OVERVIEW OF VIETNAM LEGAL ENTITIES
In terms of the percentage of foreign ownership in a Vietnam company, investors can set up a Wholly Foreign-Owned Company (WFOC) whose shares (capital contribution) wholly owned by foreign investors or a Joint Venture Company whose shares (capital contribution) partly owned by local partners. A Wholly Foreign-Owned Company (WFOC) is a very common company structure in Vietnam as foreign investors will have absolute rights and powers to run their companies in Vietnam. Unlike Foreign-Owned Companies, foreign investors may join local partners to set up Joint Venture Companies as the Vietnamese law so requires in certain industries or foreign investors want to make use of the existing experience, expertise, real estate properties, distribution channels and so on of their local partners.
AVAILABLE FORMS OF COMMERCIAL PRESENCE OF FOREIGN INVESTORS IN VIETNAM
Limited Liability Company is the most preferred company form in Vietnam and is recommended for small and medium-sized enterprises (SMEs). The number of shareholders (members) in a Limited Liability Company may range from 1 to 50. An existing shareholder (member) of a Limited Liability Company will have the pre-emptive right to buy shares (capital contribution) of the other shareholders (members).
Unlike a Joint-Stock Company which has 3 layers of management, a Limited Liability Company only has 2 layers of management, i.e. President/ Members’ Council and General Director (Director). A Limited Liability Company may neither issue shares to the public nor have its shares listed on the stock exchange. A Limited Liability Company may convert itself into a Joint-Stock Company at any time as long as there are at least 3 existing shareholders (members) at the time of conversion.
There must be at least 3 shareholders in a Joint-Stock Company. Within 3 years of incorporation, a founding shareholder may freely sell his shares to another person other than the other existing founding shareholders only after he has offered for sale such shares to the other existing founding shareholders. After such a period, a founding shareholder may freely sell his shares on the market.
A Joint-Stock Company has 3 layers of management, i.e. Shareholders’ General Meetings, Board of Management and General Director (Director). A Joint-Stock Company is allowed to make an IPO (Initial Public Offering) and have its shares listed on the stock exchange.
III. Representative Office (RO)
A representative office is the simplest form of commercial presence of foreign companies in Vietnam. A Representative Office offers a low-cost solution for foreign companies seeking to understand the Vietnamese market before establishing their full presence in Vietnam. A Representative Office is allowed to conduct market research, act as a liaison office for its parent company and conduct other promotion activities.
A branch is a dependent unit of a foreign company in Vietnam. It is incorporated to conduct business under Vietnamese law or treaties to which Vietnam is a party. In practice, it is extremely difficult to open a branch in Vietnam as compared to other forms of the commercial presence of foreign investors in Vietnam.
Please refer to the Companies Comparisons Sheet for further information.
PROCESS OF FORMING A COMPANY IN VIETNAM IN 2020
USEFUL TIPS TO REGISTER A COMPANY IN VIETNAM
A. Pre-company formation consulting services:
- Advising clients on how to select a type of legal entities they want to incorporate in Vietnam; what conditions and/or requirements they need to meet; what documents they need to provide; the timeline, etc.
- Preparing an Information Sheet for clients’ completion. Based on the information provided in the Information Sheet, we will prepare the necessary application documents.
(ii) Preparing and gathering documents:
- Preparing the application form for the Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC);
- Preparing the draft Charter (Company Constitution);
- Preparing Proposal for Investment Project, and any other necessary documents;
- Collecting all the necessary documents from clients to establish application dossiers.
B. Filing and following up application dossiers:
- Assembling and reviewing all the necessary documents before filing for Investment Registration Certificate and Enterprise Registration Certificate;
- Representing clients to file application dossiers for Investment Registration Certificate and Enterprise Registration Certificate; and
- Acting for clients to follow up with evaluation of application dossiers by the competent state agencies and obtaining Investment Registration Certificate and Enterprise Registration Certificate.
C. Post-company formation services:
Upon obtainment of Investment Registration Certificate and Enterprise Registration Certificate, we will assist clients in carrying out certain post-licensing procedures as follows:
- Obtaining a company seal and filing the registration notice of seal sample with the competent agency;
- Carrying out initial tax registration, including the filing of an annual business tax return, acquiring a package of VAT invoices from vendors and filing the registration notice of such invoices;
- Handling tax and accounting tasks;
- Assisting in bank account opening;
- Carrying out labor-related procedures at the labor-management agencies, etc.
About LTS LAW
LTS LAW is one of the leading corporate and commercial law firm in Vietnam providing a full menu of services, such as pre-licensing consulting services, incorporation services, litigation, legal consulting services concerning investment, drafting and reviewing of contracts, company formation, labor disputes, etc.
Contact us today via email: firstname.lastname@example.org or call: (+84) 938 666 010 for more information about our services.
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