HOW TO ESTABLISH AN INVESTMENT PROJECT?
QUESTION
Dear TLK Law Firm, I would like to ask your company to answer the following question: Currently, I am planning to establish an investment project in Vietnam, but I still have difficulties in choosing the form of project establishment of the investment project. How do Vietnamese laws regulate the forms of investment projects in Vietnam? Looking forward to having you answer my questions. Thank you.
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LEGAL BASIS
1. Investment Law No: 61/2020/QH14 passed by the National Assembly on June 17, 2020;
2. Decree No. 31/2021/ND-CP promulgated by the Government on March 26, 2021, detailing and guiding the implementation of a number of articles of the Investment Law;
3. Other relevant guiding legal documents (if any).
CONSULTING CONTENT
Investment activities are activities of an investor during his/her investment process, including the stages of investment preparation, the establishment of investment projects, implementation, and management of investment projects. Thus, it can be seen that investment activities are always associated with investment projects. In other words, an investment project is the most specific and intuitive expression of investment activities. Therefore, it is extremely necessary and important to learn about the legal issues surrounding the establishment of an investment project before carrying out investment activities. So nowadays, how does the law regulate the establishment of investment projects in Vietnam? What are the forms of establishing investment projects in Vietnam? What are the differences between these forms? TLK Law Firm will provide information to you through the article below.
Picture 1: How to establish an investment project?_Hotline: +(84) 97 211 8764
I. SOME IMPORTANT LEGAL ISSUES RELATED TO THE ESTABLISHMENT OF INVESTMENT PROJECTS
1. Some concepts related to the establishment of investment projects
1.1. What is an investment project?
According to the regulation of the Investment Law 2020: “an investment project is a collection of proposals to invest medium-term or long-term capital to conduct business investment activities in a specific area, within a defined period of time.”
From the above legal regulation, we can draw the basic characteristics of investment projects including:
Firstly, the content of the investment project is only proposed. That means they are the future plans of an investment project. On the other hand, It also shows that investment projects always have clear economic, social and financial goals.
Secondly, investment projects, whether big or small, always need to be determined in terms of specific space and time. More specifically in terms of time, the investment project has only a finite lifetime. Determining the specific location, time and progress is an important factor for the project to be invested, established and operated according to the plan, to achieve the set goals.
Thirdly, the investment project has the participation of many parties. First of all, the participation of investors, contractors and state management agencies. In addition, in the investment process, depending on the actual situation, the investment project will have the participation of investment consulting service providers, project sponsors,...
1.2. What is the establishment of an investment project?
Currently, the law does not have specific regulations on what the establishment of an investment project is. But based on the nature of the "investment project" as described above, as well as through synthesis and analysis, it can be understood that the establishment of an investment project is the formulation and presentation of making plans and proposals related to the activities and costs of the investment project, and at the same time setting goals for future results.
The formulation and presentation of plans, proposals and objectives of an investment project will require approval from a competent state agency for the project to be established and on stream.
1.3. What is an Investment Registration Certificate?
According to the regulation of the Investment Law 2020, an Investment registration certificate is understood as a document recording the investor's registration information about the investment project that he or she performs. This document may be in paper or electronic form.
Therefore, the Investment Registration Certificate issued by a competent State agency proves that the investment project is legally established and put into operation.
1.4. What is an investment policy approval?
According to the regulation of the Investment Law 2020: “approval of investment policy means the approval by a competent state agency of the project's objectives, location, scale, progress and time limit; investors or the form of investor selection and special mechanisms and policies (if any) for the implementation of investment projects”. It can be seen that the approval of the investment policy is the preliminary approval of the State agency on the intention and direction of the implementation of the investment project.
2. Cases of the establishment of investment projects
An investment registration certificate is a form showing approval and control of state agencies over the establishment of investment projects as well as the implementation of investment projects. Depending on the nature of the investment project, the issuance of an Investment Registration Certificate will be divided into two cases:
(1) Establishment of an investment project required the issuance of an Investment Registration Certificate;
(2) The establishment of an investment project not required to issue an Investment Registration Certificate.
2.1. Establishment of an investment project requires the issuance of an Investment Registration Certificate
Two cases in which the procedures for issuance of an Investment Registration Certificate must be carried out, including:
(1) Investment projects of foreign investors;
(2) Investment project of an economic organization that invests in the establishment of another economic organization; making capital contribution, purchasing shares, purchasing capital contribution portion of other economic organizations; investment in the form of BCC contract in the following cases:
- Having a foreign investor holding more than 50% of the charter capital or having the majority of active partners being foreign individuals for economic organizations being a partnership;
- Having economic organizations specified at Point a of this Clause holding more than 50% of charter capital;
- Having foreign investors and economic organizations specified at Point a of this Clause holding more than 50% of charter capital.
As for the compulsory issuance of an Investment Registration Certificate, Vietnamese law also divides it into two small cases below:
(1) Issuance of investment registration certificates for projects subject to the approval of investment policies;
(2) Issuance of investment registration certificates for projects not subject to the approval of investment policies.
From that, it can be seen that not all investment projects with Investment Registration Certificates must also apply for approval of investment policies. Instead, projects that are required to be approved by the State Agency for investment policies are projects of specific nature that need close supervision by the State Agency.
To distinguish these two types of projects, it is necessary to rely on the regulations of the Investment Law 2020:
- Investment projects subject to the approval of investment policies are the cases specified in Articles 30, 31, and 32 of the Investment Law 2020. Depending on the field and size of the investment project, each type of project has a different investment policy approval agency. Specifically, these projects will be subject to the approval of the respective investment policies of the National Assembly, the Government or the Provincial People's Committee. For example, an investment project that has a great impact on the environment or has the potential to have a serious impact on the environment, such as the construction of a nuclear power plant, will be subject to the approval of the National Assembly's investment policy. Besides, according to the Investment Law 2020, regarding the order of procedures, investors need to apply for approval of investment policies before carrying out the procedures for applying for an Investment Registration Certificate;
- Other projects that are not subject to the approval of investment policies, but only need to apply for an Investment Registration Certificate in the cases specified in Article 30, Article 31, and Article 32 of the Investment Law 2020. That means before establishing an investment project, the investor in this case is not required to carry out the procedures for applying for investment policy approval at a competent State agency. Instead, they can immediately proceed to carry out the procedures for applying for an Investment Policy Certificate and proceed with the implementation of the investment project.
=> See more: What are the conditions for granting an investment registration certificate for a project that does not require approval of an investment policy?
2.1. The establishment of an investment project not required to issue an Investment Registration Certificate
Three cases an investor not required to carry out procedures for issuance of an Investment Registration Certificate include:
(1) Investment projects of domestic investors;
(2) Investment project of an economic organization that invests in the establishment of another economic organization; make a capital contribution, purchase shares, purchase capital contribution portion of other economic organizations; investment in the form of BCC contract in the following cases:
- There is no foreign investor holding more than 50% of the charter capital or the majority of general partners are foreign individuals, in the case of an economic organization being a partnership;
- There is no economic organization specified at Point a of this Clause holding more than 50% of charter capital;
- There are no foreign investors and economic organizations specified at Point a of this Clause holding more than 50% of the charter capital.
(3) Investment in the form of capital contribution, share purchase, and purchase of capital contribution of economic organizations.
Note: In case the investor wishes to issue an Investment Registration Certificate for the investment project in cases (1) and (2) above, the investor can still carry out the procedures for issuance of an Investment Registration Certificate. The first registration certificate follows the normal order as prescribed in the Investment Law 2020 and Decree 31/2021/ND-CP. Customers can refer to the procedure for granting an Investment Registration Certificate through the following article:
=> See more: Procedures for issuance of Investment Registration Certificate for investment projects that are not subject to approval of investment policies
Picture 2: How to establish an investment project?_Hotline: +(84) 97 211 8764
3. What important contents should investors pay attention to in the documents related to the establishment of an investment project?
According to the Investment Law 2020, when drafting the application for approval of the investment policy, as well as applying for the Certificate of Business Registration to establish an investment, the investor must prove a number of important contents as follows:
Firstly, demonstrate the investor's financial capacity, including:
- Financial statements for the last 2 years of the investor;
- Commitment to the financial support of the holding company; financial institution's commitment to financial support;
- Guarantee the financial capacity of the investor;
- Other documents demonstrating the investor's financial capacity;
Secondly, the investment project proposal:
- Investor information or investor selection form;
- Investment objectives;
- Investment scale;
- Investment capital and capital mobilization plan;
- Location, duration, and implementation schedule;
- Information on the current land use situation at the project site and proposed land use demand (if any);
- Labor demand;
- Proposing investment incentives;
- The socio-economic impacts and efficiency of the project;
- Preliminary environmental impact assessment (if any) in accordance with the law on environmental protection.
Note: If the construction law stipulates the preparation of a pre-feasibility study report, the investor may submit a pre-feasibility study report instead of the investment project proposal.
Thirdly, for projects subject to appraisal and collection of opinions on technology according to the provisions of the law on technology transfer, it is necessary to add explanations about the technology used in the investment project.
In addition, in order to carry out the procedures for applying for investment policy approval, the documentation needs to be supplemented with some other documents as the regulation in the Investment Law 2020 and Decree 31/2021/ND-CP. In particular, Decree 31/2021/ND-CP has more detailed and specific instructions on the contents of the application for approval of the investment policy. Details of the procedures will be presented in other articles by TLK Law Firm.
=> See more: Procedures for applying for approval of investment policies fall under the authority of the Management Board of industrial parks, export processing zones, high-tech zones, and economic zones.
II. HOW SHOULD YOU CHOOSE THE BEST LEGAL SERVICE PROVIDED ORGANIZATION?
First: Must be an official legal organization with a legal operating license;
Second: Having a Board of Directors must be lawyers, the more experienced and highly educated the better;
Third: Having a team of lawyers, a professional and well-trained human resource system;
Fourth: Friendly, dedicated and make every effort for the benefit of customers. Consider customer satisfaction, and work quality as one's own honor;
Fifth: Professional, thoughtful, flexible, and logical service delivery process to optimize work performance and maximize customer time savings;
Sixth: Reasonable and competitive service prices;
Seventh: Wide range of services in both the field of providing service packages in the same field for customers to choose the appropriate service package, as well as being able to provide comprehensive support to customers throughout the operation process;
Eighth: Capable of Connecting - Promote commercial relationships for customers if customers have needs,...
Finding a comprehensive, professional, and reputable legal consulting organization is what any client wants. Because no one wants to take the risk of losing both finance and time while 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 a lot with different quality.
One suggestion for you is that, although our TLK Law Firm does not dare to claim to be the best legal service provider in the market, we satisfy all of the above criteria and more, and will definitely be a good choice for you.
=> See more: The procedure for applying for approval of an investment policy is under the authority of the People's Committee of the province
III. SOME QUESTIONS RELATED TO THE ESTABLISHMENT OF INVESTMENT PROJECTS
Question 1: Why is it necessary to apply for approval of investment policy when establishing an investment project?
Answer:
When it comes to approving an investment policy, everyone will have the same question: Why must approve the investment policy but not immediately issue the Investment Registration Certificate for the project in the process of appraising investment registration documents, aspects of the project must also be considered?
First, it is necessary to re-affirm once again, that not all projects need to be approved for investment policies, but only certain types of projects mentioned above in the article.
The reasons for applying for approval of investment policy for such projects are:
- Ensure economic balance and development in line with the country's orientation;
- Investors themselves, the agency in charge of project formulation needs to have a thorough survey and study, which is costly and time consuming, therefore, in order to avoid the case that after surveying and researching but not Accepted by competent State agencies will cause waste.
Question 2: Which agency has the authority to process files and procedures related to the establishment of investment projects?
Answer:
- The Department of Planning and Investment has the authority to issue the Investment Registration Certificate for the establishment of an investment project;
- The Prime Minister, Management Boards of industrial parks, export processing zones, hi-tech zones, economic zones, and provincial-level People's Committees are competent to appraise the request for approval of investment policies for the establishment of the project. investment project
Here 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 hotline: +(84) 97 211 8764/ +(84) 969 760 195 (Tel/ Whatsapp/ Zalo) for direct advice from a lawyer (free consultation).
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Business and Investment Department – TLK Law Firm
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