Procedures for setting up a foreign-invested security service company in Vietnam

by DangKhoi

Procedures for establishing a foreign-invested security service company in Vietnam

So, when a foreign investor establishes a company in Vietnam, what conditions do they need to meet? Is the procedure complicated? How long does it take to get permission? Are there any special requests? What is the procedure for setting up a foreign-invested security service company in Vietnam? Currently, foreigners investing in Vietnam are increasing in popularity. So what is the procedures for foreigners to contribute capital to a company in Vietnam? Let’s find out in this article with LSX Law firm.

Legal Ground

  • Investment Law 2014
  • Enterprise Law 2014
  • Decree 118/2015/ND-CP
  • Decree 96/2016/ND-CP

What are Foreign-invested companies in Vietnam? 

Clause 16.17, Article 3 of the Investment Law 2014 has the following provisions:

16. Economic organization means an organization established and operating under the provisions of Vietnamese law, including enterprises, cooperatives, unions cooperatives and other organizations conducting business investment activities.

17. Foreign-invested economic organization means an economic organization with a foreign investor as a member or shareholder.

Accordingly, a foreign-invested company is one type of foreign-invested economic organization. So, A foreign-invested company is a company whose foreign investors are members or shareholders. In which, foreign investors are individuals with foreign nationality or organizations established under foreign laws that carry out investment and business activities in Vietnam.

Investment forms.

Forms of foreign capital investment in Vietnam.

Contributing capital to establish a 100% foreign-invested enterprise in Vietnam.

100% foreign-invested enterprise means an enterprise owned by a foreign investor, established by a foreign investor in Vietnam. And, assets of enterprises with 100% foreign capital are owned by one or more foreign organizations and individuals. When contributing capital to establish this enterprise, foreign organizations and individuals will self-manage and be responsible for the business outcome. The State only manages through the issuance of investment licenses and checks whether they comply with the law. Also, it does not interfere in the organization and management of enterprises. 

The advantages of this form can be mentioned as follows:

The fact that the enterprise is directly or indirectly managed by foreign investors with a different management method than domestic enterprises, often brings effective results. higher economy. Besides, businesses will be better invested in technology, capital and human resources. On the other hand, the host country does not need to invest capital, will avoid business risks, immediately collect land rent, taxes, and create jobs for workers.

However, it would be a mistake to ignore the obvious risks when investors decide to contribute capital to establish a business in Vietnam. The first is on the issue of cultural differences. Enterprises with 100% foreign investment when entering Vietnam will encounter differences in business culture with domestic enterprises, affecting their access to the Vietnamese market. Then there are certain limitations of Vietnamese law for this type of business for the purpose of protecting domestic investors.

For this form, according to Article 22 of the 2014 Investment Law, before being established, foreign investors need to have an investment project, carry out procedures for granting an investment registration certificate, etc.

Venture business with Vietnamese enterprises.

A joint venture enterprise means an enterprise established in Vietnam on the basis of a joint venture contract signed between two or more parties to conduct investment and business in Vietnam.

The advantage of the joint venture form is that it contributes to solving the shortage of capital, the host country can take advantage of large capital sources for economic development but share risks. In addition, there are opportunities for technological innovation and product diversification. So For investors, this form is a tool to legally and effectively penetrate foreign markets, create new markets, and contribute to creating favorable conditions for host countries to integrate into the global economy

However, this form has a disadvantage which is conflict in business administration and management because the parties have different political regimes, traditions, culture, customs, language, etc. laws, etc. Moreover, the host country is often at a disadvantage due to its low capital contribution rate and weak management capacity compared to foreign investors. 

Forms of foreign capital investment to establish a security service company in Vietnam.

To carry out the procedures for establishing a foreign-invested company in general, the investor must first meet the following conditions:

  • The investor’s business must be in the industries that Vietnam has committed to allow investment in the WTO schedule of commitments or it’s not included in the WTO schedule of commitments but Vietnam’s law has specific provisions to allow investment;
  • Must have an investment project;
  • Carry out the procedures for issuance of the Investment Registration Certificate in accordance with the law.

Security services (CPC 87305) are not included in the schedule of commitments of WTO and FTAs ​​but are regulated in Decree 96/2016/ND-CP on security and order. From general regulations on businesses and For the above investment, it can be seen that foreign-invested organizations and individuals that want to do business in the field of security services have two following forms: 

Firstly, in the form of a foreign business establishment contributing capital, purchase of machinery, and technical means for security work.

Secondly, in the form of a joint venture with a Vietnamese enterprise that has registered for the security industry and is doing business in this field in case, it is necessary to invest in machinery and technical means to serve the business.

Procedures for establishment.

Step 1: Establish a Vietnamese security service company;

A company establishment dossier includes: 

  • An application for registration of security service business;
  • Company charter;
  • List of members or shareholders of the company (if it is a limited liability company with two or more members or a joint-stock company)
  • A valid copy of one of the authenticated papers:
    • Valid identity card or Valid passport for individuals;
    • Certificate of business registration for organizations and enclosed with personal identification papers, written authorization of authorized representatives of the organization;
    • Decision on capital contribution for company members, company shareholders being organizations;
    • Authorization letter to perform company establishment services for organizations and individuals (if authorized)

Submit to the Department of Planning and Investment where the enterprise’s head office is located. 

Step 2: Attain an eligibility permit  (because this is the profession conditional)

Dossier for granting the certification that said the business are eligible for security and order for business enterprise security services include: 

  • Business registration and logo (logo) of the enterprise;
  • Curriculum vitae (with photo and certification of the People’s Committee of the commune, ward or township where you reside), copy of university or college diploma (certified by a competent authority), copy of the decision to retire, demobilize or decide to quit (if any),
  • Criminal record of business leaders and managers

Step 3: Transfer of contributed capital to foreign investors

Documents include: 

  • A written registration for capital contribution and capital contribution, including the following contents:
    • Information about the economic organization to which the foreign investor intends to contribute capital, capital contribution;
    • The rate of ownership of charter capital of foreign investors after capital contribution or capital contribution to economic organizations.
  • A copy of the identity card, identity card, or passport for the investor being an individual; copy of Certificate of Establishment or other equivalent document certifying legal status for investor being an organization.
  • Notarized copy of current business registration certificate.
  • Minutes of the meeting and the company’s decision on approval for the member to transfer capital contribution to a foreigner.
  • Transfer of capital contribution Agreement.

Hope this article is useful for you, If you need any further information, please contact LSX Law Firm0833102102

Frequently Asked Questions 

So, what is the time limit for the investment registration agency to get opinions from the Ministry of National Defense and the Ministry of Public Security on meeting the conditions prescribed by law?

Within 03 working days from the date of receipt of valid dossiers, The investment registration agency consults with the Ministry of National Defense and the Ministry of Public Security on meeting the conditions prescribed by law

So, Where are the forms of investors contributing capital to Vietnamese companies?

Investors may contribute capital to companies in Vietnam in the forms specified in Article 23 of the Law on Investment 2020.

See more

Procedure for change of shareholders as a foreign investor in Vietnam

Capital contribution, share purchase, purchase of capital contribution

Dissolution of enterprises with foreign capital in Viet Nam

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