STEP BY STEP SETUP COMPANY IN VIETNAM

Due to the development of the Vietnamese economy during the COVID-19 epidemic, more and more foreign investors are attracted by the increasingly strong growth of the Vietnamese economy with favorable economic geographic location, highly skilled human resources, abundant mineral resources, and appropriate and inexpensive investment costs as well as a potential market. Foreign investors usually invest in Vietnam by setting up business corporations, representative offices, or branch offices. Nowadays investors would choose to set up a new business instead of choosing branches or representative offices so that they can have better supervision over the business as well as being independent in a specific new line of business. So what are the legal procedures for setting up a company in Vietnam? Let’s unravel the process with Doanh Tri Law through the following article.

Mục lục

I. Legal Basis
- Corporation Act 2020.

II. Forms of business entity for foreign Investors
Before setting up a company, business owners would need to choose a form of business entity.
According to the Corporation Act, there are the following business entity for foreign investors setting up a company in Vietnam (Apart from State-Funded Enterprise)
1. Private Enterprise
A private enterprise is an economic organization that is registered to do business in accordance with regulations and to carry out business activities. A private enterprise is owned by an individual with assets and a transaction office. The owner of a private enterprise is the legal representative and has full authority to decide on all business activities of the company. Normally, the owner of a private business will directly manage and run all activities of the company, but the owner can still hire someone else to do this work on his behalf. A private enterprise is an unlimited company with no legal status.
- Advantages:
+ Private enterprises are fully active in deciding issues related to their business operations.
+ Private enterprises are less likely to be bound by the law.
+ Private businesses create trust for partners and customers by unlimited liability.
- Disadvantages:
+ Due to the lack of legal status, the owner of a private company is very risky.
+ Unlimited Liability: The business is responsible for the debts not only of the company's assets but also the property of the owner.
2. Limited Liability Company (with more than 2 members)
A limited liability company is a type of enterprise with legal status recognized by law (Enterprise Law). The company owner and the company are two separate legal entities. Before the law, a company has a legal status from the date of issuance of the business registration certificate, the company owner is a natural person with the rights and obligations corresponding to the ownership of the company.
A limited liability company has no more than 50 capital contributors to the establishment and the company is only liable for debts and other financial obligations within the company's property obligations. Limited liability companies are not allowed to issue shares to raise capital.
- Advantages:
+ Limited liability regime: The company is only responsible for liabilities within the amount of capital contributed to the company, thus causing little risk to capital contributors.
+ The capital transfer regime is tightly adjusted, so investors can easily control the change of members, limit the penetration of strangers into the company.
- Disadvantages:

+ The reputation of the company in front of a partner is somewhat affected by the limited liability regime.
+ Subject to the strict regulation of the law rather than a private enterprise or partnership.
+ There is no right to issue shares to raise capital.
3. One Member Limited Liability Company
A one-member limited liability company is a special form of limited liability company. According to the provisions of Vietnamese law, a single-member limited liability company is an enterprise owned by an organization or individual; The owner is responsible for the debts and other liabilities of the enterprise within the amount of its charter capital.

The company owner has the right to transfer all or part of the company's charter capital to other organizations or individuals. One member limited liability company has the legal status from the date of being granted the business registration certificate. One member limited liability company is not allowed to issue shares.

The company owner is not allowed to directly withdraw part or all of the capital contributed to the company. Company owners are only entitled to withdraw capital by transferring part or all of the capital to another organization or individual. The company owner must not withdraw profits of the company when the company fails to pay all due debts and other property obligations.

Depending on the size and industry, business line, the internal management organizational structure of a single-member limited liability company includes Board of Directors and Director or President and Director.
- Advantages:
+ The owner of the company will have full authority to decide on all matters related to the company's operations.
+ An individual can also set up a business. It is not necessary to find partners to co-establish businesses. Or some organizations can split capital, invest in other areas.
+ The owner of a one-member limited liability company is only responsible for the company's operations to the extent of the capital contributed to the company, therefore be less risky for the owner. This can be seen as an advantage over the private enterprise type.
+ Has a compact and flexible organizational structure. The establishment procedures are simpler than the two-member limited liability companies and joint-stock companies.
+ Regulations on capital transfer are strictly regulated. Investors are easy to control.
- Disadvantages:
+ This type of business is not allowed to issue shares. Therefore, the company's capital mobilization will be limited. The company will not have a large amount of capital to be able to implement large business plans.
+ Since a limited liability company is owned by only one individual or organization, hence when mobilizing additional capital contributions from other individuals and organizations. The enterprise-type conversion procedure will be required. Becoming a two-member limited liability company or a joint-stock company.
+ One member limited liability company is not allowed to directly withdraw capital. Which must be by transferring part or all of the capital to another organization or individual.

4. Joint-stock Company
A joint-stock company is a type of company in which charter capital is divided into equal parts called shares which are established and exist independently. A joint-stock company must have the General Meeting of Shareholders, the Board of Directors, and the Director (General Director), for a joint-stock company with more than eleven shareholders, there must be a Control Board. Shareholders are only responsible for the debts and other property obligations of the company to the extent of the capital contributed to the company, have the right to freely transfer their shares to others, the minimum number of shareholders is three and not limited to the maximum number. A joint-stock company has the right to issue securities to the public in accordance with the law on securities.
- Advantages:
+ Limited liability regime: The company is only responsible for liabilities within the capital contribution, so the level of risk caused by shareholders is not high.
+ Joint-stock companies' ability to operate is very wide, in almost all fields and trades.
+ The capital structure of a joint-stock company is very flexible, allowing many people to contribute capital to the company.
+ Have the right to issue shares to raise capital → very high ability to raise capital.
+ The transfer of capital in a joint-stock company is relatively easy, so the scope of subjects to join a joint-stock company is very wide, even civil servants have the right to buy shares of a joint-stock company.
- Disadvantages:
+ The management and operation of a joint-stock company are very complicated because the number of shareholders can be very large, there are many people who do not know each other and there may even be differentiation into groups of shareholders. benefit.
+ The establishment and management of joint-stock companies are also more complicated than other types of companies because they are strictly bound by the provisions of law, especially financial and accounting regimes.
5. Partnership Company
A partnership means a company in which at least two general partners are joint owners of the company, apart from the members of a partnership that may have capital contributors. Capital contributors are only responsible for the company's debts to the extent of the capital contributed to the company. partnerships have legal status, members have the right to manage the company and conduct business activities on behalf of the company, jointly responsible for the responsibilities and obligations of the company. Capital contributing members are divided profits according to the proportion of the company's charter, general partners have equal interests when deciding on company management matters.
- Advantages:
+ A partnership is a combination of the personal reputations of many people. Due to the unlimited joint liability regime of general partners, partnerships can easily create the trust of partners and business partners.
+ Managing a partnership is not too complicated due to the small number of members and reputable people who absolutely trust each other.
- Disadvantages:
+ The limitation of a partnership is due to the limitless partnership regime, so the risk level of partners is very high.
+ Despite having legal status, a partnership is not allowed to issue any kind of securities. Therefore, the company's capital mobilization will be limited. Members will add their own assets or receive new members.

III. Legal Procedures for Setting up a Company
A. Documents for business registration, for each type of business entity, business owners would need to prepare specific papers for the registering process
1. Documents for private business registration
- Application for business registration.
- Copies of individual legal papers for private business owners.
For each type of business entity, business owners would need to prepare specific papers for the registering process
2. Documents for a partnership company
- Application for business registration.
- Company charter.
- List of members.
- Copies of individual legal papers for members.
- A copy of the Investment Registration Certificate, applicable to foreign investors in accordance with the Law on Investment.
3. Documents for limited liability company (one member and from two members or more)
- Application for business registration.
- Company charter.
- List of members
- Copies of the following documents:
+ Legal papers of individuals, for members being individuals, legal representatives;
+ Legal papers of the organization for the member being the organization and the document on appointing the authorized representative; legal papers of individuals for authorized representatives of members who are organizations.
+ If the member is a foreign organization, the copy of the organization's legal papers must be consular legalized;
+ Certificate of investment registration for foreign investors in accordance with the Law on Investment.

4. Documents for joint-stock company
- Application for business registration.
- Company charter.
- List of founding shareholders; the list of shareholders is a foreign investor.
- Copies of the following documents:
+ Legal papers of individuals for founding shareholders and foreign investors who are individuals, legal representatives;
+ Legal papers of the organization for shareholders being organizations and documents on appointing authorized representatives; legal papers of individuals for authorized representatives of founding shareholders and foreign institutional shareholders.
+ For shareholders who are foreign organizations, the copy of the organization's legal papers must be consular legalized;
+ Certificate of investment registration for foreign investors in accordance with the Law on Investment.
B. Order and procedures for enterprise registration
1. Enterprise founders or authorized persons conduct enterprise registration with business registration offices by the following methods:
- Direct enterprise registration at the business registration authority;
- Enterprise registration via postal service;
- Enterprise registration via an electronic information network.
a) Online enterprise registration means that an enterprise founder submits an application for enterprise registration via electronic information at the National Business Registration Portal. An application for enterprise registration via an electronic information network includes data as prescribed by this Law and is presented in the form of an electronic document. An online application for enterprise registration is as valid as a paper application for enterprise registration.
b) Organizations and individuals have the right to choose to use digital signatures in accordance with the law on electronic transactions or use business registration accounts to register enterprises via an electronic information network.
c) A business registration account means an account created by the National Business Registration Information System, granted to an individual to register an enterprise via an electronic information network. Individuals who are granted business registration accounts are responsible before law for the registration to be granted and for the use of business registration accounts for enterprise registration via an electronic information network.
d) Within 03 working days from the date of receipt, the business registration agency is responsible for examining the validity of the application for enterprise registration and granting enterprise registration; In case the dossier is not valid, the business registration agency must notify in writing the contents to be amended and supplemented to the enterprise founder. In case of refusal to register an enterprise, a written notice must be made to the enterprise founder, clearly stating the reason.
2. Recipient of Certificate of business registration
An enterprise shall be granted an enterprise registration certificate when it fully satisfies the following conditions:
- The business lines registered for business are not prohibited from business investment;
- The name of the enterprise is placed in accordance with the provisions of Articles 37, 38, 39, and 41 of the Corporation Act 2020;
- Having a valid application for enterprise registration;
- The fee for enterprise registration is fully paid in accordance with the law on fees and charges.
In cases where an enterprise registration certificate is lost, damaged, or otherwise destroyed, an enterprise shall be re-granted the enterprise registration certificate and must pay a fee according to law provisions.