5 Essential Contracts You Should Know Before Starting Your Business In Vietnam

When starting to invest or run a business in Vietnam, foreign investors or entrepreneurs often have too many concerns in terms of market, finance, partners, employment, etc. so it’s easy to forget legal issues, especially contracts or agreements. Legal issues are usually only considered to be important when disputes arise, or rights and interests are adversely affected. In fact, paying attention to legal issues and in particular, legal contracts, from the beginning will significantly help you reduce risks and disputes that may occur later. Our contract lawyers will summarize 5 types of contracts that the foreign investors or entrepreneurs should care about before or when starting a business in Vietnam.

1. Shareholder Agreement under Vietnamese law

When you start a business with one or more partners, it’s more convenient because you can share startup costs and responsibilities. However, there may be potential issues arising from such business cooperation. Shareholder agreement, a document involving multiple shareholders of Vietnam companies, will be useful in such a case. This agreement governs the relationship between shareholders, especially co-founders of the Vietnam companies, which helps to identify the rights and interests of each person and prevent later disputes from happening. Even when you start your business in Vietnam with your relatives or friends, such an agreement should be existing for a fundamental basis for the development of relationships between shareholders.

By addressing the following issues, a shareholder agreement which is made under Vietnamese law will allow you to clearly define the rights and obligations of each shareholder and avoid inevitable problems in the future:

  • Each shareholder’s shares in a Vietnam company
  • Who should be on the board of management?
  • Approval thresholds and veto rights for certain shareholders on important matters
  • How losses and income will be distributed?
  • What are the requirements in case of share transferring?
  • What will happen in the case of the dissolution of the Vietnam company?
  • Non-competition term to protect against a partner leaving, taking your customers and setting up a competing business.

2. Investment Agreement

A startup usually starts with the capital contribution of founders and later multiple rounds of financing will be set up for capital raising under Vietnamese law. An interesting project in Vietnam can attract venture capitalists and angel investors to join and cooperate with you. After negotiation and due diligence, an investment agreement must be concluded before the first disbursement. This agreement sometimes can be in the name of the share purchase agreement, it governs the relationship between the company and investors.

Find out more about investment agreements and other documents in raising investment capital here.

3. Employment Agreement

An employment agreement that completely complies with Vietnamese law is crucial for hiring employees to work for you. Unless such employees work temporarily for less than 3 months, the employment agreement must be in written form. To avoid future conflicts, an employment agreement should clarify what is expected by both employer and employee including but not limited to the following:

  • Position
  • Working hours
  • Salaries and wages
  • Other benefits
  • Confidentiality
  • Non-competition
  • Term and termination

Having a well-tailored employment agreement will give you many advantages such as clarifying terms and conditions of employment, providing a mechanism to negotiate with potential employees, helping to protect your confidential information by means of a confidentiality clause. Understanding this and desiring for helping clients to save time and money, our law firm provides services for preparing templates of employment agreement for different positions which you can use many times for the same positions in your company.

4. Non-disclosure Agreement

Confidentiality is always a matter which almost every company concerns about. Daily business activities require you to share trade secrets and other proprietary information with your employees or partners. In such cases, how to protect your intellectual properties and related interests?

A non-disclosure agreement seems to be an effective method regarding this matter. It prevents other persons who can access confidential information from disclosing or making the information public. There are some main points such an agreement should contain as follows:

  • Type of confidential information or material
  • Scope of confidentiality obligations
  • Penalty and compensation in case of breach

Before engaging any relationship or deal related to confidential information, please keep in mind the matter of signing a non-disclosure agreement to protect your business.

5. Sales and Services Agreement

Before your company starts selling goods or providing services, a standard form of sales agreement or services agreement should be well prepared for laying out terms and conditions under which you provide goods or services. Having a good agreement from the beginning will help to avoid misunderstandings between you and your customers and keep your business activities happen smoothly.

A sales agreement sets out the price, payment method, delivery and other relevant rights and obligations for the sale of goods, equipment, or other products. You can conduct many business transactions with a standard form, however, provided that, this form is well-prepared by a lawyer or professional for your best protection and in particular cases, is tailored for suitability.

A services agreement sets out the rights and obligations related to providing and using services. A good form must give you flexibility in completing your services, protect you when encountering unforeseen circumstances and set limitations on your liability and also show your customers your professionalism.

Read more about good sales and services agreements.

Whether your business is large or small, having the right legal documents in place is a competitive advantage. Let the contract lawyers of LTS LAW FIRM help you with your contracts by clicking here to choose your right contract services.