Procedures for setting up a foreign joint venture company

I. What is a joint venture?

In Vietnam, joint venture is a quite unique form of business and this form has been removed from the list of business types.
Currently, joint venture enterprises are established in the forms of limited liability companies, partnerships and joint stock companies. Vietnamese and foreign partners are responsible for the amount of capital committed to contribute to the company's overall legal capital. The joint venture has legal status under Vietnamese law and is established and operates from the date of issuance of the Investment License.

II. Procedures for registration for the establishment of a joint venture company

Step 1: Prepare and finish legal documents
Foreign investors need to prepare the following documents:
– Certificate of business registration in Vietnam;

– Company policies;

– Audited financial statements for the latest financial year;

– Bank confirmation related to the account balance equivalent to the amount of capital contributed to the company to be established in Vietnam;

– Decide on investment to establish the company in Vietnam and appoint a representative to manage such contributed capital in Vietnam;

– Identity papers of the legal representative (in the case of being appointed as the Director of the Company) or in the case of the representative managing the contributed capital.
Note: Documents issued by foreign agencies need to be notarized and consular legalized at the Vietnamese Embassy in that country before being used in Vietnam.
Vietnamese investors need to prepare the following documents:
– Certificate of business registration;

– Company rules;

– Bank confirmation related to the account balance equivalent to the amount of capital contributed to the company to be established in Vietnam;

– Meeting minutes, company decisions relating to capital contribution to establish the company in Vietnam and appoint a representative to manage such contributed capital in Vietnam;

– Passport/identity card of the legal representative (in the case of being appointed as the Director of the Company) or in the case of the representative managing the contributed capital.
Other documents:
In addition to the above documents, the application for an investment registration certificate when establishing a joint venture company will include:

– A written request for an investment certificate prescribed by a competent authority; (According to the prescribed form);

– A list of members of the company, enclosed with copies of personal identification papers and authorized representatives at law;

– A notarized copy that has been translated and consularly legalized of the foreign enterprise that wants to invest in a joint venture;

– The charter of the joint venture company;

– A document determining legal capital, a copy of the practicing certificate of the head of the company in accordance with the law in the case of the establishment of a company with the above conditions;

– Contract for leasing the location of the company’s head office;

– A certified true copy of the certificate of land use right for the leased place (for the ground house) or the document proving the business address with the office business function (with the address being a storey building)

An investment certificate is required if this is the first time a foreign enterprise invests in a joint venture in Vietnam.
Step 2: Fill out and submit the application
After the application is fully prepared, the company founder submits the application at:

– One-stop section of the provincial/municipal Planning and Investment Department, or;

– Secretariat office or other departments according to specific regulations of each locality if some agencies do not have a one-stop shop. Step 3: The competent authority receives the application
The competent authority will receive the registration application and verify its validity. If the application is valid and meets business registration requirements, the City People's Committee/Director of the Industrial Park Board will approve. If they do not qualify, they will be notified to edit their profile.
Step 4: Investors receive the results of one-stop application review.

III. Q&A

Q: What is a foreign joint venture company, and why might businesses choose this structure?

A: A foreign joint venture company is a business entity established through collaboration between a local company or individual and a foreign company or investor. Businesses may choose this structure to:

• Gain access to local expertise, resources, or markets.
• Share risks and costs with a local partner.
• Navigate regulatory and cultural challenges more effectively in a foreign market.

Q: What are the key steps involved in setting up a foreign joint venture company?

A: The specific steps can vary depending on the country and industry, but the typical procedure includes:

• Market Research: Conduct thorough market research to identify potential partners and assess market conditions.
• Partner Selection: Choose a suitable local partner with complementary skills and resources.
• Legal Structure: Determine the legal structure of the joint venture, such as a limited liability company or partnership.
• Registration: Register the joint venture with the appropriate government authorities in the foreign country.
• Capital Investment: Define each partner's capital contributions and ownership shares.
• Drafting Agreements: Create legal agreements, including the joint venture agreement and articles of association, outlining rights, responsibilities, and profit-sharing.
• Compliance: Ensure compliance with local laws and regulations, including foreign investment laws.
• Operational Setup: Set up the necessary infrastructure, obtain licenses, and commence business operations.

Q: What challenges might businesses encounter when establishing a foreign joint venture, and how can they address them?

A: Challenges in setting up a foreign joint venture can include cultural differences, legal complexities, and communication barriers. To address these challenges:

• Cultural Sensitivity: Invest in cross-cultural training for your team to understand and respect local customs and norms.
• Legal Expertise: Hire local legal experts who are well-versed in foreign investment laws and regulations.
• Communication: Establish effective communication channels between partners and implement clear dispute resolution mechanisms in your agreements.

Q: What are the benefits of a foreign joint venture, and how can businesses ensure its success?

A: Benefits of a foreign joint venture can include access to new markets, shared risk, and access to local expertise. To ensure success:

• Clear Agreements: Develop detailed agreements that define the roles, responsibilities, and decision-making processes of each partner.
• Communication: Maintain open and transparent communication between partners.
• Regular Review: Periodically review the joint venture's performance and adapt strategies as needed to align with changing market conditions.

Setting up a foreign joint venture can be a complex process, but with careful planning, the right partners, and a commitment to effective collaboration, it can be a successful way to expand into new markets. Consulting with legal and business experts with experience in the target country is highly recommended to navigate the specific requirements and challenges involved.