Vietnam business set up
To set up an entity in Vietnam, client is advised to comprehensively understand about the formality and function of entity that going to be formed according to Vietnam Law.
Basically, entity can be set up under 3 forms: (i) 100% foreign owned Company, (ii) Branch of Company and (iii) Representative Office of Company.
Please see below the business nature of each entity for further information:
1. Setting up company in Vietnam.
Under Vietnam Law on Investment, foreign investors can run a company in Vietnam for profit making purposes by either (i) newly setting up foreign-invested companies ("FIC") in order to invest and develop a specific project in Vietnam (Except for setting up an FIC to engage in specific services; which is not required to have a specific investment project) and (ii) buy out equity interest/ stakes in existing purely domestic companies.
FICs are defined by the Law on Investment to include (i) wholly foreign-owned companies ("WFOCs"), in which the relevant foreign investor holds 100% equity capital of the company; and (ii) joint venture companies ("JVCs"), in which the relevant foreign investor enters into a joint venture agreement with one of more local partners in order to set jointly set up and run the JVC.
In order to run the business in Vietnam, the business lines of foreign investors need to satisfy legal requirements and also need to be permitted according to the law.
However, some business lines are considered as conditional investment sectors, such as banking, insurance, securities, medicine, education.
2. Setting up Branch in Vietnam
Basically, a Branch of foreign invested company has the same nature of a foreign invested company.
In addition, to be established a Branch in Vietnam, it is required by law that its parent of company in abroad needs to have been operating at least for 5 years.
3. Setting up Representative Office in Vietnam
Representative Office is a Commercial Presence of company for non - profit purpose only.
Vietnam-based representative office of a foreign investor means a dependent unit of the foreign investor, which is established under the provisions of Vietnamese law to conduct market survey and a number of commercial promotion activities permitted by Vietnamese law.
It means that Representative office does not directly conduct profit-generating activities; therefore Representative office cannot directly enter into contracts in order to purchase and sale of goods.
Procedures for establishment of a legal entity.
Under Vietnam Law, foreign investors can run its foreign investment project for profit making purpose by
(i) Setting up a Foreign Invested Company under the form of Wholly Foreign Invested Company;
(ii) Co-operating with a local Partner in order to setup a Joint Venture Company or to enter into a Business Co-operation Contract;
(iii) Buying in an existed Companies;
(iv) Setting up Representative Office in Vietnam for trade promotion or co-ordinating with its local Partners to implement existed contracts.
With regarding to establishment of a foreign invested company, either of wholly foreign invested company or joint venture company,
Foreign Investor shall be required to obtain the Investment Certificate. For this purpose, Foreign Investor is required to propose an Investment Project. Investment Project is understood as “a collection of proposals for the expenditure of medium and long term capital in order to carry out an investment activity in a specific geographical area and for a specified duration”.
Then relevant competent authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine whether to grant Investment Certificate or not. Investment Certificate shall be considered as a Certificate of Incorporation of the Foreign Invested Company in Vietnam.
Q&A about formation of foreign company in Vietnam
2. How much does cost to establish a legal entity?
Our cost for establish a legal entity in Vietnam shall be based on the complexity of each case or our actual working time for the case.
3. What are the deadlines for state registration of a legal entity?
Under Vietnam Law on Investment, total time for setting up a legal entity in non-conditional investment sector is 30 days from the submission date of application dossier. While total time for setting up a legal entity in conditional investment sector is 45 days from the submission date of application dossier. In practice, the progress of establishment of a legal entity may be longer.
5. Is an established company office required in order to register a legal entity?
No, it is not.
6. What is the minimum authorized share capital and what is the deadline for its contribution?
Generally, Vietnam Law does not require for minimum authorized share capital. However, in several conditional investment sector such as banking, real estate, securities, finance etc, the minimum authorized share capital shall be required.
7. Can the authorized share capital be transferred from a foreigner’s account set up abroad?
Yes.
8. Can a foreign citizen act as a 100% shareholder of a legal entity?
Yes.
9. If it is impossible to be a 100% shareholder what is the share a foreign founder can have in a legal entity?
It shall be considered as common share
10. Does a foreign citizen have to get any permissions, visas, etc. for this?
Firstly, he must obtain the visa to enter into Vietnam. After obtaining the Investment Certificate, he can obtain the Residence Permit to leave and work in Vietnam.
11. Can a foreign legal entity or an offshore company act as a legal entity founder?
Yes.
12. What are the essential requirements to be observed in order to register a legal entity?
In order to register a legal entity, investor must carefully consider the location of the targeted legal entity to be registered, structure, planned activities of the legal entity and budget to put in the legal entity, etc.
13. What is the liquidation procedure of a legal entity? Is it necessary to make any payments for employees? If yes, what kind of payments?
In order to liquidate a legal entity, firstly, investor must fulfill all financial liabilities of the legal entity, including loan, salary, tax etc. After finalizing all financial liabilities, investor shall notice the Licensing Authority. Then, the Licensing Authority shall withdraw the Investment Certificate, Seal Sample from the Company. In case the Company fails to fulfill all financial liabilities, investor must request the Court to open the bankruptcy procedure.
13. Are there any complications related to opening a bank account for a foreign citizen?
No, there are not.
13. If a company gets a loan from abroad, is permission from any authorities required?
Offshore loan having loan period from 01 year upward must be registered with the provincial state bank. Nature of registration in this case can be considered as a notice only. It does not need to obtain the permission.
14. Are there any limitations with regards to the loan period?
No, there are not.
15. When a loan is reimbursed abroad and the interest is paid, shall this transaction be coordinated with any authority?
No, it is not required.
16. What is the minimum and maximum interest for a loan?
Loan interest shall be subjected to the negotiation between the borrower and the lender.
17. Can the entity use a trade mark by the license Agreement with a foreign entity? Can a national entity make payments for royalty to a foreign entity?
Yes.
