Question11: As I may know, the Investment Law 2014 has made a fundamental change in the separation between investment registration and enterprise registration procedures. Please refer to the details above?
Answer:
According to the Law on Investment 2005, foreign investors investing in Vietnam for the first time must have investment projects associated with the establishment of economic organizations; The Investment Certificate issued for foreign investor is also a Business Registration Certificate. The Investment Certificate is also a Business Registration Certificate aimed at simplifying procedures for foreign investors but in practice has led to many difficulties for investors because thesetwo types of documents are completely different in nature. The Investment Certificate contains the registration information of the investor on the investment project, while the Business Registration Certificate registers information on the enterprise registration. Therefore, provision that the Investment Certificate issued for foreign investor is also a Business Registration Certificate has created difficulties and inadequacies for investors when adjusting the information related to the legal entity.
In order to overcome the above limitations, the Investment Law of 2014 has separated the procedures for registration of investment and registration procedures for the establishment of enterprises for foreign investors in Vietnam. Accordingly, after the procedures for granting the Investment Registration Certificate are granted, the foreign investor is allowed to establish an enterprise at the Business registration office as a domestic investor. At the same time, under the provisions of Enterprise Law 2014, the enterprise registration dossier of the foreign investor must have an Investment Registration Certificate. Accordingly, the contents of investment registration for investment projects shall be recognized in the Investment Registration Certificate and managed by the investment registration agency. The content of the legal entity is recognized in the Enterprise Registration Certificate and managed by the enterprise registration agency.
This provision clearly distinguishes the legal status of legal entities and specific investment activities, at the same time, reduces inconvenience for investors when adjusting information related to legal persons in the course of operation and shortening the time for issuing Investment Registration Certificate to foreign investors (from 45 days under the Investment Law 2005 to 15 days under the Investment Law 2014).
Question12: I am a foreign investor who is planning to join with Vietnamese friends to establish an economic organization in Vietnam. I intend to contribute 5% of the capital contribution. Do we need to carry out investment registration procedures in order to be granted an Investment Registration Certificate before the registration of the establishment of the enterprise?
Answer:
Under the provisions of Article 22 of the Investment Law, investors may establish business organizations in accordance with law. Before establishing a business organization, the foreign investor must have an investment project and apply for a Certificate of investment registration.
Clause 1 and 2 of Article 23 of the Law on Investment stipulate:
“1. When establishing business organizations, contributing capital, buying shares or capital contributions of business organizations; making investments under business cooperation contracts in one of the following cases, the foreign investor must satisfy the conditions and follow investment procedures applied to foreign investors:
a) 51% of charter capital or more is held by foreign investors, or the majority of the general partners are foreigners if the business organization is a partnership;
b) 51% of charter capital or more is held by the business organizations mentioned in Point a of this Clause;
c) 51% of charter capital or more is held foreign investors and the business organizations mentioned in Point a of this Clause.
2. Foreign-invested business organizations in other cases than those mentioned in Points a, b, and c of this Clause shall satisfy conditions and follow investment procedures applied to Vietnamese investors when establishing business organization, when making investment by contributing capital, buying shares, buying capital contribution of business organizations, when making investments under business cooperation contracts.”.
At the same time, Clause 14, Clause 16, Clause 17, Article 3 of the Investment Law stipulates:
“14. Foreign investor means an individual holding a foreign nationality or an organization established under foreign laws an making business investment in Vietnam”.
“16. Business organization means an organization established and run in accordance with Vietnam’s laws. Business organizations include companies, cooperatives, cooperative associations, and other organizations that make business investments”.
“17. Foreign-invested business organization means a business whose members or shareholders are foreign investors”.
Basing on the above-mentioned provisions, cases that investment registration procedures are required in order to be granted Investment Registration Certificate before registration of the establishment of enterprises include:
a) Foreign investors register for the establishment or participate in the establishment of enterprises in Vietnam.
b) Economic organizations with foreign investors holding 51% or more of charter capital or a majority of partners being foreign individuals to economic organizations being partnerships registered for establishment or participate in the establishment of enterprises in Vietnam.
c) Economic organizations with economic organizations defined in Point b, who hold 51% or more of their charter capital, register their establishment or participate in the establishment of enterprises in Vietnam.
d) Economic organizations with foreign investors and economic organizations specified in Point b, who hold 51% or more of the statutory capital, register the establishment or participate in the establishment of enterprises in Vietnam.
After being granted the Investment Registration Certificate, the investor shall carry out the procedures for registering the establishment of the enterprise in order to be granted the Enterprise Registration Certificate according to regulations.
Therefore, if you are a foreign investor, who holds only 5% of the capital of an economic organization, you still need to carry out investment registration procedures in order to be granted an Investment Registration Certificate before the registration of the establishment of the enterprise.
Question13: Please indicate the investment conditions applicable to foreign investors when investing in the establishment of economic organizations?
Answer:
Under the Investment Law 2014, before the establishment of an economic organization, a foreign investor must have an investment project, carry out procedures for issuance of an investment registration certificate and must satisfy the following conditions:
a) Regarding the ownership of charter capital
Foreign investors may own an indefinite amount of charter capital invested in business organizations, except for the following cases:
- The holdings of the foreign investors at listed companies, public companies, securities-trading organizations, and securities investment funds are conformable with regulations of law on securities;
- The holdings of the foreign investors at state-owned companies that have been equitized or converted are conformable with regulations of law on equalization and conversion of state-owned companies;
- With regard to holdings of the foreign investors in other cases than those mentioned in Point a and Point b of this Clause, relevant regulations of law and the international agreements to which the Socialist Republic of Vietnam is a signatory shall apply.
b) Form of investment, operating scope, Vietnamese partners, and other aspects are conformable with the international agreements to which the Socialist Republic of Vietnam is a signatory.
Question14: Please answer "Investment conditions for foreign investors" and "Conditions for business investment" are the same or not?
Answer:
“Investment conditions for foreign investors” and “Investment conditions” are two different terminologies. Accordingly, under Clause 6, Article 2 of Decree No. 118/2015/ND-CP, investment conditions applied to foreign investors are conditions that foreign investors must satisfy before making investment in the business lines subject to conditions applied to foreign investors specified in relevant Laws, Ordinances, Decrees, and international agreements on investment. As stipulated in Paragraph 7, Article 2 of Decree No. 118/2015/ND-CP, investment conditions are conditions that every organization and individual must satisfy when making investment in the business lines specified in Appendix 4 of the Law on Investment according to relevant Laws, Ordinances, Decrees, and international agreements.
Question15: Please distinguish “Investment conditions for foreign investors” and “Investment conditions”?
Answer:
“Investment conditions for foreign investors" and "Conditions for investment and business" are two different types of conditions regarding for both the subject and the time of application of the conditions.
a) For “Investment conditions applied to foreign investors”
According to Clause 6, Article 2 of Decree No. 118/2015/ND-CP, investment conditions applied to foreign investors are applied in the following cases:
a) Investment in establishment of a business organization;
b) Investment in the form of capital contribution, purchase of shares/stakes in a business organization;
c) Investment in the form of a business cooperation contract;
d) Receipt of an investment project;
e) Change or addition of business lines of a foreign-invested business organization.
Moreover, under the provisions of Clause 1, Article 23 of the Investment Law, when establishing business organizations, contributing capital, buying shares or capital contributions of business organizations; making investments under business cooperation contracts in one of the following cases, the foreign investor must satisfy the conditions and follow investment procedures applied to foreign investors:
a) 51% of charter capital or more is held by foreign investors, or the majority of the general partners are foreigners if the business organization is a partnership;
b) 51% of charter capital or more is held by the business organizations mentioned in Point a of this Clause;
c) 51% of charter capital or more is held foreign investors and the business organizations mentioned in Point a of this Clause.
Therefore, the object of the "Investment conditions applied to foreign investors” are foreign investors and economic organizations defined in Clause 1, Article 23 of the Investment Law. About the time of application of the "Investment conditions applied to foreign investors" are five cases stipulated in Clause 6, Article 2 of Decree No. 118/2015 / ND-CP.
For economic organizations defined in Clause 1, Article 23 of the Investment Law, there are 3 cases: (i) investment in the establishment of economic organizations; (ii) investment in capital contribution, share purchase, capital contribution of economic organizations and (iii) BCC investment.
b) For "Investment Conditions"
Clause 8, Article 7 of the Government's Decree No. 78/2015 / ND-CP dated 14/9/2015 on enterprise registration stipulates: “Enterprises are entitled to engage in conditional business lines if they satisfy all conditions and are able to maintain fulfillment of such conditions throughout their operation”.
Thus, the object of the “Investment conditions” includes enterprises established under the Enterprise Law and applied when enterprises conduct the conditional business lines.
Hoang Thanh Tuan
Source: Agency for Business Registration