Establishing a company in Vietnam is an important step for foreign investors and should form the beginning of a successful business undertaking.
Nevertheless, the process of registering a company in Vietnam can be somewhat time consuming, partly due to the requirements that each activity be appropriately detailed and approved, and also due to the intricate paperwork required by Vietnamese authorities. Furthermore, each enterprise should understand and follow requirements and requests under prevailing laws, from pre-licensing to post-licensing; from initial registration through to accounting/human resources set-up requirements.
A Limited Liability Company is the most common structure used by investors when entering the Vietnamese market, as it offers flexibility and benefits in various business scenarios, allowing a 100% foreign ownership for a wide range of business lines as listed in the World Trade Organisation agreement which Vietnam commenced following from 2007.
The process of registering a company in Vietnam generally involves the submission of an application file to the Department of Planning and Investment. Subsequent to obtaining the licenses, the company is required to undertake certain post-licensing procedures.
6 Steps for incorporating a foreign invested company in Vietnam:
Step 1. Preparing the key documents required for the application process:
· Lease Agreement. Each applicant must have a lease (or pre-lease) agreement in place for where their company will be registered.
· Proof of Financial Capacity. Investors must demonstrate that they have sufficient funds at bank or the financial capacity to meet their investment commitments in Vietnam, and
· Investor Documents. Each investor will need to have appropriate notarised/legalised documents from their home country for the application.
Step 2. Application for an Investment Registration Certificate (the “IRC”)
IRC stands for INVESTMENT REGISTRATION CERTIFICATE. The first step for a foreign investor seeking to incorporate a company in Vietnam is to register an “investment project”, with this project becoming the initial purpose of the foreign investor’s company. The resulting Investment Registration Certificate permits the foreign investor to commence the establishment of their company in Vietnam. The IRC is akin to the concept of “Foreign Investment Approval” in other jurisdictions.
Step 3. Application for an Enterprise Registration Certificate (the “ERC”)
ERC stands for ENTERPRISE REGISTRATION CERTIFICATE and shows the business registration information of a company established in Vietnam. An ERC usually contains the following information: company number, establishment date (and all amendment times), address of the company, company owner information and legal representative information. This document is akin to the “Certificate of Incorporation” in other jurisdictions.
Step 4. Initial post establishment registrations (procedures implemented after incorporating of a new company in Vietnam):
a) Application for making public notification of the establishment of the new company
b) Purchase and provision of Company Seal
c) Application for announcement of the Seal specimen;
d) Drafting Decision of appointment of the General Director/Director
Step 5. Additional post licensing and sub licensing applications:
After successfully registering a company in Vietnam, depending on the company’s business activity, the investor my need to apply for additional licenses or sub-licenses, according to licensing requirements and conditions for specific sectors, industries and business lines.
Step 6. Charter Capital Contribution: a critical requirement after registering a company in Vietnam
The company’s enterprise capital (“Investment Capital”) is comprised of Charter Capital and Loan Capital. The Charter Capital is the amount of funds that Members (or Shareholders) contribute or commit to contribute within a certain period as stated in the charter and must be fully contributed within 90 days from the date on which the company is established.
Typical Timeline for Registering a Company in Vietnam (where no additional conditional elements exist):
· Discussion and documentation preparation: up to 2 weeks
· Application for an Investment Registration Certificate: up to 3 weeks
· Application for an Enterprise Registration Certificate: up to 1 week
· Initial post establishment registrations: up to 2 weeks
Each company in Vietnam must appoint at least 1 Legal Representative. A Legal Representative of an enterprise is an individual who can exercise the rights and obligations for and on behalf of that enterprise. Generally, only a Legal Representative can sign contracts for the company with other parties, although Power of Attorney’s can be issued to delegate certain powers to others in the organisation.
A company can have more than one Legal Representative, however the Law requires that at least one Legal Representative resides in Vietnam. If all Legal Representatives are outside of Vietnam for more than 30 days, they must authorise another party to exercise their rights.