In this article, you will find the requirements and the process of forming a joint venture in Vietnam. You will also learn what business lines require a local partner and how to protect your investment when entering into a joint venture.
Why form a joint venture in Vietnam?
A joint venture (JV) is a business entity that is established together with a partner. One of the primary reasons why investors opt for forming a joint venture as their market entry strategy is that some business lines in Vietnam are not fully open to foreign investment and require a local partner.
If your desired business line requires a joint venture, your business partner has to be a 100% locally-owned company in Vietnam. Also, keep in mind that its business line must align with the planned activities of the joint venture company.
Business lines with limited foreign ownership
Vietnam allows full foreign ownership in most business lines. However, if your planned business activities fall under any of these following sectors, you will need a local partner:
- Advertising services
- Services incidental to agriculture, hunting, and forestry
- Telecommunication services
- Travel agencies and tour operator services
- Entertainment services
- Electronic game business
- Container handling services
- Customs clearance services
- Internal waterways transport, rail and road transport services
- Services auxiliary to all modes of transport
How to form a joint venture in Vietnam
In the end, the joint venture company you establish will be a limited liability company (LLC). Therefore, the process for setting up a joint venture is the same as for registering a 100% foreign-owned company in Vietnam.
Step 1: Investment Registration Certificate (IRC)
As the initial step towards forming a joint venture in Vietnam, you first have to receive an Investment Registration Certificate (IRC) from the Department of Planning and Investment.
IRC is the initial license for establishing a legal entity in Vietnam, and it takes approximately one month to obtain it.
Step 2: Business Registration Certificate (BRC)
Once you have secured the IRC, your next move is to acquire a Business Registration Certificate (BRC), also known as the Enterprise Registration Certificate (ERC).
The DPI generally issues it within one week.
Note that you have 30 days from receiving the BRC to complete tax registration and pay the annual business license tax (~US 90).
Within 90 days of receiving the BRC, you also need to inject the capital contribution that you stated in the company’s Articles of Association.
Step 3: Obtain sub-licenses, if necessary
Depending on your business activities, you may also need additional licenses. For example, to form a trading company in Vietnam, you will also need a trading license. To set up a manufacturing company in Vietnam, you will need a construction permit, fire protection, and fire safety license, etc.
The exact timeline for getting these licenses depends on the type of license and can take from several weeks to a few months.
As the formed joint venture entity will be an LLC, the capital contributed also limits the founders’ liability. However, this will also limit the risk.
Find more information about the complete process of incorporation in our comprehensive guide to company registration in Vietnam.
The minimum capital requirement in Vietnam
Take note that there is no official minimum capital requirement in Vietnam. However, when deciding upon permitting you to set up an LLC in Vietnam, the Department of Planning and Investment (DPI) will check whether your capital contribution complies with your planned expenses.
There are also some business lines in which Vietnam has set a minimum capital requirement. For example, to set up a real estate business, you will need at least VND 20 billion (~US 850,000) of minimum capital.
The most common amount for setting up a company in Vietnam, however, is USD 10,000.
How to protect your investment when forming a joint venture
Getting into agreements, especially in emerging markets can always carry certain risks. For this reason, it is essential to take a few precautional steps to reduce the risk of unpleasant surprises.
#1 Always carry out a proper background check
The first and foremost step before entering into a joint venture with a new business partner is to conduct due diligence on your future associate.
Emerhub’s company registry in Vietnam allows you to get a hold of information such as:
- Company information (owners, legal representatives, etc.)
- Transaction history and capital
- Articles of Association/Charter of Company
The information in our company registry origins from the respective government institutions and is available on our company registry page.
Want to learn more about the kind of information you can access through our business registry? Find details in our previous article about the company registry in Vietnam.
#2 Check the company’s Articles of Association
When researching on your future joint venture partner in Vietnam, make sure also to verify that the Charter of Company/Articles of Association of your partner’s company supports the cooperation agreement.
#3 Prepare a cooperation agreement
While the Articles of Association/Charter of Company is the most important document of each of the entity, it does not regulate different aspects of the joint venture. Therefore, the most important paper to focus on when forming a JV is the cooperation agreement.
The agreement should stipulate conditions such as:
- Parties, their liabilities, and benefits
- Purpose and structure
- Capital and future financing
- Governing law
- Confidentiality, warranties, exit provisions
Emerhub can assist you with all the necessary paperwork. Contact us via [email protected] to get started.
Setting up a local nominee company in Vietnam
It is also possible to set up your own joint venture partner. You can do that by setting up a 100% Vietnamese-owned nominee company. The registration of a local company takes up to one week.
Only keep in mind to use a reliable nominee as signing contracts with untrustworthy nominees is one of the seven common mistakes foreign investors make when establishing a company in Vietnam.
Also, make sure your nominee company fulfills the requirements and gets all the necessary licenses.
For example, if you plan on setting up a tourism business, you can set up a nominee company in Vietnam and, for example:
- Acquire the international travel license
- Hire the required number of tour guides
- Keep a deposit
Have more questions or need assistance with setting up a joint venture in Vietnam?
Just contact us by filling in the form below. Our consultants will gladly advise you and handle the process on your behalf.