In light of the new Law on Investment that came into effect on July 1, the final draft decree implementing the law, as well as the draft circular implementing the decree, are now being prepared by the Ministry of Planning and Investment (MPI).
Although some finer points will have to be ironed out during implementation, the new laws on Investment and Enterprise have been welcomed by foreign businesses
In the meantime, the MPI has issued Official Letter 4326 /BKHĐT-ĐTNN (OL 4326) for ad hoc guidance on implemeting the new law, as well as the forms to be used from July 1, 2015 to obtain the Investment Registration Certificate (IRC) and its amendments. The key points of this include:
|Dr. Le Net|
- Firstly, the online application for IRC: Investors can file their IRC application online at the National Investment Portal (NIP), and submit a paper dossier within 15 days from the online filing. In the event that the dossier is accepted, the investors will be given a temporary account to check the application status. Any incorrect or incomplete application must be notified within 3 days from receipt by the licensing authority.
- Secondly, the project code: The project code is a 10 -digit code to be issued to the applied project during its operation.
- Thirdly, the forms issued: among the forms submitted, please note that CPC Code and VSIC Code (for business lines) are still required when submitting to obtain the IRC. Separate forms are also available for amendments to the project.
- Fourthly, M&A approval: the form for M&A approval is on form I.6 attached to OL 4326. This form is simplified, and the explanation to satisfy conditions for M&A is rather brief and must strictly follow WTO commitments. It is unclear how other restrictions under local laws could be satisfied or would need to be satisfied (e.g. ENT for distribution companies).
- And finally, the forms of decisions and IRCs: OL 4326 also provides new forms of IRCs, In Principle Approvals (IPAs), and other decisions for authorities to use.
While it is a progressive move forward, there are issues still to be clarified. Any questions are encouraged to be addressed to the Foreign Investment Agency (FIA) for guidance.
Official letter released for the Law on Enterprise
The MPI has also released the urgent Official Letter 4211/BKHĐT-ĐKKD dated June 26, 2015 (OL 4211) on business registration, implementing the Law on Enterprise (LOE). The most notable changes in OL4211 are as follows:
- Firstly, the re-application of ERC for current foreign invested enterprises (FIEs): for enterprises operating under an Investment Certificate (IC) or an Investment License (IL), when amending the IC or IL they will apply for the Enterprise Registration Certificate (ERC). The ERC dossier will be similar to the dossier for applying a new ERC, attached with the current IC or IL.
- Secondly, for the simplified ERC registration process, Article 24 of the LOE only requires applicants to file the scope of business, and not the HS Code or CPC to the registration request for establishing an enterprise, be it a limited liability company or a joint stock company, and the forms under Article of the LOE have now been released. The CPC will be filled in by the local department of planning and investment (DPI), and there is still a risk that the CPC/HS Code filled by the DPI will not match the CPC/HS Code of products to be imported by the enterprise. However, the enterprise’s application will no longer be rejected because the CPC/HS Code is not recognised or is unsuitable. Please note that with respect to FIEs, the filing of HS Code and CPC would still be required under form MĐ-6 of Circular 08/2013/TT-BCT dated April 22, 2013 of (Circular 08) of the Ministry of Industry and Trade (MoIT). This requirement is still valid until July 1, 2016, at the latest (LOI, Article 74.3).
- Thirdly, the place of business will now be notified, not registered: the notice shall be sent within 10 days to the local DPI from the date of the decision to open a new place of business. This regulation does not affect requirements to have a specific licence for each type of business (e.g. a supermarket licence, warehouse licence, school licence etc).
- Fourthly, a change of the scope of business, a JSC private placement, and entry of foreign shareholders to be notified, not registered: these changes are notified at the local DPI, who will then reconfirm within three working days from receipt of notice. The DPI reserves the right to reject the notice if the conditions for foreign investors’ entry under WTO assessments or other local laws are not met (for “conditional projects”). Therefore it is advisable that the scope of business of an enterprise must be “clean” from conditions before a notice of foreign shareholders is sent. After foreign shareholders have been duly notified, the enterprise may change its scope of business. This change may still be subject to scrutiny, but the conditions will be strictly according to the law (e.g., percentage of foreign shareholding) rather than at the discretion of the authorities.
- Fifthly, enterprises can make more than one seal by notice. The new seals will be published on the National Business Registration Portal (NBRP).
- Finally, the liquidation process has been simplified: the enterprise’s liquidation shall be made within six months from the passing of the resolution for its liquidation. Within that period, the tax authority should confirm the enterprise’s fulfillment of tax obligations. Unless the tax authority send a notice of objection, the liquidation process will be completed within that time period and the enterprise will be deleted from the NBRP.
Key questions to consider
There are some issues that are still unclear under OL 4211, including whether an enterprise operating under an IC or IL must surrender its original IC or IL when receiving the ERC, and if so, what would be their new Investment Registration Certificate under the new Law on Investment (LOI), what would be the IPA, and should an IPA be required under the new LOI? Also, must a foreign shareholder have a “project” when it acquires shares (i.e., indirect investment) in a local company? It is likely that it is not required, but we might need to confirm this by an official letter implementing the LOI (ad hoc regulation pending decrees implementing the LOI). Lastly, what is the real difference between “registration” and “notice” if DPI may have the right to send a negative opinion on a notice filed?
By Dr. Le Net Partner, LNT & Partners