Question:
Dear lawyer, I would like to receive advice on the conditions and procedures for establishing a foreign-invested company (FIC) in Vietnam in the fields of security services and laundry services.
Answer:
Under Vietnamese Law on Investment, for setting up a FIC in Vietnam, the Client is required to propose an Investment Project initially to obtain Investment Registration Certificate. The relevant licensing authorities shall evaluate the legitimacy and the feasibility of such an Investment Project to determine on granting of the Investment Certificate on the following basis:
(i) The legal framework includes Vietnam’s WTO Commitments, Vietnam Investment Law, Vietnam Enterprise Law, Regulations applicable to specific industries as well as the master economic development plan of the city or province that the FIC shall register its head office.
At law, the investment of a foreign investor in several business industries is subjected to statutory market access conditions. The statutory market access conditions are the conditions which must be satisfied by foreign investors to make investment in the list of business lines with prohibited and restricted market access. The market access conditions are provided under international treaties to which the Socialist Republic of Vietnam is a signatory, and the law of Vietnam. Given that Vietnam is a member of World Trade Organization (WTO), there are several market access conditions provided under Schedule of commitments on services of Vietnam when joining WTO (the "WTO Service Commitments"). The market access conditions are provided under the form of:
- Limitation of holding of charter capital by the foreign investor in the company;
- Investment method;
- Scope of investment;
- Capacity of the investor; partners participating in the investment activities;
- Other conditions specified in the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government, and international treaties to which the Socialist Republic of Vietnam is a signatory
Given that the Client plans to operate in the business sector of security and laundry services, these business sectors have not been committed in WTO Service Commitments by the Vietnamese Government or provided under any legal instrument of Vietnam on market access conditions. Please note that, under WTO Service Commitments, other country members of WTO only reached a mutual agreement with Vietnam Government for over 11 (eleven) main services in the fields of Banking and Securities, Accounting, Auditing and Insurance services; Distribution and Logistics; Express delivery and Telecommunication; Business Services; and Transportation. Many other services including but not limited to Real Estate Business, Labor Outsourcing Services, Sanitary Services etc. were not mentioned in WTO Service Commitments.
In an unofficially interview with a high officer of the Ministry of Industry and Trade made by SB Law in the year of 2011, during the negotiation between Country Members of WTO and Vietnam for terms of its WTO participation, Vietnam reserved right to restrict foreign investor’s accession to several certain sensitive services. Those services were remarked as “not committed” in Vietnam-WTO Commitment. Then, according to the best practice, the licensing authority shall have to consult at least the Ministry of Planning and Investment and the Ministry of Industry and Trade before granting approval for any application for a foreign investor to provide services remarked as “not committed” in Vietnam-WTO Commitments.
In the year of 2021, Vietnam Government introduced the concept of Conditions for market access by foreign investors in business lines without market-access commitment of Vietnam under the Decree No. 31/2021/ND-CP as follows :
- In case the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of Standing committee of the National Assembly, Decrees of the Government (hereinafter referred to as “the law of Vietnam”) do not restrict market access in those business lines, foreign investors have the same market access as that of Vietnamese investors;
- In case the law of Vietnam has restrictions on market access by foreign investors in those business lines, the law of Vietnam shall apply.
The above Decree No. 31/2021/ND-CP paid the way for provincial Department of Planning and Investment to make appropriate decision with the respect to cases in which foreign investor(s) applies for running business activities in services not committed by Vietnam Government in Vietnam-WTO Commitments. However, it has been noted to us that the actual implementation or explanation of the above concept of “the business lines without market-access commitment of Vietnam” is not the same in different cities/provinces. Some of them just only rely on conditions promulgated by Vietnam Legal Instruments to make a decision. Meanwhile, others still consult the relevant Ministries before approval.
(ii) Client’s financial ability, investment capital to put in the Investment Project, facilities, and human resources serving the implementation of such investment project in Vietnam.
(iii) Head of the office of the FIC should be in line with the master plan of the Province/Municipal. In this case, there is no strict requirement for the head office address applied for the FIC’s expected business sectors. However, the Client should make sure that the lessor who signs the Office Lease Contract with you can provide sufficient evidence proving his/her legal ownership of the office.
Hence, in order to set up the FIC, the Client is required to undergo the following steps as follows:
(i). Step 1: Obtaining Investment Registration Certificate;
(ii).Step 2: Obtaining Enterprise Registration Certificate;
(iii). Step 3: Obtaining sub-licenses for the statutory conditional business sector. Given the proposed business sector of the FIC, the business sector of security service is a conditional business sector, which requires a sub-license named “Certificate of eligibility regarding security and order” being granted before official operation of service provision.
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