Over the past three decades, Vietnam has shown incredible growth with no signs of slowing down. With its large, youthful working population and constant changes to regulation, making it more business friendly, it is no wonder why Vietnam is becoming an increasingly attractive option for conducting business.
For those interested in doing business in Vietnam, it is important to know the type of entities that are available and the features of each entity.
Legal Entities in Vietnam
There are many specific types of entities available, however the most common types for foreign entrants is :
- Limited Liability Company (LLC)
- Joint Stock Company
- Representative office
- Branch Office
Limited Liability Company
An LLC may be most suitable for small to medium sized enterprises wishing to enter Vietnam, as only one shareholder is required to set it up and it has a rather simple corporate structure. The limitation on this type of entity is that it cannot issue any shares and it also cannot be listed on a public stock exchange.
The requirements to set up a Limited Liability Company in Vietnam are:
- At least one shareholder, with a maximum of 50 (of any nationality);
- A director – who acts as the company’s legal representative (he/she can be foreign, however they will be required to travel to Vietnam to obtain a valid work permit and provide evidence of previous managerial experience);
- A registered address in Vietnam;
- A capital account with a local bank; and
- A Foreign Investment Certificate (FIC) – approval for an FIC requires a minimum investment, generally set at $10,000, however the figure may differ depending on the industry.
After all requirements have been met, a certificate of deposit is required from the bank, reflecting the amount of share capital (this needs to be transferred within 12 months, after incorporation has been complete).
The process of opening an LLC is as follows:
Joint Stock Company
A Joint Stock Company (JSC) or public limited company is suitable for medium to large sized enterprises, as it has a more complex structure than that of an LLC and at least 3 founders are required in order to establish it.
A JSC’s corporate structure consists of:
- A Management Board – which is supervised by an inspection committee and is reviewed at an Annual General Meeting.
- A General Director – who serves as the legal representative of the company and is in charge of the day to day activities of the company. The General Director must reside in Vietnam and be employed by the company.
- A Chairman of the Board – a member of the management board who has been elected by members of the board to organize board affairs and arrange the quarterly meetings.
As part of this structure all board members, directors and shareholders are responsible for acting in the best interests of the company and may be held responsible for any actions that may be deemed negligent.
This form of enterprise is beneficial for shareholders as liability is limited, meaning that any loss suffered by a shareholder cannot exceed the amount they have contributed.
Other entities such as a representative office or a branch can be established in Vietnam, however the capacity of these entities are limited.
A representative office can only be established for supporting roles of a parent company, such as conducting market research or looking for investment opportunities. It cannot conduct any commercial activities in Vietnam.
A branch is allowed to carry out commercial activities, however the scope of the activities is limited to that of the parent company and the parent company bears all legal liability. The use of a branch office is only recommended in highly regulated industries such as banking and finance.
Partner with INS Global
INS Global has assisted over 300 enterprises worldwide to register their operations all across Asia. If you are considering expanding your business or you would like to start a new venture in Vietnam, let our experts help you setup your business today.