Foreign investors can invest in Vietnam in various forms. Especially for investors who are a foreign company, the choice to open a subsidiary in Vietnam is the first choice. In the market economy and the current context of economic integration, the subsidiary model is no stranger and increasingly plays an important role in the operation of businesses. Establishing subsidiaries of foreign enterprises has many advantages, allowing businesses to be more proactive in arranging investment structures. So how to set up a subsidiary, this article of ours will answer your questions.
What is a subsidiary? What is the parent company?
The parent company in the group of companies may dominate the subsidiary in terms of capital, management or in terms of company development strategy.
- Financial dominatey
- Governing the management apparatus
- Governing the organization of production and business activities
The subsidiary is the company dominated by the parent company. Subsidiary may not invest capital, buy shares of the parent company. Subsidiaries with the same parent company, which owns at least 65% of state capital, may not jointly contribute capital to establish the enterprise.
Establishment conditions
Foreign enterprises establishing subsidiaries in Vietnam are forms of investment in establishing economic organizations in accordance with the law on investment. Thus, foreign enterprises must carry out procedures for applying for investment registration certificates, meeting the conditions on charter capital ownership ratio, form of investment, scope of operation, Vietnamese partners participating in investment activities and other conditions under the provisions of the international treaty to which the Socialist Republic of Vietnam is member
After being granted the Investment Registration Certificate, the foreign enterprise chooses the type of enterprise that wants to establish and carry out the business registration procedure at the Business Registration Office – Department of Investment Planning.
Procedures for establishing a subsidiary
According to the Investment Law 2020 and Decree No. 31/2021/ND-CP on procedures for establishing subsidiaries for foreign investors, it is divided into two cases:
TH 1: If the foreign capital in the original company is 51% or more, the investment procedure is similar to that of a foreign investor
Step 1: Please make investment decisions and policies (for some cases where investment decisions and policies are required)
+ Depending on the type of project, the size of which the investor must register to apply for investment decisions and policies with the respective competent authorities. The decision-making authority belongs to one of the agencies including: The National Assembly, the Prime Minister, the Provincial People's Committee.
+ Investors prepare and submit dossiers of application for approval of project investment policies to one of the competent agencies, the Ministry of Planning and Investment and the Investment Registration Agency of the Provincial People's Committee
+ The competent authorities will take steps to appraise dossiers and issue decisions approving investment policies in accordance with the Investment Law 2020.
Step 2: Apply for an investment registration certificate.
For investment projects not subject to investment policy decisions, investors shall submit 01 set of dossiers of application for investment registration certificates to investment registration agencies including the following papers:
- The written request for the implementation of the investment project, including the commitment to bear all costs and risks if the project is not approved.
- Documents on the legal status of investors.
- Documents demonstrating the financial capacity of the investor.
- Proposed investment project. In case the law on construction provides for the preparation of pre-feasibility study reports, investors may submit pre-feasibility study reports instead of investment project proposals.
- In case the investment project does not request the State to assign land, lease land, allow the transfer of land use purposes, it shall submit a copy of papers on land use rights or other documents identifying the right to use the place for the implementation of the investment project.
- The contents of explanation of technology used in investment projects for projects subject to appraisal and opinions on technology in accordance with the law on technology transfer.
- BCC contracts for investment projects in the form of BCC contracts.
- Other documents related to investment projects, requirements on the conditions and capacity of investors in accordance with law (if any).
Step 3: Procedures for establishing a business
Immediately after receiving the Investment Certificate, the investor establishes a subsidiary of a foreign enterprise in accordance with the Law on Enterprises 2020. The basic business establishment procedure consists of the following steps:
+ Apply for a business registration certificate
+ Publicly announce businesses on the national portal
+ Engraved with the mark of a foreign-invested company
+ Sign pattern notification
+ Registration of tax codes, digital signatures.
TH 2: If the foreign capital in the original company is less than 51%, it applies as a domestic investor
If the enterprise initially has foreign capital less than 51%, when establishing a subsidiary, it is only necessary to implement the reporting regime as prescribed in Article 72 of the Investment Law 2020. The contents of the report include: Name of investment project, investment objectives, investment scale, investment capital, location, duration of operation, implementation progress, labor demand, investment incentives (if any).
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- Advising on conditions for establishing subsidiaries for foreign investors.
- Advising on the steps of establishing a subsidiary for foreign investors including procedures for applying for investment registration certificates, business registration certificates, business licenses.
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