Thông tư 215/UB-LXT

CIRCULAR

GUIDING FOREIGN DIRECT INVESTMENT ACTIVITIES IN VIETNAM

Pursuant to the Law of foreign Investment in Vietnam dated 29 December 1987 and the Laws on amendment of and addition to a number of articles of the Law on foreign Investment in Vietnam dated 30 June 1990 and December 1992;
Pursuant to Decree 18-CP dated 16 April 1993 of the Government regulating the implementation of the Law on foreign Investment in Vietnam;
Pursuant to Decree 191-CP dated 28 December 1994 promulgating Regulations on formation, appraisal and implementation of foreign direct investment projects in Vietnam
Pursuant to Decree 39-CP dated 9 Junes 1993 of the Government on functions and duties of the State Committee for Co-operation and Investment; the State Committee for Co-operation and Investment hereby issues this circular providing guidance on foreign direct investment activities in Vietnam.

Part I

ENTERPRISES ORGANIZATION AND MANAGEMENT

1. Board of Management of the enterprise:

1.1. The board of management (BoM) is the ruling body of the enterprise. The parties shall appoint their respective nominees to be members of the BoM in proportion with their respective capital contribution but the Vietnamese party shall appoint at least 2 members of the BoM. In a case where a new joint venture enterprise (JVE) is established by an existing JVE and one or more foreign parties, the existing JVE shall appoint at least 2 members of the BoM, one of whom must be a Viet na

The BoM, representing the parties to the JVE as the owners of the JVE, is responsible for the management of all assets and operation of the JVE. Board members of each party are plenipotentiary representatives of the parties and are responsible representative of the parties and are responsible to the BoM and their respective parties.

1.2. The BoM shall meet at least once a year. Board meetings are convened by the chairman of the BoM or by request of 2/3 of the Board members. The general director or first deputy general director has the right to request chairman of the BoM to convene BoM meetings. Board meeting shall be deem duly convened if at least 2/3 Board members representing the parties are present. A Board member may appoint his proxy to be present at Board meeting(s) and to vote on his behalf to the extent of such authorization. Any appointment must be executed in writing and signed with the registered signature of the Board member mak ing such appointment and matters for the purpose of which the appointment is made shall in any event not extend beyond the powers and authority of that Board members.

1.3.

a) The BoM shall conduct its managerial functions through its resolutions and shall direct and supervise the implementation of such resolutions.

b) The BoM has authority to decide most matters of the JVE. Matters listed below shall necessarily be subject to unanimous resolutions of Board members:

+ long-term and annual production/business plans of the JVE; loans and borrowings;

+ any amendment of or addition to the charter of the JVE;

+ appointment or dismiss of chairmen of the BoM, general director, first deputy general director and/or chief accountant.

c) Any BoM resolutions relating to other matters shall not be valid unless agreed upon by 2/3 of the Board members present at the meeting.

d) If there is disagreement among Board members in respect of significant matters requiring unanimous resolution, which may negatively affect the JVE's operation, then the BoM may at its option:

+ refer the matter for settlement either: - to a reconciliation council, which shall be established by mutual agreement of all the parties to the JVE and the members of which shall be representatives of the parties thereto in equal proportion and a representative from SCCI in the capacity of chairman of such reconciliation council; any award or decision of the reconciliation council shall be passed by majority vote and, once passed, be final and binding upon the parties; - to SCCI as an arbitrator, in which case any award or decision made by the SCCI shall be final; or

+ decide to dissolve the JVE.

1.4. The Chairman of the BoM shall be responsible for the following:

a) convening and chairing Board meetings;

b) being a key person in supervising and directing the implementation of the BoM resolutions. The Board chairman shall not give his instructions directly to the general director and deputy general director(s) of the JVE.

1.5. The BoM shall, six months prior to expiration of its term, meet to summarize all activities carried out by it during the term and at such meeting parties shall appoint their nominees to be their members of a new BoM and the han d-over shall take place between the existing BoM and the new BoM.

1.6. In a case where the term of the JVE is terminated or the JVE is dissolved prior to expiration of the term, the BoM shall set up a liquidation board and define the content and duration of its activity. After the liquidation is completed the BoM shall consider the report made by the liquidation board on the result of the liquidation and resolve any consequential matters in accordance with law.

1.7. The Board members shall not receive salary but they are entitled to remuneration determined by the BoM for their activities relation to the BoM. Such amounts shall be included in management fees in accordance with Clause 2 of Art icle 74 of Decree 18-CP regulating the implementation of the Law on foreign Investment in Vietnam.

2. Director of the JVE

2.1. The general director and first deputy general director, who are appointed and dismissed by unanimous vote of the BoM, shall be responsible for the management and operation of daily activities of the JVE. If there is more than deputy general director, the BoM shall appoint one of them to be the first deputy general director. If there is only one deputy general director, this person shall function in the same way as the first deputy general director. Either of the general director and first deputy general director must be a nominee of the Vietnamese party and also must be a Vietnamese citizen resident in Vietnam. functions and duties of general director and deputy general directors shall be determined by the BoM. The general director and first deputy general director shall not concurrently be involved in any other activities in any other enterprises, including enterprises of the parties to their JVE.

2.2. In the case where the chairman of the BoM acts concurrently as general director of the JVE, a distinction must be made in the management by him of the JVE between then two functions and any document of the JVE shall, depending on its nature and contents, be signed and sealed by him in the relevant capacity, not stating both his titles in any particular document.

2.3. The general director and deputy general director are responsible to the BoM for the operation of the JVE. The general director shall have the final decision in managing the daily activities of the JVE. The general director shall consult with the first deputy general director before making his decision on matters which may affect directly the implementation of BoM resolutions and other essential matters listed below:

+ organizational apparatus, personnel, salary, wages and bonus system of the JVE;

+ appointment, dismissal of key personnel of the JVE;

+ periodical and annual financial reports of the JVE;

+ enter into any economic contract. In the case of any disagreement between the general director and first deputy general director in relation to the above matters, the opinion of the general director shall be complied with but the first deputy general director has the right to reserve his opinion and shall either refer the same for consideration to the next BoM meeting or make a proposal to the Board chairman requesting him to convene an ad-hoc BoM meeting for settlement.

2.4. The general director and first deputy general director are responsible for the implementation of BoM resolutions provided that such resolutions are not contrary to the law and the joint venture contract and charter. If any BoM resolution is on the opinion of the general director and first deputy general director not appropriate to the circumstances, they have the right to request the Board chairman to convene an ad-hoc BoM meeting for considering and resolv in The general director and first deputy general director have the right to refuse to comply with any direction or instruction of a personal nature made by the Board chairman or any Board member or any illegal resolution made by the BoM. 2.5. The general director and first deputy general director shall sign labor contracts with the BoM chairman in accordance with currently applicable labor laws.

3. Management company

3.1. In the case of necessity, SCCI shall, depending on the area of business, scope of project and effectiveness of management services, permit an enterprise with foreign invested capital to hire a management company to manage the enterprise. A decision to hire such a management company shall require approval of the BoM.

3.2. The management contract to be entered into with the management company shall cover the operation, management and exploitation of the project in line with business objectives to be agreed upon by the parties to the contract. The management contract shall be subject to the approval of SCCI. The management fee, which shall include marketing and billboard costs, shall be agreed upon by the parties to the management contract, based on the nature and effectiveness of management activity to be carried out.

3.3. foreign management companies shall register their business in the area(s) where they are hired to conduct management services and, as regards services to be provided by them in Vietnam, they shall have to register their activities at the people's committee of the province/city directly managed by the central government, where the head office of the enterprise with foreign invested capital is located. Management companies shall during their operation in Vietnam

3.4. The execution and implementation of the management contract shall in no event change or negatively affect the business objectives of project and interests of the State of Vietnam as stipulated in the investment license issued to the project. Any provisions of the management contract stipulating the obligations and interests of each party thereto shall not be inconsistent with or contrary to stipulations of the investment license and other legal documents re

3.5. The management contract shall be submitted to SCCI for approval. Within 15 days following receipt of the file, SCCI shall notify the applicant of its decision in relation thereto.

3.6. The management company shall act by virtue of, under the seal and shall use bank accounts of, the enterprise with invested capital. It shall undertake such work and receive such remuneration as is stipulated in the management contract and shall be responsible to the enterprise and the law for the performance by it of its rights and obligations stipulated in the management contract. All tax obligations of the management company to the State of Vietnam shall be covered by the enterprise with foreign invested capital hiring it.

3.8. An enterprise with foreign invested capital shall in any event be responsible under the laws of Vietnam for the whole of its operation, including the operation of the management company as provided for in the management contract and shall be responsible directly for any activities which are conducted beyond framework of the management contract.

3.9. The board of directors of the enterprise shall be responsible for supervising the operation of the management company and assisting in such operations and shall make proposals to the BoM for dealing with any breaches by the management company of any stipulations in the management contract.

3.10. Any dispute arising between the management company and the enterprise with foreign invested capital shall be first settled by negotiations and reconciliation measures, failing which it shall be referred to relevant jurisdiction body of Vietnam for settlement in accordance with the laws of Vietnam.

Part II

FINANCIAL MATTERS

4. Contribution of capital

4.1. The contribution by the parties to a JVE or an business co-operation contract of their capital must be in compliance with time limits and procedures stipulated in the contract and charter entered into by them. Value of equipment, materials, plant and technology to be contributed as capital contribution shall be agreed upon by the parties. If the capital contribution is made in the form of equipment and machinery, the procedure for valuation and approval shall have to be carried out. After such contribution is completed and certified by the BoM, the enterprise shall, no later than 30 days following such certification, have to submit to SCCI a balance sheet in respect t

4.2. Any proceeds from leasing infrastructure works, sale of membership cards and the like shall be deemed to be the enterprise's revenue and shall not be used by any party to the enterprise as its capital contribution.

4.3. Any increase in capital of the enterprise with foreign invested capital shall be conditional upon and subject to the following: a) Conditions of the capital increase. The increase of capital may be permitted only if it is made in order to:

+ expand the business scope or readjust or supplement operational objectives in order to bring them into line with investment targets set by the State of Vietnam;

+ maintain production and business activities in case of natural calamities or other difficulties;

+ adapt to any changes in the market. The increase of capital may not permitted if it is intended to:

+ obtain more favorable quota(s) for duty-free import of such machinery, equipment, materials, means of transport etc., which are not necessarily required for fundamental construction for the formation of the enterprise;

+ reach operation objectives which are not relevant compared with the investment targets set by the State of Vietnam;

+ expand the production scope without satisfying conditions required in respect of land site area, materials, consumer market, and environmental protection. b) Capital increase application An application file for increase of capital shall include: + name, address, area of activity of the enterprise, any license issued to it;

+ report summarizing the implementation of the investment project to which commitment has been made;

+ report summarizing the situation with regard to the investment capital (or, in the case of a business co-operation contract, business capital) as stipulated in the license issued to it;

+ reasons for the increase of capital (whether working or fixed capital); amount of the increase; evidence of the possibilities for making such increase, and the conditions for so doing;

+ any change or readjustment (if any) of legal capital and capital contribution percentage;

+ list of machinery and equipment to be imported the cost of which is to be covered by such increase;

+ opinion of the BoM (of a JVE) or parties (to a business co-operation contract) or general director (of a 100% foreign owned enterprise) on such increase. In principle, SCCI shall consider any increase of capital only in the case the relevant project investor has already implemented the investment capital of the enterprise as stipulated in the investment license or business license and in the capital readjustment documentation.

5. Increase in a Vietnamese party's capital contribution to the legal capital of the JVE; purchase of capital of 100% foreign owned enterprise

5.1. Parties to joint venture enterprises for development of economically significant projects shall in the joint venture contract agree on gradual increase of the Vietnamese party's capital contribution percentage in the enterprise's leg al capital, together with a schedule for such increase, the rate of such increase, and the purchase price.

5.2. As regards 100% foreign owned projects for development of economically significant objects. SCCI shall provided guidelines for foreign project investors to state expressly in their investment licensing applications the right for a Vietnamese party, subject to mutual agreement between them, to purchase part of the 100% foreign owned enterprise's capital, thus transforming the 100% foreign owned enterprise into a JVE. To that effect, the amount of capital to be trans SCCI shall determine which Vietnamese party shall purchase such transfer.

6. Re-investment

6.1. "Re-investment" means the funding of any increase in legal capital or invested capital for a project in Vietnam or the investment in any other project in Vietnam by means of mobilizing any profits received from investment activities in Vietnam.

6.2. foreign organizations and individuals who re-invest their share of profits shall be repaid the amount of profit tax imposed on their re-invested share of profits. This is conditional on the following:

+ The re-investment is made in such fields where foreign investment is encouraged by the State of Vietnam;

+ The re-invested capital is used for at least 3 years;

+ The legal capital stipulated in the investment license has been contributed in full;

+ The amount of profit tax imposed on the re-invested profits shall be repaid.

6.3. Any project investor wishing to re-invest its profits shall submit to SCCI an application file comprising the followings.

a) Objectives of the re-investment: to implement a new project or to expand the business scope of the existing project, and the amount of profits to be re-invested. If the re-investment is made for development of a new project, such project shall have been licensed by SCCI. The re-investment of profits for the purpose of raising the invested or legal capital of an existing joint venture enterprise shall be subject to a unanimous board resolution, and an explanatory report of director shall be required in the case of 100% foreign owned enterprises.

b) Certificate (or any receipt or copy thereof certified by notary public) issued by the relevant taxation office clearly stating the tax amount paid.

6.4. Within 15 days following receipt of a duly established application file, SCCI shall notify the applicant of its decision. After the re-investment has been completed, SCCI shall issue a decision certifying that all conditions required are met for the tax amount to be repaid to the project investor.

6.5. The amount of profit tax imposed on the amount of profits which has already been re-invested shall be repaid by the taxation office upon production by the foreign party of the above-mentioned certificate issued by SCCI.

6.6. Any abuse of re-investment made with the purpose of illegal non-payment of tax shall be handled in accordance with law. If the project investor, for any reason, is not able to ensure that the re-investment is made for at least 3 years or if, on investigation, it is found that the amount of profits claimed to be re-invested has not been re-invested actually or in full, then the project investor shall be required to pay back the relevant part of the profit tax repaid any interest thereon.

7. Transfer of assets

7.1. Non-compensatory transfer of a foreign party's assets to a Vietnamese party shall be on a voluntary basis and in such a case provision shall be made in the contract of the enterprise and the investment license. The transferred assets must on completion of the project's operation be in normal working condition. In a case where the foreign party has undertaken to transfer, after completing the enterprise's operation and on non-compensatory basis, its assets to the Vietnamese party, SCCI shall, depending on the nature of the project and schedule for such transfer, consider the granting to it of favorable financial conditions in accordance with the currently applicable laws. Notwithstanding the enterprise is dissolved prior to termination of its operation term, the f

8. Tax and duties

8.1. Capital transfer tax Any transfer of capital or agreement therefor shall be subject to approval SCCI. The transferring party shall submit to SCCI an application together with the transfer agreement, the report on the implementation of the project as of the date of application, the relevant documentation on juridical status and financial standing of the transferring party, and price of such transfer. If there is any excess of the transfer price over the initial value, the transferring party shall have to pay transfer tax at a rate of 25% of the excess, and any failure to do so shall be handled in accordance with the currently applicable law.

8.2. Import duty Equipment, machinery, spare parts, materials and production/business tools (including means of transport), which are imported into Vietnam as fundamental investment for the formation of the enterprise or for setting up its fixed assets in order to implement the business co-operation contract, shall be exempt from import duty accordance with Article 76 of Decree 18-CP dated 16 April 1993. Such exemption shall also be applied to such equipment and machinery (except means of transport) which are imported for the purpose of increasing the enterprise's fixed assets, thus expanding its production scope and the capability of the enterprise. The duty-free import of cars shall be in accordance with the provisions of Annex 7 attached hereto.

Part III

FORMATION, APPRAISAL, AND IMPLEMENTATION OF INVESTMENT PROJECTS

9. Project formation and appraisal

9.1. The list of documents to be included in each project file as stipulated in Articles 9, 20 and 46 of Decree 18-CP dated 16 April 1993 shall be detailed as follows:

a) The Vietnamese party shall submit together with the project file the following:

+ Copy notarized by notary public of its Decision of Establishment;

+ Document certifying legal ownership of the assets to be contributed as capital contribution (approval by the relevant competent State body is required in the case of common use assets);

+ Document certifying legal use of land or evidencing the relevant municipal/provincial people's committee's permission to use land for the purpose of investment and co-operation with foreign partners.

b) The foreign project investors being a company or companies, shall in addition submit:

+ Copy of its Decision of Incorporation or Activity Permit;

+ financial report for the two last years; + Power of Attorney given to its signatory(ies).

c) The foreign project investors being individuals shall in addition submit:

+ Banker's certificate of the assets to be invested;

+ Copy passport.

d) The joint venture contract and charter shall be initialed page-by-page by authorized representatives of the parties and with the seal at the last page.

e) The application for land lease shall be set up in accordance with the guidance thereon of the General Department for Land Management.

f) The project file shall be executed in 12 copies, of which one is the original. They are all required to be bound with thick cover for the purpose of long-term filing.

9.2. Project appraisal

a) The Prime Minister shall, based on the proposal of the Chairman of SCCI, make decisions relating to projects of Group A. Before submission to the Prime Minister, the Chairman of SCCI shall consult with the State Planning Committee and relevant ministries and localities. In the case of necessity, he shall set up a consulting council to consider and appraise the project concerned, which shall consist of authorized representatives of the State Planning Committee, the Ministry of finance, the Ministry of Trade, the Ministry of Science. Technology and Environment, the Ministry of Construct Within 5 days following receipt of the project file, SCCI shall forward it to the State Planning Committee, the Ministry of Trade, the Ministry of Science. Technology and Environment, the Ministry of Construction, ministries supervising scientific/technological branches, the General Department of Land Management and other relevant State bodies. Within 20 days following receipt of the project file sent by SCCI, the recipients shall send to SCCI their written opinion relating to matters which are within their authority. In the case of necessity, the Chairman of SCCI shall, within 30 days following the receipt of the project file, set up a consulting council before submission to the Prime Minister. Within 50 days following receipt of a duly established project file, the Chairman of SCCI shall submit an appraisal assessment to the Prime Minister and within 7 days following notification from the Prime Minister, the Chairman of SCCI shall give to the project investor a notice of the same. All the above-mentioned time limits shall not include time required for the project investor to amend and/or supplement the project file.

b) The Chairman of SCCI shall, after consulting with the State Planning Committee, the Ministry of finance, the Ministry of Science, Technology and Environment, the Ministry of Trade and other relevant State bodies, issue decisions relating to projects of Group B. Within 5 days following receipt of the project file, SCCI shall forward it to the State Planning Committee, the Ministry of finance, the Ministry of Trade, the Ministry of Science. Technology and Environment, the Ministry of Construction and other relevant State bodies. Within 20 days following days receipt of the project file sent by SCCI, the recipients shall send to SCCI their written opinion relating to matters which are within their authority. Within 45 days following receipt of a duly established project file, the Chairman of SCCI shall notify the project investor of its decision relating to the project. The above-mentioned 45 days period shall not include time required for the project investor to amend and/or supplement the project file.

10. Project implementation

10.1. According to Article 19 of the Law on foreign Investment in Vietnam, the investment license issued by SCCI shall be deemed valid as the certificate of registration of the activities of the enterprise. Enterprise with foreign invested capital and parties to business co-operation contracts shall be permitted to contract shall be permitted to carry out their business in the fields and with the objectives stipulated in the investment license issued to them. The registration of professional activity is required for special businesses, namely: lodging; stamp carving; typography and photocopying; hunting gun production and repair; hunting gun bullet production

10.2. No later than 90 days following the investment being issued, the parties to the joint venture shall have to convene a meeting, on which the following essential matters shall be decided: + approval of BoM members; appointment by the BoM of its Chairman and Vice Chairman, appointment of General Director, Deputy General Director and Chief Accountant;

+ approval of the rules for the operation of the BoM, definition of working relationships between the BoM and the Board of Directors, between the BoM Chairman and the General Director and first Deputy General Director;

+ details of the capital contribution schedule for each party and manner for the realization thereof; proposed method for registration of capital contributed by each of them;

+ determination of the production and business plan for the enterprise, based on which the Board of Directors shall set up the plan for importation of materials, equipment and manpower recruitment and start the execution of economic contracts, labor contracts, service contracts and the like. Minutes of the first BoM meeting shall be sent to SCCI, the People's Committee of the province/city where the enterprise locates its head office, and the project investors.

10.3. After their appointment, the General Director and Deputy General Directors shall promptly implement required administrative procedures, including:

+ to have the enterprise's stamp made and registered in accordance with the procedure stipulated by the Ministry of the Interior:

+ to register the enterprise's head office with the people's committee of the relevant province/city;

+ to open the enterprise's bank accounts, except if the enterprise desires to open a loan capital account at a bank abroad, it shall first have obtained approval from the State Bank of Vietnam for doing so;

+ to register the accounting principles adopted by the enterprise with the Ministry of finance;

+ to register the enterprise's manpower recruitment plan with the labor management agency of the relevant province/city or to authorize a labor service company to do the same at the enterprise's request;

+ to register the enterprise's right to direct importation and set up a list of materials and equipment to be imported as fundamental investment items required for the formation of the enterprise, to be submitted to the Ministry of Trade which shall approve it and issue import quotas to the enterprise;

+ within 30 days following the date of issuance of the investment license, to publish in a central or local newspaper essential information of the enterprise stated in the investment license issued to it;

+ to make application for construction permits;

+ to fulfill relevant procedures for the opening in other locality of the enterprise's representative office(s) or branch(es), the latter being subject to approval from SCCI.

10.4. This post-license procedure shall be applied also to business co-operation contract projects and 100% foreign-owned projects.

10.5. All the procedures listed above shall have to be completed within 6 months following the date of issuance of the investment license to the enterprise, failing which the enterprise shall have to serve on SCCI a notice explaining the reasons therefor and applying for extension of such time limit.

11. Liquidation of the enterprise

11.1. Liquidation of an enterprise shall be applied only in the following events:

a) the term of operation for the enterprise as stipulated in the investment license issued to it expires;

b) the enterprise is dissolved prior to expiration its term as stipulated in the investment license issued to it for the following reasons:

+ An event of force mejeure occurs, which prevents the parties from performing their obligations under the contract entered into by them;

+ The parties fail to perform their respective obligations provided for in the contract, therefore the implementation of the contract becomes impossible;

+ The enterprise suffers such losses that it is unable to continue its operation (except where it is in insolvency situation);

+ Other circumstances stipulated in the enterprise's contract and charter;

c) A decision of SCCI is issued requiring that the enterprise be dissolved prior to expiration of its operation term by reason of its non-compliance with the activity objectives stipulated in the investment license issued to it or any breach of the laws of Vietnam.

11.2. The Liquidation Board to be established in accordance with Article 39 of Decree 18-CP shall be a working apparatus which will assist the enterprise's BoM and shall fulfill instructions issued by the latter in the liquidation of the enterprise. The establishment and operation of the Liquidation Board shall be stipulated as follows:

a) The Liquidation Board is the plenipotentiary representative of the enterprise in the process of liquidation. It shall carry out the liquidation of the enterprise in accordance with the stipulations of the decision establishing it and shall be responsible to the BoM for such activity;

b) No later than 30 days following the date of issuance of the decision establishing it, the Liquidation Board shall convene its first meeting to pass the plan and methods for its activity and expenses requirements and submit the same for approval to the BoM. Within 30 days after such submission is made, the BoM shall make its written response to the Liquidation Board, failing which the submission shall be deemed to be approved;

c) During the process of liquidation, the enterprise's BoM, General Director, Deputy General Directors and Chief Accountant shall be responsible for providing the Liquidation Board with any information, date, materials, documents and expenses required for the liquidation and for signing any of the enterprise's papers relating to the liquidation. At the same time they shall supervise the operation of the Liquidation Board. All other activities of the enterprise shall ha

d) Notwithstanding that the parties, on expiration of the time limit for the liquidation stipulated in Article 39 of Decree 18-CP dated 16 April 1993, have not completed the liquidation, the Liquidation shall nevertheless terminate its ope ration and the parties shall settle between themselves any matters remaining unresolved. Any dispute arising in connection therewith shall be settled in accordance with Article 100 of Decree 18-CP dated 16 April 1993;

e) The Liquidation Board shall have to report on the results of the liquidation to the BoM before submission of the same to SCCI; If the BoM meeting for that purpose is not convened or the BoM does not agree to the report, the Liquidation Board shall nevertheless submit the report to SCCI and terminate its operation. SCCI shall make its final decision on the liquidation, before which it may in the case of necessity request the relevant professional organization to examine the same, and withdraw the investment license issued to the enterprise and serve a notice thereof to all relevant State bodies a

f) No later than 30 days following the completion of the liquidation, the Liquidation Board shall have to publish in the Official Gazette the announcement thereon and return thereon and return the enterprise's stamp to the State agency where the enterprise has obtained or registered its seal, and shall notify SCCI of the same.

11.3. The Liquidation Board of the joint venture company, which is established by SCCI in accordance with Article 40 of Decree 18-CP dated 16 April 1993, shall have powers and responsibilities other than those of the Liquidation Board set up in accordance with Article 39 of Decree 18-CP, namely:

a) The Liquidation Board shall have sole discretion as against the enterprise's board of management in the implementation of liquidation procedures in accordance with the provisions of the decision establishing it and shall be responsible to SCCI and the law for so doing;

b) No later than 30 days following the date on which the decision to establish it is issued, the Liquidation Board shall have its stamp made and registered for the purpose of carrying out the liquidation process and shall convene its first meeting to announce its activity plan and methods and expense requirements and submit the same to SCCI for approval, there upon it shall give a notice of the same to the BoM of the enterprise for implementation. Results of this first meet in

c) During the process of liquidation, the Liquidation Board has the right to ask the enterprise's BoM, General Director, Deputy General Directors and the Chief Accountant to provide it with any information, date, materials, documents and expenses required for the liquidation. If such requirements are for any reason not met, the Liquidation Board shall have the right to apply all necessary measures to ensure the implementation of the liquidation plan.

11.4. If the 100% foreign-owned enterprise or the business co-operation contract terminates its operation on or prior to expiration of it term stipulated in the investment license, the owner of such enterprise or parties to such contract shall have to carry out the liquidation of its assets and clear any claims in accordance with Articles 53 and 18 of Decree 18-CP dated 16 April 1993. If such liquidation and clearance is carried out improperly or in breach of law, SCCI shall

12. Opening of branches and representative offices 12.1. If an enterprise with foreign invested capital or party to a partnership wishes to open its branch or representative office for business purposes, the project investor shall together with the project file submit the following:

+ document explaining the requirement for the opening of such branch/representative office;

+ written opinion thereon of the People's Committee of province/city where such branch/representative office is proposed to be located. After issuance to it of the investment license, the project investor shall fulfill the procedure for leasing of a working place and registration of the premises of the branch/representative office with the authority of the province/ city where it opens its branch/representative office.

12.2. Any licensed enterprise wishing to open its branch or representative office in order to expand its business activities shall after obtaining the investment license submit to SCCI an application for setting up the branch/representative office, together with following:

+ document explaining the requirement for the opening of such branch/representative office;

+ written opinion thereon of the People's Committee of province/city where such branch/representative office is propose to be located. SCCI shall consider the application and make its decision. If approval from SCCI is obtained, the project investor shall fulfill the procedure for leasing of a working place and registration of the premises of the branch/representative office with the authority of the province/city where it opens its branch/representative office.

Part IV

THE MANAGEMENT OF ENTERPRISE WITH FOREIGN INVESTED CAPITAL

13. The distribution of managerial responsibilities and authority among State agencies The Ministries, ministry-level bodies, the offices of the Government and People's Committee of provinces and cities directly managed by the central government (hereinafter in this Chapter referred to as the "Ministries and provincial authorities") shall in conformity with their respective powers, authority and duties make guidance for and supervise the operation of enterprises with foreign invested capital.

13.1. The Ministries shall:

+ set up a master plan, issue policies and determine norms and standards;

+ participate in regular inspections and directly carry out specific inspections and inspections without warning in the framework of their respective functions and powers; If a Ministry plans to carry out such inspections, it shall first serve notice thereof on SCCI and the relevant provincial authorities for co-ordination;

+ at the proposal of SCCI, deliver their opinions regarding any amendment of or supplement to the investment license;

+ train managers and qualified workers for enterprise with foreign invested capital at their request;

+ assess, in co-ordination with SCCI, the socio-economic effect of foreign direct investment activities.

13.2. SCCI shall:

+ issue its circulars guiding the implementation by enterprises of investment licenses issued to them;

+ be a key body for co-ordination all Ministries and provincial authorities in carrying out regular inspections in respect of such enterprises and for setting any matter referred to them by the project investors;

+ request the Ministries and provincial authorities to issue guidelines relating to foreign direct investment; submit to the Prime Minister its proposals for ceasing implementation and making necessary amendment of any decisions of any branches and levels which are contrary to the regulatory documents of the State;

+ reconcile any disputes on the request of parties thereto; + depending on the nature and scope of the project concerned, consider and decide or in co-ordination with the relevant branches and local authorities consider and decide any adjustment or amendment of or supplement to the investment license issued to the project;

+ decide upon the dissolution of any enterprise prior to expiration of its term in connection with any breach of its investment license and the laws of Vietnam;

+ assess the socio-economic effect of foreign direct investment.

13.3. Provincial authorities shall conduct their state management in respect of all the enterprises with foreign invested capital located in their geographical area, namely:

+ to apply administrative procedures, such as: to issue land use right certificates and construction permits, direct the vacating of land sites for the projects, issue permits for the locating of the enterprises' premises, facilitate the registration of residence and travel and introduce Vietnamese workers to the enterprises;

+ introduce nominees to be BoM members and to hold other positions as well as other key personnel in joint venture enterprise; manage and supervise their functioning;

+ in accordance with their authority and powers, supervise the contribution by the parties of their respective share of capital and the implementation by them of stipulations of the investment licenses issued to them and other regulatory documents; settle any disputes arising among Vietnamese parties and other matters arising in the enterprise;

+ supervise the implementation of stipulations on financial obligations, the relationships between the manpower and salary and wages system, social order and security and environmental protection, fire fighting and prevention;

+ co-ordinate with the Ministries to carry out regular inspections and carry out specific inspections and inspection without warning in respect of enterprises but first serving notice thereof on SCCI and the relevant Ministries prior to such inspection being carried out;

+ assess the socio-economic effect of foreign direct investment in their geographical areas.

14. Inspecting the enterprises' operation Inspections may be regular, specific or without warning.

+ Regular inspections shall be carried out by SCCI with the participation of the relevant branch and local authorities in respect of the overall implementation of stipulations of the investment license. Such inspections shall be made not more than once a year and only in respect of such enterprises where such inspections are deemed necessary; + Specific inspections shall be carried out no more than once a year in the case of necessity by the relevant Ministries and provincial authorities;

+ Inspections without warning shall be made in a case where the enterprise is found to have admitted any breach of law or suffered any serious hindrance in its operation. The carrying out of such inspections shall be in strict accordance with the currently applicable law. The process-verbal of any inspection made shall have to be signed by a representative of the inspecting team and a representative of the enterprise inspected and the conclusion of the inspection shall be delivered the relevant State bodies and SCCI. Any organization or individual making a decision to inspect or carrying out such inspection in breach of law or otherwise busing such inspection for causing any hindrance or impediment to the enterprise's operation shall be liable for any damage resulting for causing any hindrance or impediment to the enterprise's operation shall liable for any damage resulting from such illegal inspection and shall be dealt with in accordance with law.

Part V

SOME GUIDELINES ON THE TARGET OF FOREIGN DIRECT INVESTMENT

1. Guideline for in manufacture and assembly of civil electric products (to be set out in Annex 1 to this Circular);

2. Guideline for investment in assembly and manufacture of cars, motorcycles and spare parts thereof (Annex 2);

3. Guideline for investment in the areas of hotel development, serviced apartments and office space for rent; restaurant/bar business (Annex 3);

4. Guideline for investment in the areas of garment and foot-wear industry (Annex 4);

5. Guideline for investment in the areas of engineering, construction and technical and designing consultancy (Annex 5);

6. Guideline for setting up investment licensing applications (Annex 6);

7. Guideline for duty-free import of cars (Annex 7);

8. Guideline for setting up a report on the operation of an enterprise (Annex 8).

Part VI

IMPLEMENTATION PROVISIONS

This Circular shall come into force as of the date it is signed. This Circular shall replace the following regulatory documents issued by SCCI:

1. Circular 1621/UB-LXT dated 5 August 1993 guiding the implementation of Decree 18-CP dated 16 April 1993 providing detailed stipulations on the implementation of the Law on foreign Investment in Vietnam;

2. Circular 248/HTDT-VP dated 17 May 1991 clarifying some matters relating to post-license procedure;

3. Circular 1034/HTDT-TD dated 1 August 1992 guiding the re-investment of profits;

4. Decision 698/HTDT-VP dated August 1991 on reporting.

5. Official Letter 718/HTDT-VP dated 20 September 1991 guiding the implementation of Decision 689/HTDT-VP;

6. Official Letter 1661/HTDT-VP dated 16 November 1994 on the processing of investment project files by ministries and local authorities;

7. Official Letter 533/HTDT-TD dated 22 March 1993 stipulating time limits for evaluating foreign investment projects;

8. Official Letter 2308/UB-TD dated 14 November 1994 providing guideline for investment in assembling and manufacturing cars in Vietnam;

9. Official Letter 1536/UB-VP dated 11 August 1994 providing guideline for investment in manufacturing motorcycles and their spare parts in Vietnam;

10. Official Letter 1730/HTDT-TD dated 8 November 1994 providing guideline for investment in manufacturing and assembling civil electric products in Vietnam;

11. Official Letter 112/UB-TD dated 21 November 1994 on co-operation in construction;

12. Official Letter 2427/UB-TD dated 24 November 1994 setting out targets for projects in the garment and foot-wear industry;

13. Official Letter 1541/UB-TD dated 26 July 1993 setting out targets for projects in the areas of hotel development, service apartments and office space for rent, and restaurant and bar business;

14. Official Letter 667/HTDT-TD dated 23 May 1992 on projects in the area of restaurants and bars;

15. Official Letter 1961/UB-VP dated 22 November 1993 guiding the setting up of project files;

16. Official Letter 236/UB-QL dated 11 November 1993 stipulating procedure for increasing capital for enterprises with foreign invested capital and parties to business co-operation contracts;

17. Official Letter 139/HTDT-VP dated 28 January 1993 on transfer of assets after termination of operation term;

18. Official Letter 1412/UB-QL dated 27 July 1994 on import of cars by enterprise with foreign invested capital;

19. Official Letter 501/HTDT-VP dated 16 March 1993 on project implementation.