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Vietnam Company Formation - A Comprehensive Guide [LHD Law Firm]

Vietnam company formation: Under Vietnamese laws, a foreign investor (foreign entity or individual) may establish its presence in Vietnam as a limited liability company with one or more members, a joint-stock company or a partnerships.

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VIETNAM COMPANY FORMATION - STEP BY STEP GUIDE 

Vietnam company formation Vietnam foreign investment: Legal advice, We have a team of lawyers who have not only good legal backgrounds and skills but having also business mind and strong ties to the field, evidencing by a large number of clients having their foreign direct investment in Vietnam.

Company formation in Vietnam 

One of the most common approaches, is doing business in Vietnam with a local entity. This includes the Limited Liability Company (Wholly Foreign-Owned), which is a fit for most investors whereby the company can both trade with Vietnam and foreign customers.

  1. A Limited Liability Company (Joint Venture) is another commonly incorporated entity beneficial to investors who already have existing business partners in Vietnam, whereby they can tap on their specialist local knowledge.
  2. A Joint Stock Company (JSC) alternatively, may be more attractive if you are planning to form a business with several partners to finance the business by issuing company shares and mobilizing capital by the sale of shares.
  3. If doing business in Vietnam with a foreign entity is of preference, a Vietnam Representative Office is a commonly recommended option.

This entity is suitable for foreign investors looking into developing their business network in Vietnam, such as finding business opportunities in Vietnam and overseeing business development of the parent company, without being subjected to local tax. Otherwise, a Branch Office may also be advantageous especially if the foreign entity is reputable, and in regulated industries such as banking, finance and insurance. 

Limited Liability Company (LLC)

The Limited Liability Company (LLC) is one of the most popular forms of business structure in Vietnam, especially among foreign investors. It offers a blend of flexibility and protection while allowing individuals or groups to limit their liability. Understanding the nuances of LLCs is crucial for successful Vietnam company formation.

Definition and Characteristics

An LLC is recognized as a separate legal entity under Vietnamese law. This means that the company itself holds rights and obligations distinct from its owners. Consequently, shareholders enjoy limited liability, where they are only accountable for debts to the extent of their capital contribution.

The establishment of an LLC requires at least one founder but no more than fifty members. This characteristic makes it an attractive option for small to medium-sized enterprises aiming to operate with minimal bureaucracy.

Advantages of Forming an LLC

One of the primary advantages of forming an LLC is the limited liability aspect. In today's uncertain economic climate, having protection against personal assets can be invaluable. Additionally, LLCs benefit from simpler management structures compared to Joint Stock Companies (JSCs), making them easier to operate.

Another advantage lies in the flexibility LLCs offer in terms of profit distribution. Unlike JSCs, which are bound by strict regulations, LLCs allow owners to decide how profits are shared based on their internal agreements.

Challenges and Considerations

While LLCs present considerable benefits, there are challenges to consider. For instance, the inability to issue shares limits capital-raising strategies. This restriction may hinder growth for businesses that plan to expand rapidly. Furthermore, navigating the regulatory landscape can be daunting, requiring local expertise to ensure compliance with all legal requirements.

Whether you're a seasoned entrepreneur or a first-time investor, understanding these intricacies will help you make informed decisions about Vietnam company formation.

Joint Stock Company (JSC)

A Joint Stock Company (JSC) is another prevalent form of business entity in Vietnam, especially suited for larger enterprises or those seeking to raise capital through public investment. This section will delve into the nature of JSCs, their advantages, and the complexities involved in establishing one.

Nature and Structure of JSCs

A JSC is characterized by its charter capital being divided into shares, which can be freely transferred between shareholders. This structure provides flexibility in attracting investment and expanding ownership base, making JSCs particularly appealing for businesses with ambitious growth plans.

A JSC must have a minimum of three shareholders and is required to hold regular General Meetings to ensure compliance with corporate governance standards. The existence of a Board of Directors further establishes accountability within the management structure.

Benefits of Establishing a JSC

One of the standout features of a JSC is its ability to raise capital through issuing shares to the public. This capability opens avenues for extensive fundraising potential, facilitating rapid expansion and development of operations.

Additionally, JSCs possess greater credibility in the market due to their structured governance system. This reputation can enhance partnerships and attract top-tier talent, contributing to overall business success.

Regulatory Obligations and Challenges

However, entering the realm of JSCs comes with heavier regulatory obligations. Companies must comply with stringent reporting and governance requirements, demanding a robust administrative framework and constant vigilance regarding legal adherence.

Moreover, should your JSC exceed eleven shareholders, establishing a Control Board becomes mandatory, adding to the complexity of management. Therefore, an understanding of the structuring and operational implications of a JSC is vital for prospective entrepreneurs looking towards Vietnam company formation.

Partnership Company (PC)

The Partnership Company (PC) model offers an alternative route for those wishing to establish a business in Vietnam. It presents unique characteristics that may suit certain entrepreneurial aspirations. Let’s explore what a PC entails and its specific advantages.

Overview of Partnership Companies

In a PC, at least two partners share ownership and responsibility, fostering a cooperative spirit among founders. While general partners usually manage the business, capital-contributing members can also partake in the financial gains without taking on full liability for company obligations.

The partnership structure encourages collaboration and shared decision-making, as every partner has a voice in the day-to-day operations.

Benefits of Forming a PC

One key advantage of a PC is the flexibility it affords in terms of management and profit-sharing arrangements. Since partners can define the terms of their relationship, there’s room for customized solutions tailored to individual business goals.

Additionally, forming a PC has lower administrative requirements relative to other structures, resulting in reduced costs associated with compliance and ongoing management.

Potential Risks and Limitations

Despite these benefits, it's important to note that general partners bear joint liability for debts incurred by the partnership, which can pose risks if the business encounters financial difficulties. Moreover, securing funding through traditional avenues may be challenging, as lenders often prefer the stability offered by LLCs and JSCs.

For those considering a PC as part of their Vietnam company formation strategy, carefully evaluating the implications of shared liability and operational dynamics is paramount for long-term success.

Representative Office (RO)

Establishing a Representative Office (RO) is a strategic choice for companies looking to enter the Vietnamese market without fully committing to a local entity. While not a standalone legal entity, ROs provide essential functions that can facilitate business activities in Vietnam.

Functionality of Representative Offices

An RO operates as a liaison between the parent company and local business environments, primarily focusing on promoting the company's interests. Its scope includes conducting market research, identifying potential business opportunities, and nurturing relationships with local partners.

Importantly, ROs cannot engage in direct profit-generating activities, which leads to a primary focus on non-commercial operations such as marketing and business development efforts.

Advantages of Using an RO

Utilizing an RO allows foreign companies to test the waters in Vietnam with reduced risk and investment. It provides a platform to understand local market conditions, consumer behavior, and industry trends before making significant commitments.

Establishing an RO is generally less complex than full company registration, which appeals to businesses wishing to gauge potential before diving into the intricate process of Vietnam company formation.

Challenges and Limitations

While ROs have their advantages, there are restrictions to be aware of. The inability to engage in direct sales limits revenue-generating capabilities, prompting many companies to later transition to formal entities.

Furthermore, navigating the regulatory landscape surrounding ROs can be challenging, necessitating local expertise to ensure compliance with Vietnamese laws and regulations.

Others

Aside from the primary business structures discussed, several alternative options exist for foreign investors considering Vietnam company formation. These options include Private Enterprises, Business Cooperation Contracts, and Branch Offices.

Private Enterprises: A Unique Alternative

A Private Enterprise allows an individual to own and operate a business independently. This structure provides complete control over decision-making and profit distribution, making it ideal for solo entrepreneurs. However, the individual assumes full liability for the business's debts, which can be a significant risk factor.

Business Cooperation Contracts (BCC)

Business Cooperation Contracts establish collaborative relationships between parties without forming a new legal entity. This structure is often utilized in industries like oil and telecommunications, enabling parties to work together on specific projects while sharing resources and expertise. BCCs provide flexibility but require meticulous drafting to ensure all parties' expectations align.

Branch Offices: Expanding Horizons

Branch Offices enable foreign entities to extend their operations into Vietnam while retaining their legal status abroad. This option allows for partial representation of the parent company and is ideal for businesses looking to maintain close oversight of their international activities.

Have a question? Get in touch today

With the myriad of options available for Vietnam company formation, it’s natural to have questions and seek guidance. The complexities of regulatory requirements, cultural nuances, and market conditions demand that businesses approach these processes with a well-informed strategy.

Our team at LHD Law Firm stands ready to assist you through this journey. Whether you're exploring the right business structure, need help navigating legalities, or want to understand market entry strategies, our experienced specialists are here to guide you every step of the way. Send a requirement: email us at all@lhdfirm.com. We’ll provide the insights and support necessary to empower your venture in Vietnam.

Scope of Work with LHD Law Firm

 1. Written registration/request for issuance of investment certificates for cases associated with the establishment of enterprise

2. Draft Charter Company (select the suitable type for established enterprises)

3. List of members/shareholders founders (select a suitable sample  with established business type)

4. Joint Venture Contract (for the case of foreign investors invested joint venture with Vietnam).

5. Documents certifying the legal status of the investor:

    + In case the investor is held together with a copy of the certificate of business registration / Decision established (together with the original for comparison); the text in a foreign language must be translated into Vietnamese and certified by organizations with a translation function;

     + In case the investor is an individual copy the attached Passport of the Investor (together with the original for comparison).

6. Written authorization of the investor for the authorized person for the event is organized investors.

7. A copy of one of the personal identification documents of the legal representative of the enterprise was established in Vietnam (enclosed with the original for comparison).

8. The financial statements of the most recent year audited balance sheet asset or the most recent year have been audited (for investors is held), documents certifying the account balance (for personal).

9. The documents relating to the location of the project:

+ In case of established project consultancy, software manufacturers, (not construction): venue hire contract and/or certificates of land use rights, house ownership accommodation and assets attached to land for leased assets.

+ In case of established projects construction: Negotiable principles signed between the investor and the city People's Committee (of the land lease agreement) / certificate of land use right and the decision approving Total ground.

10. Decision approving reports environmental impact assessment approved by the Municipal People's Committee / or written commitment to environmental protection has been the district People's Committee/district where the project is confirmed (if applicable).

11. A valid copy of the practising certificate of the director (CEO) and/or other individuals for a business enterprise that trades as prescribed by law, must have a practising certificate;

12. Documents certifying the legal capital of the organization, the competent authority for the trading company which trades under the provisions of the law must have legal capital.

3.2 Issuance of investment certificates for investment projects outside industrial parks with a total investment of less than 300 billion Vietnam in the fields of conditional investment. Investors to fully prepare 8 sets of records, including the original one, including:

1. Written registration/request for issuance of Investment Certificate for cases associated with establishment of enterprise

2. Draft Charter Company (select the suitable type for established enterprises)

3. List of members/shareholders founders (select the suitable type with the established business type)

4. Joint Venture Contract (for the case of foreign investors venture with Vietnam investors).

5. Documents certifying the legal status of the investor:

     + In case the investor is held together with a copy of the certificate of business registration / Decision established (together with the original for comparison); The text in a foreign language must be translated into Vietnamese and certified by organizations with a translation function;

     + In case the investor is an individual copy the attached Passport of the Investor (together with the original for comparison).

6. Written authorization of the investor for the authorized person for the event is organized investors.

7. A copy of one of the personal identification documents of the legal representative of the enterprise was established in Vietnam (enclosed with the original for comparison).

8. The financial statements of the most recent year audited balance sheet asset or the most recent year have been audited (for investors is held), documents certifying the account balance (for personal).

9. Explanation ability to satisfy conditions which the investment project must meet prescribed by law;

10. The documents relating to the location of the project:

     + In case of established project consultancy, software manufacturers, (not construction): venue hire contract and / or certificates of land use rights, house ownership accommodation and assets attached to land for leased assets.

     + In case of established projects construction: principle agreement was signed between the investor and the city People's Committee (of the land lease agreement) / certificates of land use rights and coffee Decision approval of Master Plan.

11. The decision to approve the environmental impact assessment report approved by the Municipal People's Committee / or written commitment to environmental protection has been the district People's Committee/district where the project is confirmed (if applicable).

12. A valid copy of the practising certificate of the director (CEO) and/or other individuals for a business enterprise that trades as prescribed by law, must have a practising certificate;

13. Documents certifying the legal capital of the organization, the competent authority for the trading company which trades under the provisions of the law must have legal capital.

3.3 Issuance of investment certificates for investment projects outside industrial parks with a total investment of 300 billion Vietnam dong or more and do not invest in sectors where conditions permit. Investors to fully prepare 8 sets of records, including the original one, including:

1. Written registration/request for issuance of investment certificates Investment Certificates for cases associated with the establishment of enterprise

2. Draft Charter Company (select the type suitable for established enterprises)

3. List of members/shareholders founders (sampling by the established business type)

4. Joint Venture Contract (for the case of foreign investors venture with Vietnam investors).

5. Documents certifying the legal status of the investor:

     + In case the investor is held together with a copy of the certificate of business registration / Decision established (together with the original for comparison). The text in a foreign language must be translated into Vietnamese and certified by organizations with translation functions.

     + In case the investor is an individual accompanied by a passport certificate of the Investor (together with the original for comparison).

6. Written authorization of the investor for the authorized person for the event is organized investors.

7. A copy of one of the personal identification documents of the legal representative of the enterprise was established in Vietnam (enclosed with the original for comparison).

8. The financial statements of the most recent year audited balance sheet asset or the most recent year have been audited (for investors is held), documents certifying the account balance (for personal).

9. Explanation economy - engineering project includes the major contents: objectives, scale, location of investment, capital. Project implementation schedule, land use needs, technological solutions and environmental solutions.

10. The documents relating to the location of the project:

      + In case of established project consultancy, software manufacturers, (not construction): venue hire contract and/or certificates of land use rights, house ownership accommodation and assets attached to land for leased assets.

     + In case of established projects construction: principle agreement was signed between the investor and the city People's Committee (of the land lease agreement) / certificates of land use rights and coffee Decision approval of Master Plan.

11. Decision approving reports environmental impact assessment approved by the Municipal People's Committee / or written commitment to environmental protection has been the district People's Committee/district where the project is confirmed (if applicable).

12. A valid copy of the practicing certificate of the director (CEO) and/or other individuals for enterprise business lines as stipulated by law, must have a practicing certificate.

13. Documents certifying the legal capital of the organization, the competent authority for the trading company which trades under the provisions of the law must have legal capital.

3.4 Issuance of investment certificates for investment projects outside industrial parks with a total investment of 300 billion Vietnam dong or more and investment in the field conditions. Investors to fully prepare 8 sets of records, including the original one, including:

1. Written registration/request for issuance of investment certificates Investment Certificate for cases associated with the establishment of enterprise

2. Draft Charter Company (select the type suitable for established enterprises)

3. List of members/shareholders founders (sampling by the established business types

4. Joint Venture Contract (for the case of foreign investors venture with Vietnam investors).

5. Documents certifying the legal status of the investor:

     + In case the investor is held together with a copy of the certificate of business registration / Decision established (together with the original for comparison). The text in a foreign language must be translated into Vietnamese and certified by organizations with translation functions.

     + In case the investor is an individual accompanied by a passport/identity certificate of the Investor (together with the original for comparison).

6. Written authorization of the investor for the authorized person for the event is organized investors.

7. A copy of one of the personal identification documents of the legal representative of the enterprise was established in Vietnam (enclosed with the original for comparison).

8. The financial statements of the most recent year audited balance sheet asset or the most recent year have been audited (for investors is held), documents certifying the account balance (for personal).

9. Explanation ability to satisfy conditions which the investment project must meet prescribed by law.

10. Technical-economic report of the project includes the major contents: objectives, scale, location of investment, capital; Project implementation schedule; land use needs; technological solutions and environmental solutions.

11. Documents related to the location of the project:

     + In case of established project consultancy, software manufacturers, ... (not construction): venue hire contract and / or certificates of land use rights, house ownership accommodation and assets attached to land for leased assets.

      + In case of established projects construction: principle agreement was signed between the investor and the city People's Committee (of the land lease agreement) / certificates of land use rights and coffee Decision approval of Master Plan.

12. Decision approving reports environmental impact assessment approved by the Municipal People's Committee / or written commitment to environmental protection has been the district People's Committee/district where the project is confirmed (if applicable).

13. A valid copy of the practicing certificate of the director (CEO) and/or other individuals for a business enterprise that trades as prescribed by law, must have a practicing certificate.

14. Documents certifying the legal capital of the organization, the competent authority for the trading company which trades under the provisions of the law must have legal capital.

We provide foreign investor advisory services company established in 100 foreign capitals and for issuance of investment certificates as follows:

Consulting the content needed before conducting investment procedures

Investment consulting areas are permitted to establish 100 foreign-owned companies.

Consulting with the provisions of the law on the type; structure, organization management and operation of the 100 foreign-owned company.

Limited consulting and investment conditions for planned investment field.

Consulting other issues related to investment projects.

Investors Guide prepared papers and legal documents necessary for the establishment of 100 foreign-owned companies.

Conduct procedures established 100 foreign-owned companies

Drafting registration documents for establishment of 100 foreign-owned.

To compile dossiers of application for investment certificates for investment projects.

On behalf of investors proceedings established 100 foreign-owned companies and apply for investment certificates.

Handle the relevant issues arising.

On behalf of the investors receive written answers (if available) of the investment management agency.

On behalf of Investor Investment Certificate at the same time as the certificate of business registration of 100 foreign-owned company.

Established companies with 100% foreign capital is a form of investment in which foreign investors are allowed to implement investment projects in the form of investment in the establishment of 100 foreign-owned companies in Vietnam, in some fields.

In this case, foreign investors conducting registration procedures established 100 foreign-owned companies in conjunction with the procedure for issuance of investment certificate.

Investment Certificate will be issued the certificate of business registration of 100 foreign companies.

Consultations of LHD (LHD Law Firm)

 Individual investors

- A certified copy of ID card / passport

- Bank certificate (proof of financial capacity).

  Investors are held

- A copy of the licensing company (Duplicate endorsement if the company in the country, consular legalization if foreign company)

Financial statements (consular legalization if foreign company)

A certified copy of passport of the representative.

Charter companies managing (consular legalization if foreign company)

Written authorization for a representative of the company (if consular legalization of foreign company)

In addition, investors provide

- Documents proving the legal right to use the business office (rental agreement / lease office or home / office organization functions for rent / legal office).

- Profile energy investor's experience.)

Consultant selected investment areas: According to WTO commitments, Decision 10, HS code...

Time consultant for each project

Consultants drafting documents for the establishment of foreign-invested companies

Strategic consulting mining personnel in Vietnam

Tax and accounting consulting protection of trademarks in Vietnam

Virtual office rental and share in Vietnam (District 1, HCM, HN)

Typical customers have used the services of LHD

TOYOTA; Wacoal, Deloite; DLH; SHISEIDO; FOS; DLT; YAMAZEN; SANKOUGIKEN; DIEMSANG; IFO; Altech; TRIUMPH; SOMETHINGHOLDINGS ... ETC…

FAQs

Answer:

When Expat Set-up a business in Vietnam they can set up LLC or JSC company (An investor can choose from six different types of business when entering the Vietnam market: Representative Office; Limited Liability Company; Joint-Stock Company; Branch Office; Joint Venture; Public Private Partnership)

Answer:

The types of documents required to register an LLC in Vietnam are,
Certificate showing the necessary amount of investment
Articles of Association certificate
Proof of registered address
Information on the shareholders or members of the LLC
The business plan includes the investment project and money that is invested
Information on company director or legal representative and power of attorney

Answer:

Yes, a foreigner can begin a business in Vietnam.

Answer:

Yes, foreigners are allowed to own 100% of the shares of their business in most industries. However, for certain specified industries, company setup is allowed only in a joint venture with a Vietnamese individual or corporate entity.

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