CAN A FOREIGN COMPANY ESTABLISH A SUBSIDIARY IN VIETNAM? WHAT ARE THE CONDITIONS?
QUESTION
Dear TLK Law Firm, I currently have a question and hope to hear from you as follows: I am the director of a company specializing in manufacturing electronic equipment headquartered in Korea. I want to establish a subsidiary in Vietnam. However, I need to clearly understand the provisions of Vietnamese law on whether foreign companies can establish subsidiaries in Vietnam. And what are the conditions for being established? Looking forward to your company's answer. Thank you!
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Thank you for your trust and sending questions to TLK Law Firm. Based on legal regulations and practical solutions, we would like to send you the following consulting content:
LEGAL BASIS
1. Enterprise Law No. 59/2020/QH14 passed by the National Assembly on June 17, 2020;
2. Investment Law No. 61/2020/QH14 passed by the National Assembly on June 17, 2020;
3. Other legal documents providing relevant guidance.
CONSULTATION CONTENT
With the current open market mechanism, the state encourages foreign investors to invest in Vietnam in many different forms. Besides, under the steady development of Vietnam's economy, our country is becoming one of the top choices of foreign investors when they have business needs. However, is a foreign company establishing a subsidiary in Vietnam a form of investment? What are the conditions that need to be met for a foreign company to establish a subsidiary in Vietnam? This is a question that many customers send to TLK Law Firm.
Therefore, through this article, we will answer your questions about "Can a foreign company establish a subsidiary in Vietnam? What are the conditions?”.
Photo 1. Can a foreign company establish a subsidiary in Vietnam? What are the conditions?_Hotline: 0972118764
I. SOME IMPORTANT LEGAL ISSUES RELATED TO CONDITIONS FOR FOREIGN COMPANIES TO ESTABLISH SUBSIDIARIES IN VIETNAM
1. What is a parent company and a subsidiary?
Pursuant to the Enterprise Law 2020, a company is considered the parent company of another company if it falls into one of the following cases:
(1) Own more than 50% of the charter capital or total common shares of that company;
(2) Have the right to directly or indirectly decide to appoint a majority or all members of the Board of Directors, Director or General Director of that company;
(3) Has the right to decide on amendments and supplements to the charter of that company.
A subsidiary is a company that has a parent company that is an enterprise that owns at least 65% of state capital and is not allowed to jointly contribute capital, buy shares of another enterprise or to establish a new enterprise.
2. Conditions for foreign companies to establish subsidiaries in Vietnam
Pursuant to the Investment Law 2020, foreign companies are allowed to establish subsidiaries in Vietnam, which is a form of investment to establish economic organizations according to the provisions of investment law. Thus, foreign companies must meet the following conditions:
(1) Carry out procedures to apply for an investment registration certificate;
(2) Meet market access conditions such as: charter capital ownership ratio of foreign investors in economic organizations, investment form, scope of operations, participating Vietnamese partners carry out investment activities;
(3) Meet other conditions according to the provisions of international treaties to which the Socialist Republic of Vietnam is a member.
Thus, from the time of receiving the business registration certificate or other documents of equivalent legal value, the company established by the foreign investor is the investor implementing the investment project according to the provisions of the Investment Registration Certificate.
3. Conditions to be granted an investment registration certificate
Pursuant to the Investment Law 2020, to be granted an investment registration certificate, investments must meet the following conditions:
(1) Investment projects do not belong to industries or occupations banned from business investment;
(2) There is a location for implementing the investment project determined on the basis of a copy of land use rights documents or a copy of the location lease agreement or other documents or documents determining the right to use the location to implement the project;
(3) The investment project is consistent with the planning according to regulations;
(4) Meet the conditions of investment rate per land area and number of employees (if any);
(5) Meet market access conditions for foreign investors.
Thus, when investing in investment projects that are not subject to investment policy approval according to the provisions of the Investment Law 2020, investors who need to meet the above conditions will be approved by competent state agencies to issue investment registration certificates.
=> See more: Can foreign individuals establish a company in Vietnam? What are conditions?
Photo 2. Can a foreign company establish a subsidiary in Vietnam? What are the conditions?_Hotline: 0972118764
II. SUMMARY OF ANSWER SECTION: CAN FOREIGN COMPANIES ESTABLISH A SUBSIDIARY COMPANY IN VIETNAM? WHAT ARE THE CONDITIONS?
Dear Customers, from the above synthesis and analysis, TLK Law Firm would like to give the following answer:
Foreign companies are allowed to establish subsidiaries in Vietnam. This is a form of investment in establishing an economic organization according to the provisions of law on investment. Therefore, foreign companies need to meet the conditions specified in the Investment Law 2020, specifically as follows:
1. Has been granted investment registration certificate;
2. Meet market access conditions;
3. Meet other conditions according to the provisions of international treaties to which the Socialist Republic of Vietnam is a member.
=> See more: Where to submit an application to establish a foreign-invested enterprise?
III. HOW SHOULD YOU BEST CHOOSE AN ORGANIZATION THAT PROVIDES LEGAL SERVICES?
An organization providing quality and reputable legal services should have the following criteria:
First: Must be an official legal organization with a legal operating license;
Second: It is better if the Board of Directors must be lawyers, experienced and have high degrees;
Third: Have a team of lawyers and a systematic, professional, and thoroughly trained human resources system;
Fourth: Friendly, dedicated and make every effort for the benefit of customers. Consider customer satisfaction and work quality as your own honor;
Fifth: Professional, thoughtful, flexible and logical service provision process to optimize work performance and save customers' time;
Sixth: Reasonable and competitive service prices;
Seventh: Rich services in both fields of supply and service packages in the same field for customers to choose the appropriate service package, as well as comprehensive support for customers throughout the operation process. movement;
Eighth: Have the ability to Connect - Promote commercial relationships for customers if customers have needs,...
Finding a comprehensive, professional and reputable legal consulting organization is what every customer wants. Because no one wants to risk losing both money and time when the results are not as expected. However, finding such an organization is not easy because the number of service providers in the Vietnamese market today is very large with varying quality.
A suggestion for you: Although our TLK Law Firm does not dare to claim to be the best legal service provider on the market, we satisfy all of the above criteria and more will definitely be a good choice for you.
IV. SOME QUESTIONS RELATED TO CONDITIONS FOR FOREIGN COMPANIES TO ESTABLISH SUBSIDIARIES IN VIETNAM
Question 1: Rights, obligations and responsibilities of the parent company towards its subsidiaries?
Reply:
Pursuant to the Enterprise Law 2020, the parent company has the rights and must perform the following obligations and responsibilities towards its subsidiaries:
(1) Depending on the legal type of the subsidiary, the parent company exercises its rights and obligations as a member, owner or shareholder in relation to the subsidiary according to corresponding regulations. provisions of this Law and other relevant legal provisions;
(2) Contracts, transactions and other relationships between the parent company and its subsidiaries must be established and implemented independently and equally according to the conditions applicable to independent legal entities;
(3) Where the parent company intervenes beyond the authority of the owner, member or shareholder and forces the subsidiary to carry out business activities contrary to normal business practices or to carry out activities that do not generate profits without reasonable compensation in the relevant financial year, causing damage to the subsidiary, the parent company must be responsible for that damage;
(4) The parent company manager responsible for intervening in forcing the subsidiary to conduct business activities in accordance with the provisions of the Enterprise Law 2020 must jointly bear responsibility for that damage with the parent company;
(5) In case the parent company does not compensate the subsidiary according to the provisions of the Enterprise Law 2020, creditors or members or shareholders who own at least 01% of the subsidiary's charter capital have the right to act in the name of the parent company. request the parent company to compensate the subsidiary for damages;
(6) In case business activities according to the provisions of the Enterprise Law 2020 carried out by a subsidiary bring benefits to another subsidiary of the same parent company, the benefiting subsidiary must be jointly with the company. The parent returns the benefits to the damaged subsidiary.
Thus, in addition to the rights that the parent company enjoys, the parent company must have obligations and responsibilities towards its subsidiaries according to the provisions of law.
Question 2: How are the forms of investors buying shares and capital contributions of economic organizations regulated?
Reply:
Pursuant to the Investment Law 2020, Investors purchase shares and capital contributions of economic organizations in the following forms:
(1) Purchase shares of a joint stock company from the company or shareholders;
(2) Buy the capital contribution of a member of a limited liability company to become a member of a limited liability company;
(3) Buy the capital contribution of a capital contributing member in a partnership company to become a capital contributing member of a partnership company;
(4) Buying capital contributions of members of other economic organizations that do not fall into the above cases.
Thus, when investing, investors can choose investment forms to buy shares or purchase capital contributions of the company according to the provisions of law.
Question 3: In what cases must the procedure for granting an investment registration certificate be carried out?
Reply:
Pursuant to the Investment Law 2020, cases where procedures for issuance of investment registration certificates must be carried out are prescribed as follows:
(1) Investment projects of foreign investors;
(2) Investment projects of economic organizations include:
- Investing in capital contribution, purchasing shares, purchasing capital contributions from other economic organizations;
- Invest in the form of BCC contract if that economic organization falls into one of the following cases:
+) There are foreign investors holding more than 50% of charter capital or the majority of partners are foreign individuals for economic organizations that are partnerships;
+) There is an economic organization specified in the Investment Law 2020 that holds more than 50% of charter capital;
+) There are foreign investors and economic organizations specified in the Investment Law 2020 holding over 50% of charter capital.
Thus, for investors making investments in the above cases, they need to carry out procedures for the issuance of investment registration certificates with competent state agencies according to the provisions of law.
=> See more: What types of periodic reports must be submitted by foreign companies?
Above is some general advice that we would like to offer to our customers. As a service provider, we always understand and are ready to accompany and solve the needs and difficulties that customers are facing. If you still have questions or need more in-depth advice, please contact the hotline: 0972118764 to receive direct advice from a lawyer (completely free consultation).
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