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Step By Step Guide To Starting A Business In Vietnam

Step by step guide to starting a business in Vietnam: According to the rankings of Legal500 and Hg.org, LHD Law Firm is one of the 10 leading legal services in Vietnam for our consultancy of establishing a foreign-owned capital business in our country. With 10-years experience in the field and the office system throughout the country: Ho Chi Minh City, Hanoi, Da Nang, Vung Tau, etc., LHD Law Firm takes pride in our commitment to satisfy our clients as foreign investors in Vietnam.

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STEP BY STEP GUIDE TO STARTING A BUSINESS IN VIETNAM

According to the rankings of Legal500 and Hg.org, LHD Law Firm is one of the 10 leading legal services in Vietnam for our consultancy of establishing a foreign-owned capital business in our country. With 10-years experience in the field and the office system throughout the country: Ho Chi Minh City, Hanoi, Da Nang, Vung Tau, etc., LHD Law Firm takes pride in our commitment to satisfy our clients as foreign investors in Vietnam.

VIETNAM COMPANY FORMATION

TOYOTA; WACOAL, DELOITTE; DLH; SHISEIDO; FOS; DLT; YAMAZEN; SANKOUGIKEN; DIEMSANG; IFO; ALTECH; TRIUMPH; SOMETHING HOLDING, HSE, D3 AQUA, SUZUKA, TNS GLOBAL, FLEXLINK, RUNSVEN, RHODES, ADJ, AOA, BERNOFARM, INNOBAY, TELESCOPE, LEEKANG, NAMAZIE, SDGI, KI …VV

Pursuant to the provisions of law:

WTO Commitments (key documents to any investors)

Enterprise Law 2014 effective since January 1st 2015

Investment Law 2014 effective since January 1st 2015

Analysis:

- Investors should, at first, choose their business industries and branches because each industry/ branch is regulated in details in the WTO commitments, then do further study on specialized law regulations (i.e. 20-billion capital is a must in real estate business) so that they can make right investment decisions and requirements.

- After choosing business industries and branches, investors should consider choosing types of investment.

References:

Limited liability company with wholly foreign-owned capital

Chapter III, Article 47. Limited liability company with two or more members

1. Limited liability company is an enterprise in which:

a) A member may be an organization or an individual; the number of members shall not exceed fifty;

b) A member shall be liable for the debts and other property obligations of the enterprise to the extent of the amount of capital contributed to the enterprise; 

c) As stipulated by the Government on “the provisions for the establishment of an enterprise with wholly foreign-owned capital”, the transfer to other members in Article 52, 2014 Law on Enterprises is of full force and effect on 1 July 2015.

2. After registration and issuance of an operating license, a company shall be entitled to have the right to trade. 

3. A limited liability company with two or more members may not issue shares.

Section I2, Chapter III, Article 73. One Member Limited Liability Companies

1. A one member limited liability company is an enterprise owned by one organization or individual (hereinafter referred to as company owner); the company owner is liable for all debts and other property obligations of the company to the extent of the amount of the charter capital of the company.

2. A one member limited liability company shall have legal entity status from the date of issuance of an enterprise registration certificate.

3. A one member limited liability company may not issue shares.

# Shareholding companies with wholly foreign owned capital

Chapter V, Article 110. Shareholding companies (2014 Law on Enterprises with full force and effect on 1 July 2015) 

1. A shareholding company is an enterprise in which:

(a) The charter capital is divided into equal portions called shares;

(b) Shareholders may be organizations or individuals; the minimum number of shareholders is three and there is no restriction on the maximum number;

(c) Shareholders are only liable for the debts and other property obligations of the enterprise to the extent of the amount of capital contributed to the enterprise; clause 3 Article 119 and clause 1 Article 126 of this 2015 Law on Enterprises.

2. A shareholding company has legal entity status from the date of issuance of the enterprise registration certificate.

3. A shareholding company may issue all classes of shares to raise funds.

# RESEARCH ON DOSSIERS AND PREPARATION FOR DOSSIERS FOR INVESTMENT 

Licenses required to be applied to a Company with wholly foreign-owned capital

-         Investment certificate

-         Enterprise registration certificate (separated)

-         Business license

With respect to Business License, please follow the guidance with basic dossiers as follows:

Dossier for requesting for issuance of a Business License:

The supplement of operational objectives for goods trading activities and activities directly related to goods trading is the amendment of operational objectives of the enterprise, the dossers include:

2.1 Dossiers for investment project verification as stipulated in Decree No. 108/2006/ND-CP dated 22 September 2006 of the Government guiding the implementation of a number of articles of the Law on Investments

2.2 Dossiers for issuance of a Business License as stipulated in Circular No. 09/2007/TT-BTM, including  

a) A written request for issuance of a Business License in form MD-1 promulgated with Circular No. 09/2007/TT-BTM;

b) A written explanation about the satisfaction of business conditions.  The content of the written explanation about the satisfaction of business conditions shall be made based on the Appendix attached to this official letter.

c) A written registration for the contents of goods purchase and sale and activities directly related to the goods purchase and sale: specifying the form of operation is wholesaling, retailing, setting up retail facilities of groups of commodities; commercial advertisement; commercial assessment…

2.3  Where a project is not associated with the facility investment and construction (not associated with the construction of workshops, installation of machinery and equipment for production) it is now suggested to supplement the goods trading  and activities directly related to goods purchase and sale, besides the dossiers mentioned in items 1 and 2 above, it is required to supplement dossiers on legal person or related documents to prove capacity and experience of the investor in carrying out the operational objectives.

Notes:

-         Investment certificate issued by a Division of Planning and Investment at provincial level

-         Enterprise registration certificate issued by a domestic Enterprise Division

-         Business license issued by the Department of Trade and Industry

NOTES AFTER ESTABLISHMENT

-         Posting announcement of establishment

-         Initial tax declaration

-         Invoice purchase

-         Bank account opening

-         Social insurance declaration

# NEW POINTS OF 2014 LAW ON INVESTMENT

EFFECTIVE SINCE 1 JULY 2015 ON THE ESTABLISHMENT OF COMPANIES WITH FOREIGN OWNED CAPITAL

On 26 November 2014, the National Assembly of the Socialist Republic of Vietnam has adopted the Law on Investment with effect from 01 July 2015. 2014 Law Investment with 7 chapters, 76 articles stipulates the operations of investors doing business in Vietnam as well as the business investment from Vietnam abroad. 2014 Investment Law has shown many new highlight points in comparison with the provisions of 2005 Law on Investment.

1.      Removing the issuance of investment certificates for domestic investors

Based on 2014 Law on Investment, domestic investors’ projects will not perform procedures for issuance of an investment certificate

2.      Composing the issuance of enterprise registration certificates

2014 Law on Investment separating the contents of investment project registration is to issue on the basis of an Investment Registration Certificate. After the Investment Registration Certificate is issued, enterprises will register for business (registering for an enterprise registration certificate) in accordance with new 2014 Law on Investment.

3.      Narrowing or abolishing branches upon establishing companies with foreign owned capital

Article 6, 2014 Law on Investment points out the limit of prohibited activities of business investment, instead of general unclear prohibition as formerly regulated in Article 30 of 2005 Law on Investment. Based on this new provision, prohibited  investment activities will include: trade in drugs; trade in chemicals, trade in prohibited minerals; trade in species of wild fauna or flora in endangered, noble and rare species with the natural origin; trade in prostitution; Purchase or sale of humans, tissues or parts of the human body and activities relating to asexual reproduction on human being. This nature is also affirmed in Article 5 of 2014 Law on Investment with the provision that investors shall be entitled to conduct business investment activities in industries and branches which are not prohibited by this Law. 2014 Law on Investment has a separate Schedule 04 to list 267 industries and branches in which business investment is conditional.

4.      Abolishing the application for investment certificate for companies with foreign owned capital

2014 Law on Investment stipulates for projects in which foreign investors or enterprises with foreign owned capital contribute 51% of the charter capital, the application for an Investment Registration Certificate for such foreign investors ‘projects. For other projects with FDI capital (having foreign investors or enterprises with foreign owned capital holding less than 51% of the charter capital), they will be treated as domestic investment projects and it is not required to apply for an investment registration certificate. This is truly an opening step of 2014 Law on Investment for contributing the investment absorption and encouragement to foreign investors to invest in Vietnam.   

5. Foreign Investor’s Capacity

Foreign investors are currently determined based on the main standards as citizenship. Those who do not have Vietnamese citizenship, they are foreign investors. However, in another viewpoint, foreign investors are determined based on their capital, it means, only enterprises in Vietnam holding invested capital originated from abroad, such enterprises shall also be considered as foreign investors. The first option should have been chosen, it means determining foreign investors based on their citizenship, 2014 Law on Investment chooses the middle option. Foreign investors are divided into three groups by law: Group 1: investors holding foreign citizenship; Group 2: Vietnam enterprises holding 51% of the foreign capital; and Group 3: Vietnam enterprises holding less than 51% of the foreign capital, Groups 1 and 2 are applied the same conditions as foreign investors (investment industries and branches to investment procedures, investment policy, etc.). For Group 3, however, procedures and conditions are applied to domestic enterprises    

There is one matter arising that is two different mechanism and investment procedures will be applied again between one enterprise with foreign owned capital accounting for 51% of the charter capital and an enterprise with foreign owned capital accounting for 50.9% of the charter capital. Does that again continue as one inadequacy of this regulation?

6. Time-limit for the issuance of investment certificates for companies with foreign owned capital

In 2014 Law on Investment, the time-limit for issuance of investment registration certificates for investment projects falling into the category of decision on investment policy is 5 working days from the date of receipt of the written decision on investment policy; and for other projects, it is 15 working days from the date of receipt of full dossiers by licensing agency. Article 40, amended investment registration certificate shall be issued within a time-limit of 10 working days from the date of receipt of full dossiers. It can be said that the time-limit for the issuance of investment registration certificate has been considerably shortened in 2014 Law on Investment in comparison with 2005 Law on Investment.

# REGISTRATION PROCESS UNDER THE NEW LAW ON INVESTMENT

STEP 01: Registration for investment policy to the People’s Committee at the provincial level. 

Upon entering into Vietnam for investment to carry out projects, foreign investors shall carry out procedures for issuance of an investment registration certificate. However, before conducting the procedure for issuance of the investment registration certificate, in some cases, investors shall register their investment policy with the People's Committees at the provincial level (The first process in the establishment of a company with foreign owned capital.

Dossiers for establishment registration of a company with foreign owned capital.

A written request for investment project implementation;

For investors as an individual: a copy of ID Card or passport,

For investors as an organization: a copy of establishment decision or other equivalent documents confirming legal capacity;

A recommended investment project includes the following contents: investor to implement the project, objectives of investment, a scale of investment, invested capital and plans for raising capital, location, term, investment progress, labor demand, proposed investment incentives, socio-economic efficiency and impact assessment  – of the project.

A copy of one of the following documents

·        Most recently two-year financial statements of investors;

·        Undertaking of financial support of its parent company;

·        Undertaking of financial support of financial institutions;

·        Guarantee on finance capacity of investors;

·        Documentation for explanation of financial capacity of investor;

Recommendation on land use demand; in case there is no recommendation to the State on land delivery, land lease, permission for land use purpose conversion for a project, a copy of the agreement on location lease or other documents confirming that investors shall be entitled to use a location to implement the investment project.

Explanation on using technology include the following details: name of technology, the origin of technology, technological process diagram; main specifications, use status of machinery, equipment and main technological lines for a project that uses technology on the List of technologies restricted from a transfer.

BCC for investment projects under the BCC form.

Note: For investment projects not falling into the category of decisions on investment policy, it is not necessary to perform this step.

Comment

Mike Yun
mikeyun@tecedgesolutions.com
Hi, looking to start a business in Vietnam, Hanoi: 1. Type of biz: Software development 2, Market focus: Intenational 3. Type of entity: Either foreign or local owned limited liability of 2 or less stake holders 4. Starting staff strength: 3 to 5 local staff with plan to grow to 20 in two years 5. Likely to operate off co-sharing office or work from home first 6 months 6. Probably need a virtual business office address too. Pls share with me the cost and scope of your service. thanks, mike