vietnam, consular legalized copy if documents are issued abroad)
(2) For organizations and enterprises investors
– Copy of consular legalization of establishment license/ business registration certificate;
– Notarized copy of the entire Passport / ID card / Identity card of the legal representative
– Notarized copy of the entire Passport / ID card / Identity card of the person authorized to manage the contribution capital at the company to be established
- Consular legalized copy of the investor's last 2 years' financial statements (showing profitable business). In case the financial statement of the enterprise shows that the business enterprise is not profitable, it is required to provide additional confirmation that the enterprise's bank account balance is at least equal to or greater than the intended capital for investment registration in Vietnam.
Within 15 days of hard work by the company's lawyers and specialists team (unless it is necessary to conduct further appraisal or consult relevant agencies, the procedure may take up to 30-35 days), the client will sign a document handing-over minutes and receive the results, including: Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC) and documents provided by the client during the use of the company's services.
OTIS are very proud and feels honored to provide legal consulting and support in the field of investment and business for foreign investors when learning about the investment market in Vietnam, the legal regulations and procedures. necessary legal procedures when investing in Vietnam.
For any questions, please contact:
OTIS & PARTNERS LAWFIRM
Address: No. K28, Lane 68 Trung Kinh, Yen Hoa Ward, Cau Giay District, Hanoi City.
Hotline: (+84) 987 748 111
Email: [email protected]/ Website: https://otislawyers.vn/
Comments