6 Fundamental Criteria For Establishing An Fdi Company

01/01/1970

6 FUNDAMENTAL CRITERIA FOR ESTABLISHING AN FDI COMPANY

Since Vietnam's accession to the WTO, the role of FDI companies has become more and more important in Vietnam's economy.

According to data from the Foreign Investment Agency, up to the end of November 2017, Vietnam has attracted 316.9 billion USD of foreign direct investment (FDI) from over 120 countries and territories in the world.

According to Prof. Dr. Nguyen Mai- Chairman of the Association of Foreign Investors, current disbursement of FDI has reached about 160 billion USD, accounting for over 50% of total registered FDI; FDI has accounted for 22-25 % of total investment, 55% of industrial output value, 70% of export turnover, 18% of total budget revenue and 20% of GDP. The FDI sector have also created jobs for 3.7 million workers.

In 2018, the role of FDI is increasingly important to newly emerged economies such as Vietnam’s, the problem is that foreign investors have still not fully understood how to meet the conditions to enter Vietnam's market of 95 million people.

With our 10-year experience as the legal consultant of more than 6,800 projects (more than 1 billion USD from 32 countries), LHD Law Firm would like to recommend foreign investors

6 FUNDAMENTAL CRITERIA FOR ESTABLISHING AN FDI COMPANY IN VIETNAM

1 # NATIONALITIES OF FOREIGN INVESTORS

Nationalities of foreign investors have been a hot issue since Vietnam entered the WTO;

Why:

In fact, it is unlikely that countries that do not participate in the WTO will be able to successfully invest in Vietnam; therefore, after WTO accession, the nationality issue will be considered.

Accordingly, the core condition of nationality issue is whether or not your country has been a member of the WTO? If it is a positive answer, you can have a peace of mind investing in Vietnam.

2 # BUSINESS LINES

In order to consider the criterion of business lines, there are two documents to study:

WTO’s commitments
CPC Code

The two documents are enough to consider options for appropriate business lines for investors.

Besides, foreign investors’ experience is also a factor to consider investors’ CAPABILITY.

For example: Import and Export – 50.000 USD

Distribution – 100.000 USD; etc.

3 # INVESTED LOCATIONS

Choosing invested locations is also essential. In addition to STRATEGIC LOCATIONS in business, investors must also consider legal regulations on this point.

For example:

Apartments are not allowed to be headquarters;

Manufacturing must not be located in residence’s areas;

Legal papers are needed for rented headquarters;

Rental agreements must be certified.

Therefore, after headquarters is rented, it is recommended that INVESTORS consult Lawyers before deciding to rent their factories or headquarters.

4 # ELIGIBILITY OF INVESTORS

Investors’ eligibility is usually considered in both aspects

IDIVIDUALS
ORGANIZATIONS

As for individuals, it is required that such persons have full civil capacity, have never violated the law of Vietnam, and are not prohibited to establish an enterprise under the Enterprise Law 2014 effective since July 1^st 2015.

As for legal entities, it is required that they have operating licenses and company charter (M&A)

Note: Invested capital must be proved sufficient when ESTABLISHING AN FDI COMPANY IN VIETNAM.

Besides, QUALIFICATIONS and experiences are still object to consideration when entering the market.

5 # CHARTER CAPITAL OR LEGAL CAPITAL

In addition to BUSINESS LINES, it is also essential to consider CHARTER CAPITAL.

Although most BUSINESS LINES do not require a minimum legal capital, investors must depend on each line’s capability to invest an appropriate capital.

Here are some basics of capital for each business line to consider:

1. Import and Export

- Registered capital of USD 50,000 or more.