Setting up a company in Vietnam – 6 regulations foreign investors must know

When setting up a company in Vietnam (“Foreign Invested Company”), Foreign Investors become aware of the differences between the laws of Vietnam and the laws of their home countries when conducting business. As a result, several questions must be considered and studied in order for Foreign Investors to understand Vietnamese regulations before investing.

Setting up a company in Vietnam

During the operation process, Warren B consulted a large number of Foreign Investors on relevant matters. We have listed the following questions on the matters to which Foreign Investors should pay attention in order to implement a proper process, beginning with the decision to establish a Foreign Invested Company and ending with a stable operation.

1. Required documents for foreign investors and time required to establish a company in Vietnam

Required documents

Passport of the legal representatives and the owners of the Vietnam company, if the owners include organizations, please provide a Business license of the company.

Bank Balance Statement (equal to or above the registered capital); or Document(s) proving the financial capacity of the investor including at least one of the following documents: the investor’s financial statements for the last two years; commitment of a parent company to provide financial support; commitment of a financial institution to provide financial support; guarantee for the investor’s financial capacity; other document proving the investor’s financial capacity.

Lease Contract (or MOU) for the head office of the new company and documentation related to the landlord

Procedures and timelines

Foreign investors investing in Vietnam in the form of establishing a new company need to obtain an Investment Registration Certificate (“IRC”) first for its “investment project”, then continue by obtaining an Enterprise Registration Certificate (“ERC”) for a new company.

The process includes three (3) primary stages:

Step 1 Application for Investment Registration Certificate (the “IRC”) 3 Weeks
Step 2 Application for Enterprise Registration Certificate (the “ERC”) 1 Week
Step 3 Post-Licensing Procedures (including arranging Company Seal and publication of notifications of company establishment) 1  Weeks

2. What type of company should be established when investing in Vietnam?

According to the Law on Enterprises issued in June 2020 – effective from January 1, 2021, there are 3 common types of businesses that investors should consider:

  • Single-member Limited Liability Company (Single member LLC)
  • Multi-member Limited Liability Company (Multi-member LLC)
  • Joint Stock Company (JSC)

In this talk, I will compare the differences between these 3 forms of business organization. So that EVERYONE can grab the main idea of what they are and maybe later decide which one they should choose.

6 difference of these company types

Single member LLC Multi–member LLC Joint stock company
1. Number of the capital contributor only 1 2-50 At least 3
No limit on the maximum number
2. Right to issue stock No No Be able to issue stocks, bonds to raise capital
3. Capital transferring has the right to withdraw capital by transferring part or all of the charter capital to another organization or individual. A member must offer the stake to other members in proportion to their capital contribution to the company. Within 30 days, if the other members do not purchase or fully purchase the stakes, non – members can instead purchase the stakes. Ordinary shares are transferred freely. Within 03 years from the date the company is established, the ordinary shares of founding shareholders are freely transferable to other founding shareholders and can only be transferred to people who are not founding shareholders if the General Meeting of Shareholders approves. 
4. Organizational structure The President of the Company or the Board of members. The board of members must have from 03 to 07 members. They are appointed or dismissed by the company owner with a 5 year term. Board of Members, President of the Board of Members, Director/General Director.The Board of Members is the supreme governing body of the company.  General Meeting of Shareholders, Board of Directors, Director or General Director.The General Meeting of Shareholders is the supreme governing body of the company.
5. Salaries, bonuses of the capital contributor be not included in reasonable expenses and are not deductible when the company declares tax be recorded as reasonable expenses and are deductible when the company declares tax. 
6. Personal income tax (to capital contributor/shareholders) Don’t have to pay personal Income tax for the after tax profit. Must pay 5% personal Income tax for their distributed profits. 

How Warren B helps in setting up a company in Vietnam

3. Regulations of Company Names in Vietnam

Article 37. Names of enterprises

1. The Vietnamese name of an enterprise shall contain 2 elements in order:

a) The type of enterprise;
b) The proper name.

2. The type of enterprise shall be “công ty trách nhiệm hữu hạn” or “công ty TNHH” for limited liability companies; “công ty cổ phần” or “công ty CP” for joint stock companies; “công ty hợp danh” or “công ty HD” for partnerships; “doanh nghiệp tư nhân”, “DNTN” or “doanh nghiệp TN” for sole proprietorships.

3. The proper name shall consist of letters in the Vietnamese alphabet, the letters F, J, Z, W, numbers and symbols.

4. The enterprise’s name shall be displayed at the headquarters, branches, representative offices and business locations of the enterprise and printed or written on transaction documents, records and printed materials published by the enterprise.

5. Pursuant to regulations of this Article, Articles 38, 39 and 41 of this Law, the business registration authority is entitled to refuse to register enterprise’s name.

Article 38. Prohibited acts of naming enterprises

  1. Use of any name that is identical or confusingly similar to another enterprise’s name that is registered in accordance with Article 41 of this Article.
  2. Use of the name of a state authority, the People’s military unit, political organization, socio-political organization, socio-political-professional organization, social organization, social-professional organization as part or all of an enterprise’s name, unless it is accepted by that authority, unit or organization.
  3. Use of words or symbols that against the country’s history, culture, ethical values and good traditions.

Article 39. Enterprise’s name in foreign language and abbreviated name

  1. The enterprise’s name in a foreign language is the name translated from the Vietnamese name into one of the Latin-based languages. The proper name of the enterprise’s may be kept unchanged or translated into the foreign language.
  2. In case an enterprise’s name is in a foreign language, the text size of the foreign name shall be smaller than the Vietnamese name displayed at the enterprise’s headquarters, branches, representative offices and business locations and on the enterprise’s transaction documents, records and materials published by the enterprise.
  3. The abbreviated name of an enterprise may be abbreviation of its Vietnamese name or foreign language name.

Article 41. Identical and confusingly similar names

1. Identical name means a Vietnamese name that is chosen by the applying enterprise and is identical to the Vietnamese name of a registered enterprise.

2. A name is considered identical to a registered enterprise’s name in the following cases:

a) The Vietnamese name of the applying enterprise is pronounced similarly to a registered enterprise’s name;
b) The abbreviated name of the applying enterprise is identical to the abbreviated name of a registered enterprise;
c) The foreign language name of the applying enterprise is identical to the foreign language name of a registered enterprise;
d) The proper name of the applying enterprise is only different from the proper name of a registered enterprise by a natural number or a letter in the Vietnamese alphabet or any of the letters F, J, Z, W that is written right after the proper name with or without a space;
dd) The proper name of the applying enterprise is only different from the proper name of an registered enterprise of the same type by the word “và” (“and”) or the symbol “&”, ”, “.”, “,”, “+”, “-”, “_”;
e) The proper name of the applying enterprise is only different from the proper name of an registered enterprise of the same type by the word “tân” or “mới” (“new”) that is written right before or after the proper name;
g) The proper name of the applying enterprise is only different from the proper name of an registered enterprise of one of the phrases “miền Bắc” (“north”), “miền Nam” (“south”), “miền Trung” (“central”), “miền Tây” (“west”), “miền Đông” (“east”);

h) The proper name of the applying enterprise is identical to that of a registered enterprise.

3. The cases specified in Points d, dd, e, g, h Clause 2 of this Article do not apply to subsidiary companies of the registered company.

4. Legal representatives of a company in Vietnam. Is the legal representative of an enterprise required to reside in Vietnam?

Article 12. The enterprise’s legal representative

1. The enterprise’s legal representative is the person that, on behalf of the enterprise, exercises and performs the rights and obligations derived from the enterprise’s transactions, acts as the plaintiff, defendant or person with relevant interests and duties before in court, arbitration, and performs other rights and obligations prescribed by law.

2. A limited liability company or joint stock company may have one or more than one legal representatives. The enterprise’s charter shall specify the quantity, position, rights, and obligations of its legal representatives. In case there is more than one legal representative, the charter shall specify the rights and obligations of each of them. Otherwise, each of the legal representatives shall fully represent the enterprise and take joint responsibility for any damage to the enterprise as prescribed by civil laws and relevant laws.

3. An enterprise shall have at least one legal representative residing in Vietnam. Whenever this representative leaves Vietnam, he/she has to authorize another Vietnamese resident, in writing, to act as the legal representative, in which case the authorizing person is still responsible for the authorized person’s performance.

4. In case the authorizing person has not returned to Vietnam when the letter of authorization mentioned in (3) expires and does not have any further actions:

a) In case the enterprise is a sole proprietorship, the authorized person shall continue acting as the enterprise’s legal representative until the authorizing person returns;
b) In case the enterprise is a limited liability company, joint stock company or partnership, the authorized person shall continue acting as the enterprise’s legal representative until the authorizing person returns or until the enterprise’s owner, Board of Members/Partners or Board of Directors designates another legal representative.

5. In case the only legal representative of an enterprise is not present in Vietnam for more than 30 days without authorizing another person to act as the enterprise’s legal representative or is dead, missing, facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has the limited legal capacity or is incapacitated, has difficulty controlling his/her own behaviors, is banned by the court from holding certain positions or doing certain works, the enterprise’s owner, Board of Members/Partners or Board of Directors shall appoint another legal representative, except for the cases specified in Clause 6 of this Article.

6. In a two-member limited liability company, if the member who is the company’s legal representative is dead, missing, facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, making getaway; has the limited legal capacity or is incapacitated, has difficulty controlling his/her own behaviors, is banned by the court from holding certain positions or doing certain works, the other member shall obviously assume the position of the company’s legal representative until the Board of Members issues a new decision on the company’s legal representative.

7. The court and other proceeding authorities are entitled to appoint a legal representative who participates in proceedings as prescribed by law.

Setting up a company in Vietnam

5. How much money should an investor invest in their company, and what are the regulations on capital contribution?

According to the Law on Investment effective from January 1st 2021, Vietnam actually doesn’t have any regulations or limitations on the minimum or maximum amount of capital investment. So, basically, investors only need to make sure that their capital is enough to cover their business activities and if they want to change the capital in the future, they can do it too.

For some conditional business lines, investors must meet some special requirements from the government, including regulations on the amount of capital investment.

There are 2 types of capital in Vietnam:

+ Charter capital (owner’s contributed capital)
+ Mobilized capital (borrowed capital).

Regarding charter capital, investors must:

+ Make a full capital investment within 90 days from the date the enterprise registration certificate is issued.

But this is not the only option, because the time limit can also be decided based on the progress of the project in Vietnam

This time limit:

+ Must be approved by the Vietnamese authority
+ Is shown in the Investment Certificate.

For the mobilized capital (borrowed capital), foreigners should be aware that

  • Foreign loans with a term of more than 1 year

OR

  •  If they are less than 1 year but then are extended, which causes the total term to be over  1 year

→ Then in these cases, these foreign loans must be registered with the State Bank in Vietnam.

In addition to this information, you should also know that capital also affects your Visa. We have 4 types of investor Visa from DT1 – DT4:

Visa DT1:

  • Valid for up to 10 years
  • Capital contribution of at least 100 billion VND (equivalent to 4,4 million USD)
  • Or when investing in industries that are eligible for investment incentives or invest in geographical areas with investment incentives decided by the government.

Visa DT2:

  • Valid for up to 5 years
  • Capital contribution: from 50 billion to less than 100 billion VND (2.2 million – less than 4,4 million USD)
  • Or when investing in industries that are encouraged to develop by the Government]

Visa DT3:

  • Valid for up to 3 years
  • Capital contribution: from 03 billion to less than 50 billion VND (131 thousand – less than 2,2 million USD).

Visa DT4:

  • Valid for up to 12 months
  • Capital contribution: less than 3 billion VND (131 thousand USD)

6. Regulations on the registration of business lines and fields in which foreign investors may conduct business.

Article 5. Policies on business investment

1. Investors are entitled to carry out business investment activities in the business lines that are not banned by this Law. Regarding conditional business lines, investors must satisfy business investment conditions as prescribed by law.

2. Investors may decide their business investment activities on their own and take responsibility therefore in accordance with this law and relevant laws; may access and make use of loan capital, assistance funds, land, and other resources as prescribed by law.

3. Any business investment activity of an investor shall be suspended, stopped or terminated if such activity harms or potentially harms national defense and security.

4. The ownership of assets, capital, income, another the lawful rights and interests of investors are recognized and protected by the State.

5. The State shall treat investors equitably; introduce policies to encourage and enable investors to carry out business investment activities and to ensure sustainable development of economic sectors.

6. International investment-related treaties to which the Socialist Republic of Vietnam is a signatory are upheld and implemented by the State.

Article 6. Banned business lines

1. The business investment activities below are banned:

a) Business in narcotic substances specified in Appendix I hereof;
b) Business in chemicals and minerals specified in Appendix II hereof;
c) Business in specimens of wild flora and fauna specified in Appendix 1 of Convention on International Trade in Endangered Species of Wild Fauna and Flora; specimens of rare and/or endangered species of wild fauna and flora in Group I of Appendix III hereof;
d) Prostitution business;
dd) Human trafficking; trade in human tissues, corpses, human organs and human fetuses;
e) Business activities pertaining to asexual human reproduction;
g) Trade in firecrackers.
h) Provision of debt collection services.

2. The Government’s regulations shall apply to the production and use of the products mentioned in Points a, b, and c Clause 1 of this Article during analysis, testing, scientific research, medical research, pharmaceutical production, criminal investigation, national defense and security protection.

Article 7. Conditional business lines

1. Conditional business lines are the business lines in which the business investment must satisfy certain conditions for reasons of national defense and security, social order and security, social ethics, or public health.

2. A List of conditional business lines is provided in Appendix IV hereof.

3. Conditions for making business investment in the business lines mentioned in Clause 2 of this Article are specified in the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government, and international treaties to which the Socialist Republic of Vietnam is a signatory. Ministries, ministerial agencies, People’s Councils, People’s Committees at all levels, and other entities must not issue regulations on conditions for making a business investments.

4. Conditions for making business investment must be appropriate for the reasons in Clause 1 of this Article and be public, transparent, objective, and economic in terms of time and costs of compliance by investors.

5. Regulations on business investment conditions shall contain the following:

a) Subjects and scope of the business investment conditions;
b) Forms of the fulfillment of the business investment conditions;
c) Contents of the business investment conditions;
d) Documentation and administrative procedures for compliance with the business investment conditions (if any);
dd) Regulatory agencies and agencies that have the power to handle administrative procedures regarding business investment conditions;
e) Effective dates of licenses or certificates or other written confirmation or approval (if any).

6. Business investment conditions to be fulfilled are those specified in:

a) Licenses;
b) Certificates;
c) Credentials;
d) Written confirmation or written approval;
dd) Other requirements that must be satisfied by individuals and business organizations to conduct business investment activities without obtaining written confirmation from a competent authority.

7. The conditional business lines and the corresponding conditions shall be posted on the National Business Registration Portal.

8. The Government shall elaborate the announcement and control of business investment conditions.

Article 8. Amendment and addition of the List of banned business lines, the List of conditional business lines, and the business investment conditions

1. Depending on the socio-economic conditions and state management requirements in each period, the Government shall review the banned business lines, and the List of conditional business lines and submit amendments and additions to Article 6, Article 7, and Appendices attached hereto to the National Assembly in accordance with the simplified procedures.

2. The amendment and addition of conditional business lines or investment business conditions must comply with Clauses 1, 3, 4, 5, and 6 Article 7 of this Law.

Article 9. Business lines with prohibited and restricted market access and market access conditions applied to foreign investors

1. Market access conditions applied to foreign investors are the same as those applied to domestic investors, except for the case specified in Clause 2 of this Article.

2. Pursuant to Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government, and international treaties to which the Socialist Republic of Vietnam is a signatory, the Government shall promulgate a Negative List for Market Access, including:

a) Prohibited business lines;
b) Restricted business lines.

3. Market access conditions applied to foreign investors specified in the Negative List for Market Access include:

a) Holding of charter capital by the foreign investor in a business organization;
b) Investment method;
c) Scope of investment;
d) Capacity of the investor; partners participating in the investment activities;
dd) Other conditions specified in the Laws and Resolutions of the National Assembly, Ordinances and Resolutions of the Standing Committee of the National Assembly, Decrees of the Government and international treaties to which the Socialist Republic of Vietnam is a signatory.

4. The Government shall elaborate on this Article.

APPENDIX

(Enclosed with the Law on Investment No. 61/2020/QH14)

Appendix I

NARCOTIC SUBSTANCES BANNED FROM INVESTMENT

A. Substances and salts, isomers, esters, ethers, and salts of isomers, esters, and ethers, whenever the existence of such isomers, esters, ethers, and salts is possible

B. Substances and salts, and isomers, whenever the existence of such salts, and isomers is possible

C. Substances and salts, whenever the existence of such salts is possible

D. The following substances

Click here to view the table of details – Narcotic substances banned from investment

Appendix II

LIST OF BANNED CHEMICALS AND MINERALS

Click here to view the table of details – List of banned chemicals and minerals

Appendix III

LIST OF GROUP I ENDANGERED, PRECIOUS AND RARE FOREST PLANT AND FOREST ANIMAL SPECIES AND AQUATIC SPECIES

LIST OF ENDANGERED, PRECIOUS AND RARE FOREST PLANT AND FOREST ANIMAL SPECIES

Click here to view the table of details. (IA, IB)

LIST OF ENDANGERED, PRECIOUS, AND RARE AQUATIC SPECIES

Click here to view the table of details. (GROUP I)

Appendix IV

LIST OF CONDITIONAL BUSINESS LINES

Click here to view the table of details – List of conditional business lines

How Warren B Helps in Setting up a company in Vietnam

We recognize how difficult it is for international investors to select which company type to choose in Vietnam. As a result, even at this early stage, we give our assistance by giving information and all necessary assistance in registering a business in Vietnam. Benefits of working with us:

✔ Operate your new company in Vietnam in max 25 days
✔ 100% Success
✔ Legit and Professional
✔ Quick processes and fixed rates
✔ Quick and no hidden costs

We take satisfaction in guiding investors through regulatory requirements, removing client misunderstanding, and making the entire business formation process clear. Foreign investors can begin their businesses in a very short amount of time with our professional guidance. As a result, investors can concentrate their valuable time to important decisions that will ensure the business’s growth in Vietnam.

Setting up a company in Vietnam

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