A foreign entity may establish its presence in Vietnam in various forms of business, such as setting up a Limited Liability Company with one or more members, a Joint Stock Company, a Partnership, a Branch, a Representative Office or a Business Cooperation Contract. Foreign investors might contribute capital, purchase shares/stakes contribute capital, purchase shares/stakesfactors in an existing domestic enterprise.
Like many countries in the world, LLC is the most popular business form in Vietnam. A Limited Liability Company is established by any organization or individual through capital contributions to the company.
Foreign investors may establish a Limited Liability Company in Vietnam in the following forms:
LLC includes Single-Member Limited Liability Companies and Multi-Member Limited Liability Companies.
(i) Single Member LLC (“SLLC”) in Vietnam
Single Member LLC is owned by one organization or individual member (“Company Owner“) who is liable to the debts and other liabilities of the Company to the extent of the amount of the charter capital of the Company (Article73 of Law on Enterprise)
Transfer or assignment of capital: Where an investor transfers only part of the charter capital, the SLLC must register for conversion into a Multi-Member Limited Liability Company. The new member must also be registered in the Enterprise Registration Certificate issued by the Business Registration Office.
(ii) Multiple Member LLC (“MLLC”) in Vietnam
Multiple Member LLC is an enterprise that has over one but no more than fifty members, which may be organizations, individuals, or a combination thereof. All members of an MLLC are responsible for debts and other liabilities of the Company to the extent of the capital contributed thereto.
Transfer or assignment of capital: In case an investor or any investors would like to transfer all or part of its capital contribution, they must first offer to sell such share of capital contribution to all other investors proportionally. The new member must also be registered in the Enterprise Registration Certificate issued by the Business Registration Office.
In general, foreign investors should obtain the following Certificates to do their business in Vietnam:
After receiving both Certificates, investors are obliged to proceed with their tax registration, pay business license tax and make their initial capital contribution.
After receiving both certificates, investors are obliged to proceed with their tax registration, pay business license tax and make their initial capital contribution.
A JSC is established through a subscription for shares in the company.
Transfer or assignment of capital: Shares can be freely assigned (unless they are subject to certain limitations on founding shareholders in the first three years, or otherwise restricted under the charter or law).Voting preference shares may not be transferred. The transfer of shares will be completed on the date the new shareholder is registered in the shareholders’ registry maintained by the company.
Per Article 172 of Law on Enterprise: A PC is a form of enterprise set up by at least two partners and has a status of a legal person.
A foreign business entity or a foreign trader is entitled to establish a branch in Vietnam to conduct business activities. A branch is a unit dependent on the enterprise and obliged to perform part or all of the enterprise’s functions, including representation under authorization. The business lines of the branch must be consistent with those of the enterprise.
A RO is a unit dependent on the enterprise and obliged to represent the enterprise’s interests under authorization and protect such interests. Thus, RO is not a separate legal entity under the laws of Vietnam. A RO’s activities in Vietnam are limited to business promotion, identification and accelerating trade opportunities, and supervising the implementation of contracts signed between its parent company and local partners. In a nutshell, a RO is only permitted to:
Thus representative offices can provide a wide range of ancillary support to their foreign-based parent companies. This is a very common form of registered legal presence in Vietnam, particularly those in the first stage of a market entry strategy.
A BCC is a cooperation agreement between foreign investors and at least one Vietnamese partner in order to carry out specific business activities.
This form of investment does not constitute the creation of a new legal entity. The investors in a BCC generally share the revenues and/or products arising from a BCC and have unlimited liability for the debts of the BCC.
A Public and Private Partnership (“PPP”) contract is an investment form carried out based on a contract between the government authorities and project companies for infrastructure projects and public services (Clause 1, Article 27 of Law on Investment).
Per Article 3 of Decree No. 63/2018/ND-CP guiding investment in the form of Public-Private Partnership, PPP contracts include Build-Operate-Transfer (“BOT”), Build-Transfer (“BT”), Build-Transfer-Operate (“BTO”), Build-Own-Operate (“BOO”), Build-Transfer-Lease (“BTL”), Build -Lease-Transfer (“BLT”) and Operate-Manage (“O&M”) contracts.
Government encourages both public and private investors to participate in PPP contracts. The rights and obligations of the foreign investor will be regulated by the signed PPP contracts and the applicable regulations governing such contracts. Investment sectors include: