Question:
We are Hongkong company and would like to establish a Joint Venture Company with business principal activities of (i) Warehousing cum Storage, (ii) Freight transport agency, (iii) Customs clearance agency, and (iv) Container handling services
We would like to request you to assist on negotiation and preparation of a Joint Venture Contract between Vietnam party and foreign party accordingly.
Please advise the legal procedure and your attorney fee?
Answer:
As your request, we would like to advise you as follow:
1.INVESTMENT REGISTRATION
The establishment of a foreign invested company (FIC) in Vietnam requires an Investment Certificate from the licensing authority. Depending upon the location of the company, the licensing authority may be the Provincial People’s Committee (for companies located outside industrial or export processing zones) or the provincial Industrial and Export Processing Zones Management Authority (for companies located in industrial or export processing zones).
According to Vietnam Law on Investment 2014, an investment in the form of the establishment of an economic organization will require a Foreign Investor to go through a two-step licensing process as follows:
- Application for obtaining an Investment Registration Certificate (IRC) which is issued to the Foreign Investor itself rather than to the Foreign Invested Enterprise (FIE); and
- Registration for establishment of an enterprise by obtaining an Enterprise Registration Certificate (ERC) for the FIE.
2.REQUIREMENTS FOR INVESTMENT REGISTRATION
- Operations Storage and warehouse services is classified to CPC 742: Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 7 years after entering into WTO, wholly foreign invested company is allowed to establish to provide these services.
- Operations of freight transport agency services is classified to CPC 748: Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 7 years after entering into WTO, wholly foreign invested company is allowed to establish to provide these services.
- Operations of customs clearance agency services: Foreign Investors shall be required to setup joint venture with Vietnamese Partner in which foreign ownership must not exceed 51%. 5 years after entering into WTO, joint ventures can be established with no foreign ownership limitation.
- Operations of container handling services is classified to CPC 7411: when entering into WTO, it is required to set-up joint ventures with foreign capital contribution not exceeding 50% can be established.
Thus, with respect to these services, Foreign Investor is allowed to setup Joint Venture Company with Vietnamese Partner(s) in which Foreign Ownership cannot exceeding 50% of Charter Capital of the NewCo.
- Other critical factors
In this case, in order to secure the high success possibility, we highly recommend Client to carefully account following factors:
- Location of the Joint Venture: In Vietnam, location of a foreign invested company is very important. Location of the Joint Venture Company must strictly comply with master plan of the City. We noted that the Joint Venture Company will conduct warehousing services. In this case, a land lot having sufficient space for warehousing services shall be strictly required. A plan for leasing existed warehouses from other suppliers for re-leasing is not recommended. According to our practical experience, locations in Industrial Zones shall be a good option. The Licensing Authority may refuse to grant the License if Client fails to provide sufficient explanation on such matters.
- Investment Capital of FIC: Under Vietnam Law, your proposed business does not require for minimum rate of investment capital. However, upon applying for investment certificate, Client shall need to provide an estimate of capital required for operating the Foreign Invested Company in a medium or long term. For a number of business activities as mentioned in your email, the competent authority may require Client to consider an amount of investment capital from 500,000 – 700,000USD upward.
- Experience of Client: Experience of Client and Vietnam Partner in the field is also one of important factor that determining the success possibility of the case. Foreign Investor and Vietnam Partner having no experience in the field is generally not favored by the Licensing Authority.
3.PROFESSIONAL FEE
3.1.For setting-up a foreign invested enterprise under joint-venture, our professional fee shall be US$ 8,000 (US Dollars Eight thousand), in particular:
- Preparation of the application documents: US$ 2,000 (US Dollars Two thousand);
- Licensing and Post-licensing procedure: US$ 6,000 (US Dollars Six thousand);
3.2.For drafting Joint Venture Contract, our professional fee shall be US$ 2,000 (US Dollars Two thousand).
