Demanding urgently on handling problems of provisions in Enterprise Law & Investment Law

It could be concluded that implementation guidelines of Law on Investment and Law on Enterprise has been basically updated quite thoroughly thus far. However, it’s time to look straight and point out the obstacles to appropriate adjustment, otherwise the high spirit of creating the best conditions for Investor might be just a slogan. In this article, due to that point of view, we will discuss about each of problems straightly instead of prolixly, in the purpose that the State Agencies will find out the ways to resolve all.

1.    APPLICATION FOR REGISTRATION OF ENTERPRISE:

Depending on types of business entity, the enterprise establishment requires component of dossier prescribed in Article 20 – 23 of Law on Enterprise. To avoid the business registration authority abuses power, the Article 9.2 of Decree No. 78/2015/ND-CP has stipulated that “the business registration authority do not request the enterprise or its founder to submit more applications or documents other than those in the application for enterprise registration as prescribed”.

Even being mentioned in law, but this Article is useless in fact. For example, when registering a company headquarter located in an officetel in commercial and residential complex building, the Department of Planning and Investment (“DPI”) shall force the Investor to prove that apartment or flat could be used as the headquarter. It means this request is based on the Official Letter No. 2544/BXD-QLN issued on November 19, 2009 by Ministry of Construction about not allowing to use the apartment as the office of company. The point is “DPI has the right to request the Investor submit more dossier to show their privilege of placing head office at rental apartment or not?!”

The same applied to some specific business lines, it requies the License or Permit showing the prior allowance of Speciality Ministries. For example, in the sector of either film production (its granted by the Ministry of Culture, Sport and Education) or credit (its granted by Vietnam State Bank), etc. This leads to a question that DPI has right to require the Investor to submit those Licenses or Permits beside the dossier prescribed in Law on Enterprise or not?!

It is no doubt that when asking for apply more, DPI has violated completely the regulation in Clause 2, Article 9 of Decree No. 78/2015/NĐ-CP, otherwise DPI will break the provisions of other law by itselft. Thus, it is necessary to guide this content more clearly so that both investor and competent authority could comply with the Law.

2.    AMENDMENT OF EITHER ENTERPRISE REGISTRATION CERTIFICATE (“ERC”) OR INVESTMENT REGISTRATION CERTIFICATE (“IRC”):

Relating to resolution coordination of two (02) certificates, currently the Law, Decree and Circular have not stipulated about which certificate should be registered first. The Authorities for business registration still apply the regulations of Official Letter No. 5122/BKHDT-PC dated on July 24, 2015 to make adjustment of ERC before IRC’s adjustment. This regulation also has pros and corn as follows:

(i)    After finishing the admendment of ERC, is it force to adjust the IRC? Unless doing so or doing lately, may the enterprise be deemed to violate the law or not?

In particular, the Enterprise adjusts the business line in ERC and already done. But when performing adjustment of Project’s Object (In fact it is the business line prescribed in ERC and reffered to as Object in IRC), this procedure seem to be never done as related to factory and environment conditions.

Moreover, the Law on Enterprise allows the Company do business prior to and within ten (10) days make a written notice for amendment of business line (Article 32 of Law on Enterprise). Hence, in this circumtances, what is the meaning of IRC’s amendment when the Company held on trading and complied with the procedure for ERC’s amendment?

(ii)   In connection with the amendment for Charter Capital prescribed in ERC and for Investment Capital prescribed in IRC:

Law on Enterprise stipulates that if increasing the Charter Capital, the investors (Members, Shareholders, Owner) must contribute fully prior (already increase) then conduct the ERC’s adjustment procedure within ten (10) days (Article 32 of Law on Enterprise).

But in fact it is totally not easily to FDI Enterprise. According to the regulations of foreign exchange management, the Investor shall submit the IRC in which specify DURATION and THE CONTRIBUTED CAPITAL (Clause 1, Article 5, Circular No. 19/2014/TT-NHNN) to the State Bank. Obviously the Law on Enterprise requires to contribute prior then carry out the procedure of capital increase. On the contrary, the Ordinance on Foreign Exchange  requests to carry out the procedure of capital increase before contributing capital. So what should the Enterprise do?

Moreover, recently (Event without any official documents for guidance), either Ministry of Planning and Investment or DPI has agreed that the procedure for contributing capital and buying shares is enforced when the Members/current Shareholders contribute more capital to increase the Chapter Capital and Investment Capital as prescribed in Article 26 of Law on Investment.

This is such an unreasonable instruction. Let’s analyze why it is.

a)    In the view of new Law, the unreasonable regulations will be decreased then make its more facilitations for the Investors, but in this case the law application is contrary to the entire its purposes. Particularly, in connection with the amendment for capital contribution rate of the Members/Shareholders, it is required to perform three (03) procedures instead of one procedure by the 2005 Law. There are:

–       Registering the capital contribition, purchase of shares – Article 26 of Law on Investment;

–       Registering for change of Charter Capital – Article 31 of Law on Enterprise; and

–       Registering for change of Investment Capital – Clause 2, Article 33 of Decree No. 118/2015/ND-CP.

b)    Opend more an Account of investment under the capital contribution and shares purchase form:

Please take a notice that, regarding to the capital contribution and shares purchase, now the Investors must obey the provisions of not only the Law on Investment, Decree No. 118/2015/ND-CP and the Circular No. 131/2010/TT-BTC (This Circular has a draft for amendment) but also the Circular No. 05/2014/TT-NHNN – prescribes that such investment account required to opend shall be deemed the account of indirect investment capital  in foreign exchange sector.

However, the Circular No. 05/2014/TT-NHNN stipulates itselft that only applying this kind of Account if the Investors do not participate in management. This term is based on the old Law on Investment in which separating the Investment forms into Direct and Indirect, but this boundary was rejected by the current Law on Investment.

Therefore, to increase the capital  it force to open the indirect investment capital account then transfer to the direct investment capital account  of Company. But the Members/current Shareholders could not opend such indirect account since they do not satisfy its conditions.

So far, all roads to grow the charter capital up are deadlocked!

We understand that (and the Draft of amendment Circular No. 131/2010/TT-BTC also stipulates similarly), the form of making investment by contributing capital and buying shares shall be applied when new Investors start conducting the capital contribution and shares purchase of the company has been established in Vietnam. This term also shows that if the Company wants to raise the capital by buying more (contributing more) or receiving transaction from other Members/current Shareholders, it is no need to conduct procedure of capital contribution and shares purchase.

Futhermore, the Ministry of Planning and Investment and the State Bank should promulgate instantly the Joint Circular to clarify those contributions of Foreign Investors. Simply, when the Investors submit any document showing the Company’s decision for raising capital, they are allowed to transfer money to Direct Investment Capital Account of Company, to conduct the procedures for ERC and IRC amendment.

This is just a simple thing so why it must be quite difficult for capital of FDP flows to country economy!?

3.    COOPERATING IN GRANTING ERC AND IRC:

The issuance of ERC and IRC is two independent proceedings. Pursuant to Law on Investment, IRC will be issued before ERC. In fact, because the dossier of Foreign Investors must be consular legalized then translated to make a notarized copy. In spite of non official regulation about this; but DPI automatically understand that, if having over three (03) months of duration from the date of notarization to the date of submittion, the notarized copy must do it again. Obviously it wastes both time and cost, hence no Investor want to encounter.

The Article 24 of Decree No. 118/2015/ND-CP has specified quite progressive when requesting DPI to receive two applications for granting IRC and ERC in once time. However, this regulation still be left: “The Ministry of Planning and Investment shall provide guidance on following the procedures specified in Clause 1 of this Article and other procedures that require cooperation between the Investment Registration Authority and Business Registration Authority.” and had non guidance by the Ministry of Planning and Investment so far.

Additionally, according to the cooperation proceedings to grant IRC and ERC, the Decree has mentioned that the authorities shall assess the application of ERC then its IRC. This process is opposite to the fact.

We do know that in order to grant IRC, with some fields, it takes six (06) to eight (08) months or may even more, because DPI have to wait the result of assessing a project from Speciality Ministries. Without any opinion of Speciality Ministries, DPI can not grant IRC. Moreover, the contents in the written proposals to issue IRC and ERC must correspond to each other, or the contents in ERC’s application must consist such information as code, issurance date and issurance place of IRC. So there is no information to fill in ERC’s application since IRC has not been granted yet, or when adjusting IRC we have to adjust ERC first.

The idea for the joint provision might seem to be very good and relevant but its concerned is theoretical rather than pratical application!

Ho Chi Minh City, dated on March 04, 2016

TRAN VAN TRI