Manufacturing activities are one of the investment industry groups that account for the largest investment rate among all industry groups that foreign investors choose to invest in Vietnam. According to data reported by the Ministry of Planning and Investment, the situation of foreign investment activities in Vietnam in the first 4 months of 2024, the processing and manufacturing industry accounts for 66.4%, of which Chinese investors Quoc leads in the number of investment projects, accounting for 28.8%.

In order for Chinese Investors (“Investors”) to invest in the production of beds, wardrobes, tables, and chairs in Vietnam, there are two important issues that Investors need to pay attention to, specifically as follows. 

1. Production and business location 

• Selecting a production and business location is crucial as it impacts traffic, supply sources, and local labor availability. A site far from the center or raw material source can lead to higher transportation and raw material costs, ultimately influencing product pricing and overall company expenses. 

• A suitable location depends on local planning. Normally, manufacturing projects are required to be located in Industrial Parks so as not to affect residential areas and ensure environmental issues and water pollution. 

• In addition, when choosing a suitable location, Investors need to choose a Factory that is suitable for their usage needs and ensure legal issues related to the Factory. For example: 

• • The lessor must be qualified to lease the factory; 

• • The factory has been built legally, has a construction permit, and has been updated on the land use rights certificate. 

• • The current construction status is consistent with the issued construction permit.  

• • The lessor meets fire prevention and environmental issues. 

• • The above conditions are extremely important and basic conditions when Investors choose a location to rent a factory. If one of the above conditions is not met, the Investor will have difficulty applying for investment projects in Vietnam. 

• Therefore, evaluating the location before signing the lease contract is very important, as it helps the investor detect risks and consider choosing an appropriate treatment plan. If potential risks are overlooked, investors can include protective terms in the contract to ensure that the lessor agrees to support or terminate the factory lease if rental conditions are not met. 

2. Investment capital level  

• This is also an issue and question asked by many investors when planning to invest in Vietnam. According to legal regulations, for the manufacturing industry group in general and the production of beds, wardrobes, tables, and chairs in particular, Vietnamese law does not stipulate the minimum capital level that Investors must register when implementing projects in Vietnam. Investors can flexibly register investment capital levels appropriate to their financial capacity and can provide documents proving corresponding financial capacity. 

• However, the registered investment capital must be appropriate and reasonable for the scale of the project. Therefore, Investors need a specific plan for activities in Vietnam to estimate the proper capital level to operate the project for at least one year. For example, estimate the costs of renting a factory, paying workers, buying machinery and equipment, building and repairing factories, and applying for licenses according to legal regulations so the project can go into operation. When applying for an investment project in Vietnam, the investment registration agency also considers costs, financial plans, and project scale to evaluate whether or not the registered investment capital level is appropriate. 

• The investment capital level will include Investor’s contributed capital + Mobilized capital. 

i. For Investor’s Contributed Capital: The Investor will have to commit and contribute the amount committed within the registered period when carrying out investment registration procedures. If the investor does not contribute in full or on time, they must follow guidelines to adjust investment capital and explain the appropriate reasons. This may subject the Investor to administrative sanctions if they do not comply with the content registered on the Investment Registration Certificate.  

Therefore, Investors must consider and choose the appropriate capital level to ensure compliance with the registered capital contribution deadline. 

ii. For mobilized capital: this is the amount of capital that the company will borrow from the Investor itself or a credit institution or a third party to support the project during its operation. For this capital level, the Investor only needs to provide a capital support agreement and documents proving the financial capacity of the party intending to mobilize capital.  

In short, investing in a production project is an important issue and should be carefully considered by Investors before deciding to make an investment and taking steps to apply for a license. 

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.