What is a joint venture company?

WHAT IS A JOINT VENTURE COMPANY?

The trend of globalization and regionalization is currently the most influential trend in the world. Joint venture companies are a popular form in Vietnam’s market economy today and have achieved certain contributions to our country’s economy. Currently, there are many domestic companies and businesses that are planning to enter into joint ventures and cooperate with foreign partners and businesses. To do that, businesses need to learn and master the concepts and characteristics of joint venture companies as well as current joint venture enterprises according to current law. So what is a joint venture company? To better understand the concept of joint venture company, readers can refer to the article below by newslax.com.

1. Concept of joint venture company

Joint venture companies are a form of foreign direct investment in Vietnam. Joint venture companies are a popular type of business not only in Vietnam but also in the world. Joint venture companies are businesses established by two or more parties on the basis of a joint venture contract. Each party when registering a joint venture must be responsible within the scope of capital committed to contribute to establishing the enterprise.

The joint venture company is established in the form of a limited liability company. Each joint venture party is responsible within the amount of capital committed to contribute to the Company’s legal capital. The joint venture company has legal status under Vietnamese law, is established and operates from the date of issuance of the Investment License.

2. Characteristics of joint venture companies

Joint venture companies have the following main legal characteristics:

Firstly , a joint venture company is a limited liability company with foreign investment, so the assets of the enterprise are separated from the assets of the parties participating in the enterprise, and are only responsible within the scope of capital contributions. mine.

Second , a joint venture company is an economic organization with legal status. Joint venture companies are established on the basis of joint venture contracts or agreements signed between the Vietnamese state and foreign countries. The investment license issued by a competent authority to a joint venture enterprise is also a business registration certificate. A joint venture company in Vietnam is an independent economic organization that can participate in business activities independently and equally with other types of businesses and is responsible for its business activities. there.

Third , regulations on capital, the legal capital of joint venture enterprises must be at least 30% of the investment capital to establish a joint venture company. For investment projects in business incentive areas, it may be lower but must not exceed 20% of the investment capital and must be approved by the licensing agency.

Fourth , in the organization and operation of the joint venture company, there is the coordination and contribution of capital for investment in production and business by foreign investors and Vietnamese investors. The capital contribution ratio of each party will determine the level of participation in business management, the rate of profit enjoyed as well as the risks each party participating in the joint venture must bear.

Fifth , the joint venture form of enterprise also has the disadvantage of being closely bound in a common legal entity between parties that are completely different not only in language but also in tradition, customs, practices, etc. business style, so conflicts may arise that are not easily resolved.

3. Conditions for establishing a joint venture company

According to the latest enterprise law, investors also need to meet certain conditions to establish a joint venture company. Below, Phamlaw Law will show you some conditions for establishing a joint venture company that you need to comply with:

Firstly , Regarding the subject (investor)

For individuals: Must have full civil act capacity and not be serving prison sentences or other administrative penalties as prescribed.

For legal entities: legally established, still operating at the time of investment.

Second, about finances

The investor’s financial capacity must correspond to the amount of capital committed to invest in the project. That means the investor must be able to pay with the committed capital. The legal capital of a joint venture company must meet the requirements under Vietnamese law on joint venture companies

Third , Regarding business lines

Enterprises do business in industries permitted by law in Vietnam, and do not do business in prohibited areas as prescribed. The registration dossier to establish a joint venture company must ensure compliance with the provisions of Vietnamese law (enterprise law, investment law, WTO commitments…).

4. Advantages and disadvantages of joint venture companies

A joint venture company is a form of company that really brings many advantages to both Vietnamese and foreign investors. For Vietnamese investors, when participating in a joint venture company, in addition to profit sharing according to the capital contribution ratio, Vietnamese investors also have access to modern science and qualifications. Advanced economic management. For foreign parties, the advantage is that they are guaranteed a higher chance of success due to the completely unfamiliar trading and legal environment. Without the Vietnamese party, they would face a lot of competition.

Besides the advantages, joint venture companies have certain limitations. That is the binding bond between Vietnamese enterprises and joint venture enterprises that must be tight. Therefore, operating and managing a business requires true experts. Or the language barrier. Joint ventures with foreign businesses will face many difficulties for businesses that are still weak in international languages. Especially the language of the joint venture business. Differences are not only in language but also in traditions, customs, practices, and business fashions, so conflicts that are not easily resolved can arise.

In particular, the documents and procedures for establishing a joint venture company are quite complicated. If your business does not want to waste time and save costs, please contact newslax.com for free consultation and comply with the law when establishing a joint venture company. In addition, newslax.com also provides additional services for applying for business licenses of all kinds (Including conditional business licenses), product announcement, trademark protection registration, barcode registration, Tax accounting for businesses,…