On January 4, 1995, Vietnam applied for membership in WTO. On November 7, 2006, the General Council adopted Vietnam’s accession package – the Working Party Report; the Goods Schedule; and the Services Schedule. On January 11, 2007, Vietnam became the WTO's 150th member after due ratification by the NA. Along with the WTO membership, many substantive changes to the legal system went into effect. The membership in WTO further reinforces the reforms that that have been taken in many sectors since the adoption of Doi Moi in 1986.
Vietnam has also signed a number of international bilateral and multilateral treaties on investment and tax. Examples are the bilateral trade agreement with the United States; the Framework Agreement on the ASEAN Investment Area (“AIA”), and the Convention on the Establishment of the Multilateral Investment Guarantee Agency (“MIGA”). The main benefits of WTO membership for the foreign investors are the tariff reduction and the liberalization of the service sectors for setting up foreign company in Vietnam. By 2017, the Vietnamese. Government had entered into bilateral agreements in trade relations with 89 countries including 72 on the Normal Trade Relations status (formerly known as Most Favored Nation status), and double taxation agreements with 45 countries
Establishment of an entity, the organization structure, and the corporate affairs are regulated by the Law on Enterprises. Both local and foreign investors are free to choose the corporate entities available under the Law on Enterprises. The entity forms under the Law on Enterprises include:
a limited liability company with one member
a limited liability company with 2-50 members
a joint stock company
a private enterprise
In addition to the Law on Enterprise which provides rules for the formation, dissolution and management of legal entities in Vietnam, one must also follow other specialized laws applicable to the areas of the business operations, such as Law on Securities, Law on Credit Institutions, Law on Insurance, Law on Real Estate Business. These specialized laws provide specific rules on things such as licensing requirements, minimum legal capital, and qualifications for directors and managers, etc.
The followings are some of the general considerations during the entity formation and business operations for setting up foreign company in Vietnam.
(a) Business Name.
The name of an entity shall consist of two components: the type of entity and a given name.
(i) Investment Capital. This is the total amount required for carrying out the investment project in Vietnam. It may consist of the charter capital plus loan.
(ii) Charter Capital. This is the amount contributed or committed to be contributed by all investors. There is no minimum capital required for the formation of a company, unless the business operates in a field that requires minimum legal capital as explained below.
(iii) Legal Capital. When the business is to operate in a specially regulated business sectors, it must meet the legal capital requirement. For example, for real estate businesses, the legal capital required is VND 20 billion; for security services, the minimum legal capital is VND 2 billion. Capital contribution may be made in the forms of cash (VND or freely convertible foreign currencies), gold, land use right, know how, intellectual property rights, and other forms as stipulated in the charter of the business.
(c) Corporate Duration.
Unlimited unless provided otherwise in the charter of the company, or dissolved. Note however that the investment project for which the entity was set up to carry out may be licensed for a specific term.
This is the constitution of the company, similar to Bylaws or Articles of Association.
The required contents include:
Name and address
Scope of business
The amount of charter capital and methods of increasing and reducing the charter
List of shareholders, address, nationality, amount and type of capital
Rights and duties of the shareholders
Principles & methods of shareholders’ disputes
Remuneration, salary or bonus of managers, supervisors
Terms and conditions for buyback
Dissolution and winding up
Profit & loss
Amending or supplementing the charter
Other provisions as agreed by the shareholders.
(e) Legal Representative.
This is the person who represents the company in all legal proceedings (appearing before the courts, administrative hearings, and signing of all contracts). The legal representative must reside in Vietnam, and if absent from Vietnam for a duration of more than 30 days, another person must be authorized in writing to act as the legal representative.
(f) Authorized Representative.
An authorized representative is the one appointed by the foreign investor and sits in the board to carry out the rights and responsibilities that a foreign investor has in the locally incorporated company.
(g) Registered Principle Place of Business.
There needs to be a permanent resident address for the company to be set up. A local or foreign investor applying for formation of the business generally signs a Memorandum of Understanding with the landlord of the premises where the business is to be located. Each place of businesses or a change of the business address needs to be registered with the licensing authority.
LPN&PARTNERS is a Vietnam Investment Consulting Firm. We advise on setting up foreign company in Vietnam for global clients.
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