Benefits of Investors to Set-up Business in Ho Chi Minh City

Ho Chi Minh City offers many benefits for foreign companies to do business and invest.

The population of Ho Chi Minh City is of more than 10 mil, earning a higher average income than other part of the country.  Consumer retail has found Ho Chi Minh City as an attractive market for investment in retail shops, malls, introducing quality consumer goods to the local.

Ho Chi Minh City offers adequate infrastructure such as the Sai Gon port systems, deep seaport access from Vung Tau port systems, Tan Son Nhat international airport, and possible Long Thanh international airport project, Saigon railway station, the expressways, etc, connecting the city to neighbouring countries in the region and other part of the world.  Through setting up factories in industrial zones, processing zones, local and international manufacturing companies could take advantage of high quality labor resources at reasonable cost and move the finished goods to final destinations in US, EU with reasonable lead-time and expenses.  Consequently, the city has become leading industrial city of Vietnam, contributing more than 30% industrial production, 30% GPD and 30% national income to the country’s total.

Ho Chi Minh City is also a financial center, which the biggest stock exchange is located.  Many corporations, and investment companies has chosen Ho Chi Minh City to set-up management and investment offices to search for opportunities,  conduct Merger and Acquisitions and other business transactions, to leverage the annual growth of the country at more than 6%.

At the same time, the city government has been improving policies to support the removal of difficulties for foreign-invested enterprises investing in Vietnam  through fixing administrative procedures to shorten the administrative process, saving time for investors, offering “one-stop” mechanism at the main state agencies.

Our professional consultants and lawyers have assisted a number of foreign companies and individuals to conduct transactions, set-up companies, make investment through M&A, and actively involve in the development of Ho Chi Minh City in particular and the whole country.

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Benefits of Investors in Setting up a Business in Da Nang

Da Nang is one of the five major cities in Vietnam, having a geographical location that is particularly conducive to rapid and sustainable economic development. Da Nang has important transportation routes such as the China-ASEAN international railway crossings, seaports and international airports.

Da Nang is one of the tourist centers of the country, has rich tourism potential including natural tourism resources and humanities. Da Nang has many famous scenic spots such as Hai Van pass, Son Tra mountain, Ba Na hills, Ngu Hanh Son, Cham Museum or My Khe beach have been voted by Forbes magazine as one of the six most beautiful beaches in the world. These conditions are favorable for the development of diversified forms of tourism such as travel, research, cultural.

Da Nang have infrastructure development, four types of roads are popular: high way, rail way, International airport and International sea way. Da Nang have the sea lanes to most major ports in Vietnam and around the world. It helps investor more convenient to travel everywhere in Vietnam and other countries. Moreover, Da Nang’s water supply, electricity supply and communication system has developed rapidly and is increasingly modernized, ranking third in the whole country after Hanoi and Ho Chi Minh City. Da Nang have Da Nang Port, which help investor in import/export activities easily.

The first advantage of the policy mechanism is that Da Nang has also had great support the mechanism and policies for socio-economic development of Da Nang. Since Da Nang was recognized as a national grade I city in 2003, Da Nang has implemented guidelines, regulatory directions and the issuance of specific regulatory mechanisms. With the support from the Central Government, Da Nang authorities have also developed appropriate policies and mechanisms to facilitate the development of the economy, such as the one-stop-shopping mechanism, so Da Nang which is considered as a locality with attracting investment policies in Vietnam. Examples: Procedures related to investment, investment locations, clearance and handover plan, the granting of business registration certificates and investment preference certificates shall be carried out under the one-stop-shopping mechanism at the provincial municipal all of them are resolved at Da Nang Administration Center. Investors shall be exempt from all expenses related to the settlement of investment procedures apart from the payment of business registration fees according to the provisions of law. When investing in Da Nang, investors not only enjoy many preferential policy from city government but also have chance to find clients from many countries or compete with other companies in Vietnam and foreign countries.

Tradition of unity, consensus of people and the dynamism and creativity of the leadership, these advantages has aroused, mobilized the strength, the most important and decisive resource for the development of Da Nang. The determination of leaders, city authorities in building programs, projects with the support of the people, investors, enterprises, ect that help investors who will invest in Da Nang have highest benefits.

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Differences Between Limited Liability Company and Joint Stock Company

Vietnam Law allows the establishment of a company in Vietnam in various forms. It is an important step in investment process.

Investors could choose different forms depending on the needs and capacity on the ability to raise capital and sharing the risk in business as well as the management and operating costs. Each form will have its own organizational structure, operating mechanism, rights and obligations specified under Law on Enterprise 2014.

Currently, Limited Liability Company (“LTD”) and Joint Stock Company (“JSC”) are two popular enterprise forms operating in Vietnam.

What is the difference between these two forms of companies?

I. Organizational Structure

Number of members/shareholders:

LTD

• Single member LTD: Having only one member (member can be an organization or an individual);
• Multi members LTD: Having at least 2 members and not exceed 50 members (member can be an organization or an individual).

JSC

Joint Stock Company has at least 3 shareholders and not limit the maximum number.

Management structure

LTD

• Single member LTD

Single member LTD owner by an organization shall be organized under two models: Company president, Director/General director and Supervisor; (OR) Members Council, Director/General director and Supervisor.

Single member LTD owner by an individual shall be organized as follows:  Company president, Director/General director.

• Multi members LTD

Multi members shall be organized by: LTD Council members, Chairman of the Members Council and Director/General director;

Multi members LTD having 11 members or more shall establish the Board of Supervisors.

JSC

JSC can be organized under two models: General Meeting of Shareholders, Board of Directors, Board of Supervisors and Director/General director; (OR) General Meeting of Shareholders, Board of Directors (Board of Internal Supervisors under Board of Directors) and Director/General director.

II. Capital Contribution

Raising capital

LTD

• Single member LTD: Owner increases charter capital
• Multi members LTD: Members increase their charter capital, or increasing the number of capital contributors

JSC

Different from LTD, JSC can raise its capital by various methods as follows: Selling shares to existing shareholders; Selling shares individually to non-shareholders; Issuing shres on the stock market.

Transfer of contributed capital

LTD

• Single member LTD: Owner transfers a part of contributed capital to other persons and this could lead to changes of the type of business or other procedures if all capital is transferred (for instance in a M&A deal).
• Multi members LTD: Offer the stakes to other members in proportion to their stakes in the company under the same conditions;  The stakes could only be transferred to other persons if the members do not buy or do not buy completely within 30 days from the offering date.

JSC

The shareholders of JSC are free for transfer their contributed capital after 03 years from the establishment.

Having said that, LTD is a type of enterprise that the capital contribution is not the only link between the members of the company but they are also linked together by relationship. They may be acquaintances and trust each other to jointly contribute capital to establish an enterprise. Therefore, the management of the LTD is as complicated as JSC. With the larger the number of shareholders, the level of capital mobilization, voting power to decide on issues of the company based on the ratio of capital contribution of each shareholder, the management and operation of the JSC is more complex.

The ability to raise capital of a JSC is higher than a LTD. Because, JSC can issue shares to the public in the form of securities. When the stocks are listed on stock exchange, the information of company’s business operations must be public and more transparent.

The procedure to set up a company in form of an LTD or a JSC has not much differences.

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Foreign investor to join financial center project in HCMC

Jun 15,2017

HCMC will cooperate with a global financial group to build large financial centers in a move to attract foreign investment capital into key projects in the city, said city vice chairman Tran Vinh Tuyen.

The city will need up to US$40 billion for urban infrastructure, environment, health, education and manpower training projects as part of its seven breakthrough programs from now to 2020. Therefore, the city is calling for investments from various sources as its budget cannot afford this hefty capital demand.

The city government has held talks with the global financial group over construction of financial centers, Tuyen said at a meeting with department leaders on June 13.

Initially, this company would seek foreign capital for an extension metro line connecting HCMC and neighboring Binh Duong Province, Tuyen said but made no mention of the foreign group’s name.

Currently, the city relies on four financing sources to implement infrastructure development projects, namely the State budget, official development assistance (ODA) loans, bond issues and foreign investments.

According to the HCMC Department of Planning and Investment, the city’s total investments amounted to VND1,193 trillion in the 2011-2015 period, with an average annual growth rate of 9%. This amount accounted for around 30% of gross regional domestic product. In which, VND 250.8 trillion (21%) came from the State, VND 729.4 trillion (61%) from the non-State sector, mostly enterprises, and the remainder from other sources.

The city favors public-private partnership (PPP) when it comes to executing infrastructure projects. There are 20 build-transfer (BT), build-operate-transfer (BOT) and build-own-operate (BOO) projects already signed with a combined value of around VND 67.2 trillion.

In recent years, some foreign groups have expressed interest in developing a financial center in HCMC. Malaysia’s Berjaya once suggested building a financial center in District 10 before France’s Vinci Construction in October 2016 proposed cooperating with Berjaya to carry out the US$930-million project.

Three U.S. investors have recently suggested building a financial complex covering 11 hectares in Thu Thiem new urban area in District 2 with a total investment of US$4 billion.

According to financial experts, the city will contribute greatly to the nation’s gross domestic product, industrial production, export-import revenues and budget collections. The city is poised to become the financial center of Vietnam.

Source The Saigon Times

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How to Transfer Investment Capital into Bank Account Vietnam?

Foreign investors must transfer money in and out through the Direct Investment Capital Account (DICA) for investment capital contribution.

FDI enterprises, foreign investors participating in business cooperation contracts, foreign investors implementing investment activities in Vietnam in the direct foreign investment forms in accordance with current provisions of law on investment should comply with the provisions of the investment law when making investment and transfer the capital into Vietnam implementing FDI activities in Vietnam, through setting up company.

The capital contribution in cash of foreign investors and Vietnamese partners in FDI enterprises must be made through transferring to the DICA, either in foreign currencies or Vietnam dong, which are opened by FDI enterprises and foreign investors participating in a business cooperation contract at an authorized credit institution in order to perform the relevant transaction to the FDI activities in Vietnam.  From DICA account, the investor could then transfer into transaction bank accounts opened in a commercial banks in Vietnam.

The transfer of investment capital before being granted investment certificate into Vietnam and the transfer of capital abroad in case of not being granted investment certificate of foreign investors shall be complying with the provisions of the relevant regulations.

After being granted the investment certificate, the accounting of pre-establishment costs of FDI enterprises into equity or foreign loans is made on the basis of agreement between the involving parties, ensured to comply with current provisions of Vietnamese law and regulations on accounting, borrowing, repayment of foreign debts of enterprises and other relevant provisions of Vietnamese law and regulations. In case the foreign investors do not use all the investment capital transferred into Vietnam to satisfy the legal costs for the preparatory phase of investment, foreign investors can buy foreign currency and transfer the remaining investment capital abroad in foreign currency on the basis of the issuing records and documents evidencing investment capital transferred into Vietnam and the expenses incurred for investment projects in Vietnam.

In case foreign investors had moved investment capital into Vietnam to satisfy the legal costs for the preparatory phase of investment in Vietnam but were not granted the investment certificate by Vietnamese competent agencies, foreign investors are allowed to transfer the investment capital transferred abroad after deducting the expenses incurred in relation to the preparation of direct investment projects in Vietnam. The investment capital transferred abroad by foreign investors shall not exceed the maximum investment capital transferred into Vietnam and the amount of interest of non-term loans incurred (if any). Foreign investors are allowed to buy foreign currency and transfer abroad the investment capital transferred into Vietnam in accordance with valid documents proving the amount of investment capital transfer red into Vietnam and legitimate expenses incurred in relation to the preparation of investment projects in Vietnam.

Along with that, foreign investors are allowed to transfer abroad the charter capital, direct investment capital upon termination of operations (due to ending, the liquidation or the dissolution of the enterprise before maturity), interest and foreign loans, profits and other lawful income relating to operations of FDI activities in Vietnam through the DICA. In case FDI enterprises and foreign investors participating in business cooperation contracts have to close the DICA due to ending, liquidation, dissolution which lead to the termination of FDI activities in Vietnam or conduct investment capital transfer resulting in alteration of the initial legal person of FDI enterprises, foreign investors are allowed to use their DICA, either in foreign currency or in Vietnam dong, opened at authorized credit institutions in order to transfer direct investment capital and legitimate income abroad legally.

Moreover, FDI enterprises and foreign investors can use legitimate income sources in Vietnam dong or foreign currency gained from operations of FDI activities in Vietnam to perform re-investment activities in Vietnam. Simultaneously, they also have the right to use such income sources to purchase foreign currency at an authorized credit institution and transfer abroad within 30 days since the date of buying foreign currency.

The credit institutions have the right to require FDI enterprises and foreign investors to provide legal records and proofs relating to the FDI activities in Vietnam. They are also responsible for regulating, inspecting and storing the documents appropriate with the revenue and expenditure transactions of the DICA of foreign investors to ensure the revenue and expenditure transactions are made complying with the stipulations of this Circular and in accordance with the relevant provisions of the Vietnamese law and regulations; and selling foreign currency to foreign investors to transfer abroad on the basis of foreign currency balances of credit institutions.

The  laws on  investment in Vietnam will continue be adjusted to encourage investment into various sectors of the economy.  The changes of laws will be monitored by ANT Lawyers Foreign Investment Practice  in Hanoi, Da Nang and Ho Chi Minh City to provide clients with updates.

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North-south expy incentives meant to lure foreign investors

HANOI – The Ministry of Finance has approved strong financial incentives proposed by the Transport Ministry for the North-South Expressway project in a move to attract capable investors, especially those from abroad. Such incentives are aimed to minimize risks for investors wanting to get involved in this big-ticket project.

The Government has offered multiple financial incentives in preparation for inviting tenders for 20 component projects, with 17 of them under the build-operate-transfer (BOT) investment format, in the first phase of the project.

In particular, the Transport Ministry is allowed to raise toll fees in the project’s feasibility study and contract. Especially, fee adjustments can be more flexible and will not have to follow the Finance Ministry’s prevailing regulations.

Inflation of around 4% a year can be factored into toll fees. Besides, the return on equity is allowed at 14% a year, or 2-3 percentage points higher than those applied to other BOT projects.

The disbursement of investors’ capital and bank loans will follow the rates specified in their contracts in line with the progress of their projects. In other words, investors will not have to contribute their capital once upon issuance of investment certificates as regulated for other projects.

These financial mechanisms are mainly designed to attract international investors, as previous regulations have kept potential investors at arm’s length due to high risks of slow capital recovery.

The suggested return on equity ratio is about 2.15 times higher than deposit rates at commercial banks, also with the aim of luring foreign investments.

As covered in the Daily on Tuesday, the Ministry of Transport has proposed a slew of policy incentives for the North-South Expressway project.

These include the State Bank of Vietnam’s commitment to allow investors to access bank loans, while the transport ministry can apply various types of investment formats and contracts in the project that is divided into multiple components.

The ministry also asked for the Government’s permission to appoint consultants responsible for drawing up the project’s feasibility study and technical design, as well as consultants offering appraisal services for the project in phase one.

The project with four to six traffic lanes and allowing for speeds of 80-100 kilometers per hour will require an estimated VND312.4 trillion (US$13.7 billion).

The main section from Hanoi City to HCMC has 1,622 kilometers in length, of which 123 kilometers has been opened to traffic, including the Phap Van-Cau Gie, Cau Gie-Ninh Binh, and HCMC-Long Thanh-Dau Giay sections. Besides, work on the 127-kilometer Danang-Quang Ngai section is underway.

In phase one, work on some 713 kilometers is divided into 11 sub-projects, with eight public-private partnership (PPP) and BOT ones, and three others under the public investment format in 2017-2020. Besides, around 659 kilometers is developed under nine BOT sub-projects from 2011 to 2025.

The second phase from 2025 onwards is intended to extend the North-South Expressway in accordance with the project’s approved master plan.

Source: The Saigon Times

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How Foreign Investors Comply with Reports Submissions in Vietnam

Foreign investors setting up business in Vietnam have to comply with statistics report submissions according to Vietnam laws.  To ensure compliance, corporate lawyers should be consulted to ensure compliance with reports applicable to foreign owned enterprises in Vietnam.

As the current regulation, foreign owned enterprises are obliged to submit monthly, quarterly, six month and annual reports to the Vietnam Department of Statistics or State agency for foreign direct investment of respective province or city.

Monthly reports are applicable to businesses and projects operating in the industry: mining, processing industry, electricity, gas, water supply, waste disposal, water treatment, information and communications, real estate, transport, warehousing, trade and services.

Quarterly reports are applicable to businesses and projects operating in agriculture, forestry and fisheries, construction;

All foreign owned enterprises have to report every 6 months on employment and income of the employee;

On annual basis, all foreign owned enterprises have to submit reports on the identification information of the business; financial indicators reflecting business results including revenue by business lines, taxes, fees, expenses, and profit; and capital investments made during the year by investment sources and investment category.

We at foreign investment practice of ANT Lawyers, a law firm in Vietnam with offices in Hanoi and Ho Chi Minh City would be able to assist clients in regulatory and licensing matters relating to the investment and the operation of the foreign investor enterprises in Vietnam.  We could be reached at email:ant@antlawyers.vn or office tel: +848 35202779.

Source: antlawyers.vn

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Do You Need a Lawyer to Write a Demand Letter for Payment?

Not in every case the Buyer admits to being wrong or responsible for payment as agreed in contract. They may plead substantially contractual breach of the Seller or insist on the null and void of contract for their non-performance of payment. For strengthening arguments, the Seller have to base on legal grounds and evidences to request for payment under contracts. Even if the Buyer is not in good faith, the Seller has right to claim an interest on delayed payment. In a easy case and having a small total amount of payment, you can write a demand letter by yourself. Contrarily, if your case is complicated with a lager damage, an attorney’s advice is probably necessary.

Legal grounds for request the Buyer/ Debtor conforms to the payment obligation as follows:

(i) Contract, purchase order (signed by legal representative of authorized representative);

(ii Applicant laws which is referred in the contract;

(iii) International commercial customs which is referred in the contract: Incoterm, UCP, ISBP (International Standard Banking Practice), etc.

It should be emphasized that the right to claim for payment of the Seller must accompany by their obligations as per contract. If the Seller fails to conform with obligations such as: quality of goods, quantity of goods, time of delivery, manner of delivery, etc that cause miss-achievement of contract purpose for the Buyer, the Seller might disable to claim for payment by laws.

Generally, the Buyer shall make payment punctually with method agreed by parties. Accepting request for postponement of payment performance from the Buyer without any conditions shall be deemed that the payment performance is timely made. As a result, the Buyer shall not be fined for breach. It should be advised that all notifications and responses to acceptance or reject the request for postponement of payment performance must be made in written form as fax, email, mal or instead of oral forms. The more carefully retain evidences, the more effective your demand letter becomes. Then, you can attach them to your demand letters for threatening the Buyer/ Debtor.

In many case, dispute settlement provision provides that “Should there be any dispute as for contract is concerned and this cannot be resolved amicably, by negotiations between parties or through mediation of professionals, the Court of Vietnam shall have exclusive jurisdiction”. In that case, the Seller shall notice the Buyer by a demand letter after the payment term is overdue. A demand letter should be clearly expressed your intention of legal actions.

There are some suggestions that you can follow related to writing a demand letter on the first or second times. If your demand letters do not effectively work, you should request supports from lawyers as soon as possible. They have enough experience in both legal knowledge and technical language skills to press the Buyer/Debtor for payment. Moreover, ANT Lawyers has many experienced professional experts to collect information about finance, legal status… prior to give legal advice. Besides representing our Clients to follow up and negotiate with the Debtor on their action plan to pay the Debt, we can support them to file lawsuits, request the Court of Vietnam to enforce judgments, or submit written requests for initiation of bankruptcy process.

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Forms of Disputes and Approaches to Settlement

Dispute in Vietnam could be between parties in business transaction, foreign investors and Vietnam government, or between countries in implementing international treaties.

The formation of market economy in Vietnam took place in the context of the development in the width and depth of the economic ties at a significant fast pace that make Vietnam an important part of the world supply chain.  Vietnam suppliers could sell the goods and services to the world and the foreign supplier could also export their goods and services to Vietnam market.  Further, as the Vietnam market opens up, foreign investors could invest through various forms of investments in Vietnam i.e. acquire equities in Vietnam companies, establish business in Vietnam.  During this process, disputes are an inevitable result which has been growing in scale and complexity.

Most should agree that disputes shall be construed as the dissent, inconsistencies or conflicts of interests, rights and obligations between the parties in the economic relations at different levels. Accordingly, economic disputes can have the following basic forms:

1. Disputes in business are between the participants in a business transaction including investments, production to consumption of products or performance of services on the market for profit purposes i.e. professional and product liability, debt disputes over a business transaction, franchise disputes, intellectual property disputes, and disputes over contract for supply of goods or services…
2. Disputes between foreign investors with Vietnam government agencies, arising in the implementation of the BTO, BT, BOT, and the implementation of international agreements on promotion and protection bilateral and multilateral investment i.e. government policy and policy measures, concession to water and sewerage, power or energy supply, project or contract payment…
3. Disputes between countries in the implementation of the international bilateral and multilateral agreements.

In Vietnam, as the disputes arise, parties involved could consider resolving the matters through negotiation, mediation, arbitration, or taking court actions after taking consideration of various factors including cost, time, and the complexity of the disputes.  Litigation law firm in Vietnam with skillful dispute lawyers should be consulted to provide the suitable advice for dispute resolution.

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