Vehicles of Foreign Direct Investment

Under the ULE and CLI, foreign investors are entitled to select one of the following vehicles or forms for their investment in Vietnam: Vietnam company formation

- Business Co-operation Contract ("BCC");

- Limited Liability Company, with One or More Members ("LLC");

- Joint Stock Company ("JSC");

- BOT;

- BTO; and

- BT

It is worthy of note that for any new establishment of LLC or JSC, it is required to attached the establishment to aninvestment project. In this case, an investment registration certificate shall be issued to the newly established LLC or JSC, which serve at the same time as the business registration certificate of the LLC or JSC.

BCC

BCC is a partnership signed by two or more parties with the objective of conducting jointly one or more business operations in Vietnam on the basis of mutual allocation or responsibilities and sharing of profits or losses, without creating or forming a legal entity in Vietnam.

As BCC is not a separate legal entity, the contractual rights and obligations of the parties must be shared. To co-ordinate the daily operation of a BCC, a co-ordination board can be set up when necessary, with presence of the equal nominees from the parties.

LLC

LLC is established by a single investor or pursuant to a joint venture contract signed by one or more investors, either Vietnamese investors and one or more foreign investors; or between foreign investors, individually or institutionally, for the purpose of carrying out business activities in Vietnam. The difference of the LLC compared with the JSC is that the LLC is not permitted to issue shares, and the number of investors, regardless individual or institutional, is not allowed to be excessive of 50.

JSC

JSC is a company established by at least 3 investors, regardless individual or institutional, local or foreign. Differing from the LLC, JSC can issue shares to the publics. JSC is a kind of limited liability company, and has the legal person status in accordance with the laws of Vietnam.

BOT, BTO and BT

Compared to the said vehicles, regulations covering BOT, BTO and BT are quite few, causing difficulties for implementing.

A written contract which must be signed by foreign investor(s) and an authorized agency, constitutes the principal legal basis for implementing a BOT, BTO or BT project. It differs from BOT to BTO in the right to commercial exploitation of the completed project for getting back investments. This right is realized for a fixed time before transferring to the State of Vietnam in the case of BOT, but in the case of BTO, it follows after transferring. As for BT, foreign investor(s) must hand over the project to the State of Vietnam upon its completion, and instead of commercial exploitation like the case of BOT and BTO, foreign investor(s) is/are provided with opportunities to carry out other projects to get back investments.

In all and every case, a LLC or JSC can be established by foreign investor(s) to carry out the project, in accordance with applicable procedures as described hereof.

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► Setting up limited liability company in Vietnam

Project Classification and Licensing Agencies

Unlike the FIL, the projects under the CLI are classified into two groups, requesting the registration procedures and appraisal procedures. More decentralized, all projects (except BOT, BTO and BT projects to which MPI will issue the Investment certificates) are approved and licensed by city/province-level people's committees with respect to projects outside EPZs and IZs, and city/province-level administration boards of EPZs and IZs with respect to projects inside EPZs and IZs.

Application Document Requirement

An application/ registration file for submission to investment registration agencies, under the CLI, normally includes:

- Application for investment certificate;

- BCC or JV contract, as the case may be

- Charter of LLC or JSC, as the case may be

- Technical-economic explanation or feasibility study for a BCC, LLC or JSC;

- Statements certifying the legal status and financial capacity of investors;and

- Explanation on satisfaction of WTO's requirements.

Licensing Procedures and Timing

All the new establishment of LLCs, JSCs, BCCs, BOTs, BTOs and BTs are required to get investment certificate.

With respect to projects subject to the investment appraisal procedures, the time limit for issuance of an investment registration certificate shall be normally within 30 days from its receipt of the satisfactory files, and in special cases the time can be extended but not exceeding 45 days.