Question: A client of us, a Tawanese company, has incorporated a company in Hong Kong. Now the client intends to use the Hong Kong company to incorporate a company in Thu Dau Mot County, Binh Duong Province, Vietnam.

The client hope that they could first incorporate a company in Thu Dau Mot County, Binh Duong Province, Vietnam and then use the company to establish a textile and dyeing mill there in local.

Could you please advise us on the following queries:

1.        company incorporation

1)        turn-around time and procedures

2)        document requirements

3)        fee quotations( including service fee, government fee and disbursements if any)

2.        textile and dyeing mill establishment

1)        turn-around time and procedures

2)        document requirements

3)        license, authentication or permission requirements

4)        fee quotations( including service fee, government fee and disbursements if any)

We welcome your professional comments on the relevant issue concerning the client’s requirement.

If you provide any other relevant service that might help the client please do not hesitate to provide us with your description of services and fee quotations.

Answer: This is reference to your email

Your Client (hereinafter referred to as “Client”) is now seeking legal advices for setting up a textile and dyeing factory (hereinafter referred to as “FIC”) in Thu Dau Mot County, Binh Duong Province. We therefore are grateful to present you our Legal Services Proposal for your review and consideration.

1. BRIEF INTRODUCTION ON ESTABLISHMENT OF FIC

1.1. General Introduction

The establishment of a 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).

We would like to clarify that the procedure for establishment of a FIC in Vietnam generally takes a rather long time in comparison with other countries in the region. Our practical experiences show that although the total time for establishment of a foreign invested

company as stipulated under Vietnam Investment Law 2014 is only 15 days, the actual process may take a longer time due to that the competent authority must consult other relevant offices to evaluate the investment project.

With respect to several cases that involves with relocation of 10,000 people or more in highlands; 20,000 people or more in other areas or requirement for changes of land purposes or project in several special field such as Construction and operation of airports; air transport; Construction and operation of national seaports; Petroleum exploration, extraction, and refinery etc, it shall require for approval from the National Assembly, Prime Minister or Provincial People Committee before starting the licensing process. In this case, we assume that your case is not subject to such requirement for approval. However, we reserve our right to re-quote our professional fee and amend the work schedule if your case is subject to approval of the National Assembly, Prime Minister or the Provincial People Committee. In order to setup a FIC, it shall require you to undergo two following steps:

Step 1: Obtainment of Investment Certificate. The Law requires that within 15 working days from submission of the application dossier the competent authority shall have to issue the Investment Certificate for Foreign Investor. However, having preliminarily discussed with the Licensing Authority, we do not much expect that the licensing authority can comply with this requirement in practice, especially, those relating to conditional investment sectors. For granting the Investment Certificate, the relevant licensing authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine on granting of the Investment Certificate on the following basis:

 Legal framework including 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.

 Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.

a. Step 2: After obtainment of Investment Certificate, Client shall be required to obtain the Certificate of Business Registration. The Law requires that within 05 working days from submission of application dossier, the competent authority shall have to issue the Certificate of Business Registration for forming the Foreign Invested Company.

1.2. Setting up FIC

For setting up a textile and dyeing factory, Client shall be required to look for and select a suitable land lot which is sufficient for building up factory. Client shall have three following options to lease a suitable land lot for building up factorys:

Option 1: Leasing a land lot in Industrial Parks from infrastructure development and construction companies. The procedure for leasing land lot in Industrial Park is rather simple, just locating the suitable land lot, negotiation for leasing price and entering into Land Lot Lease Agreement. Then, the infrastructure development and construction company shall be responsible for obtaining the Land Use Right Certificate for the FIC after establishment. For straight forward case, Client can complete the procedure for leasing land lot in Industrial Zone within 02-03 weeks.

Option 2: Leasing a land lot outside Industrial Parks from competent authority. For this option, Client shall need to contact with the Provincial Department of Natural Resource and Environment for recommending the land lot satisfying demands of Client. Then Client may be required to attend tender process in order to get approval for leasing such land lot if there are different investors interested in a same land lot. Otherwise, the Client shall be required to deposit at least 2-3% of total investment capital to be invested into Vietnam for leasing such Land Use Right. Such Deposit Amount shall be reimbursed to Client if Client strictly complies with registered project implementation process. We although further note that if your project involves with relocation of 20,000 people or more in other areas or requirement for changes of land purposes, it shall require the Licensing Authority to have prior approval from National Assembly of Vietnam. According to our practical experience in previous similar case, leasing land lot from competent authority generally takes long time, about 3-4

months for straight forward case. This option should be adopted if you could not any alternative option in Industrial Zone or Client is in need a land lot having large area. Option 3: Leasing existing factory or un-used land lot from other companies. This option is

suitable for investment project that requires for small area of land lot – about 01-02 hectare.

However, you must make sure that the Lessor must be entitled to leasing out such land lot or factory to you and the land lot is strictly compliant with master plan of the Competent Authority.

For securing possibility of obtaining Licenses for FIC in this case, we highly recommend Client to carefully consider following matters:

– Capital: Vietnam Law does not stipulate minimum capital amount for this industries.

However, according to our practical experience in previous case, an amount of 300,000USD upward should be reasonable. Client shall be required to fully contribute capital within 03 months from setting up the FIC in Vietnam;

– Parent Company must have positive business operation result in at least 01 recent year. This must be evidenced by audited Financial Statements for 01 recent year and bank account statement.

– Head office address of the FIC in Vietnam must be compliant with master plan of Vietnam.

– Technology or producing lines to be used by the factory should be new. Second hand Technology or producing line is not favorable by the Licensing Authority. The Licensing Authority only considers the second hand producing line if it is at least 80% new.

– Location and scale of warehouse or factory must be compliant with master plan of the City and it must secure enough space for producing process.

The roadmap for the incorporation of the FIC can be described in following steps as follows:

a. Preparing the application dossier: We shall collect necessary information and documents from you. Upon receipt of necessary information and documents from you, we shall translate documents from English into Vietnamese and prepare the application dossier under the standard forms. The initial drafted application dossier shall be sent to you for your comments. Then, after updating the application dossier based on your comments, we shall obtain the preliminary comments from the competent authority and send the finalized application dossiers for you to sign and seal. We anticipate that this phase shall be completed within 10 working days.

b. Licensing Procedure:

– 02 working days from receipt of documents duly signed and sealed from Client, we shall submit the application dossier for starting the licensing procedure. It shall take about 02months from submission of application dossier to the competent authority for the provincial licensing authority to grant the Investment Certificate1

– 03 working days from receipt of Investment Certificate issued by the competent authority, we shall submit the application dossier for obtainment of Certificate of Business Registration. We shall obtain the Certificate of Business Registration within 05 working days from the submission date.

c. Post licensing: Within 15 working days we shall complete the post licensing procedures such as publishing the FIC in News Paper, obtaining seal.

For avoidance of any doubt, in practice, the administrative procedure can be longer due to that the competent authority must consult relevant ministries before granting License. In such case, SB Law shall try its best to accelerate the progress in order to obtain the approval at the soonest.

2. PROFESSIONAL FEE

The Price for performing the SB Law services as mentioned in item 1 above will be asfollows:

– Professional fee for preparing application dossier including Application for Investment Certificate, Corporate charter, Board resolution, Explanation letter for satisfaction of investment condition, Application for business license and Power of attorney and conducting name search shall be 3,000USD (Three thousand US Dollar);

– Professional fee for Licensing Process shall be 3,500USD (Three thousand and fivehundred US Dollar);

– Professional fee for post-licensing procedures: 350 USD (Three hundred and fifty US Dollar);

Total estimated cost: 6,850USD (Six thousand and eight hundred fifty US Dollar).

The fee is exclusive of 10% VAT and cost for translating Client’s documents from English into Vietnamese (10USD/150 words).

If you would like further information on Query on Company Formation in Vietnam to run a textile and dyeing mill, please either email to our Partners at: info@sblaw.vn or call to our Office:

Ha Noi Office: +84 (4) 62 62 0246

HCM Office: +84 (8) 35 208 101.

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