Chinese investor establishes a beverage factory in Vietnam - Apolat Legal
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Chinese investor establishes a beverage factory in Vietnam

According to a report from the Department of Investment, 2023 is the year that attracts the most projects from Chinese investors. Specifically, there are 707 new investment projects from Chinese investors, accounting for 22.18% compared to 3,188—total new projects from more than 100 countries worldwide investing in Vietnam. Total investment capital in 2023 is up to 3,544.39 million USD. 

In addition, the industry group “Processing and manufacturing industry” is the industry group that accounts for the most significant proportion of investment and outperforms other industry groups. Specifically, in 2023, the number of new projects for this industry group is 1,075, accounting for 33.72%. 

These data show that Vietnam has always created favorable conditions for Chinese investors to invest in Vietnam, and Vietnam is also a potential market where investors aim to implement production projects. 

For Beverage factory projects in Vietnam to operate production, Chinese investors need to understand the following basic legal regulations and processes clearly:  

1. Process of establishing a factory  

To operate the Factory, the Investor has two options with the following steps: 

1.1 Option 1: Establish a direct project and factory 

Step 1: Find a suitable production location; 

Step 2: Apply for an Investment Registration Certificate; 

Step 3: Apply for an Enterprise Registration Certificate and engrave the company seal; 

Step 4: Open a bank account and contribute capital; 

Step 5: Apply for fire prevention, construction, and environmental licenses to meet requirements before starting production. 

1.2 Option 2: Establish a distribution company and then establish a manufacturing factory 

Step 1: Find a location to establish a company; 

Step 2: Apply for an Investment Registration Certificate for distribution activities; 

Step 3: Apply for an Enterprise Registration Certificate and engrave the company seal; 

Step 4: Open a bank account and contribute capital; 

Step 5: Research the market and find a suitable beverage production location; 

Step 6: Establish a branch at the production location and apply for an Investment Registration Certificate for the production project or change the headquarters address on the Enterprise Registration Certificate and project implementation location on the Certificate Investment Registration Certificate to the beverage production location. 

Step 7: Apply for fire prevention, construction, and environmental licenses to meet requirements before starting production. 

1.3 Advantages and disadvantages of each option 

  Option 1  Option 2 
Advantages 
  • Quickly and put the project into operation as soon as Step 5 is completed.
  • Investors have time to enter the Vietnamese market to conduct market research, distribute goods, and evaluate potential distributors to serve future production activities; 
  • After finding a suitable production location, all payment activities and contract signing with the lessor are performed by the Vietnamese Company. These costs are all accounted for by the Vietnamese Company. 
Disadvantages 
  • There is not enough time for investors to evaluate the Vietnamese market and choose a suitable location;  
  • The foreign investor must go through all the stages of signing the contract and paying the deposit and first month’s rent (if agreed upon). Accounting for costs is more ambiguous and complex than Option 2.  
  • Risk of choosing a location that does not meet the conditions for project establishment. Investors will waste time finding a new location and adjusting the application for an investment registration certificate in Step 2. 
  • Implementation time is longer than option 1. 
  • If, in Step 6, the Vietnamese Company establishes a branch at the production location and applies for an Investment Registration Certificate for the production project, this leads to the Vietnamese Company having two investment projects and generating many reporting obligations related to investment activities in Vietnam;  
  • If, in Step 6, the Vietnamese Company chooses to change the headquarters address on the Enterprise Registration Certificate and the project implementation location on the Investment Registration Certificate to the beverage production location, Changing the address to another province/city will be tricky because the Vietnamese company will need to perform tax finalization. 

 

In short, each option has its advantages and disadvantages. Therefore, investors need to consider the purpose and progress of the project to choose the appropriate option. 

2. Conditions of location and capital sources  

2.1 Location 

Vietnam has many industrial parks in provinces and cities throughout Vietnam, with corresponding industry planning conditions for each industrial park. Therefore, Investors can research the market and learn about each industrial park in each area to choose a suitable location for a beverage factory. 

2.2 Capital 

For production activities in general and beverage production in particular, Vietnamese law does not require investors to register a minimum capital level. However, the investment registration agency will evaluate the project scale and implementation progress to consider the Investor’s capital level for the registered project. 

For investment projects in Vietnam, investment capital, when registered, will include the following two types of capital: 

2.2.1 Investor’s contributed capital: is the amount of capital the investor commits to contribute within a certain period of time, and the investor must prove that they have sufficient financial capacity for this capital amount.  

2.2.2 Mobilized capital: is the amount of capital the investor plans to mobilize in the future to serve project activities; mobilized objects include:  

  • Loans from credit institutions. 
  • Capital mobilized from shareholders, members, and other entities. 
  • Capital mobilized from other sources (specify source). 

When choosing to register a source of mobilized capital, the Investor must also provide the Investor’s documents to prove their ability to mobilize capital from one of the expected sources mentioned above: 

  • Commitment to financial support from the party expected to mobilize; 
  • The bank statement proves the financial capacity of the party expected to mobilize an amount equal to or greater than the amount expected for the Investor to mobilize.  

In short, a factory investment project is a large project that must be thoroughly researched and understood by the investor regarding legal aspects and the Vietnamese market to choose a suitable option with a business and finance plan. 

 

Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.

Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Business and Investment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.

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