Company setup step-by-step process
While Vietnam is a highly attractive investment destination for foreign investors, it still has a complex legal process for establishing a company. In this section, we discuss the set up procedures for companies that want to begin operations in the country. We also recommend professional assistance to guide companies through these steps and the various applicable steps, laws and procedures.
In summary, the process to register and setup an FIE in Vietnam (100% Foreign-Owned Enterprise) generally requires 3 to 4 months. A Representative Office can alternatively be setup in half that time, but is more limited in the types of activities that it can engage in.
Below is a summary of the 4 main stages of setting up an LLC / FIE.
- In rare cases where an investor intends their LLC/FIE to do business in a specified special sector, they may be required to fulfil Step 1 ‘Pre-Investment Approval’.
- Most investors can skip directly to Step 2, to apply for a required Investment Registration Certificate (IRC).
- Once the IRC is in hand, an organization may pursue to subsequent Step 3 to apply for an Enterprise Registration Certificate (ERC, also referred to as a Business Registration Certificate) as well as dependent actions such as securing a physical business address, and so on.
- After being licensed, the Enterprise will be required to register their company seals, open bank accounts, and more.
This can be diagrammed as follows:
Step 1 – Pre-investment approval
For mega investment projects, companies need to seek the approval of Vietnamese competent authorities prior to starting establishment procedures. As a result, it is important to understand if an investment will require approval, and if so, preparing requisite documentation and working against the application processing times.
Here is a summary of project types which may require further special approvals:
- Construction of Residential housing projects;
- Airports, aerodromes, air transport businesses, cargo terminals, ports;
- Petroleum processing;
- Casinos and businesses involving betting;
- Infrastructure projects for industrial zones and export-processing zones;
- Nuclear power plants;
- Golf Courses;
- Special Land Use Rights;
- Projects located on or near islands, borders, coastal areas and other defence sensitive locations;
- Projects in sensitive heritage locations;
- Projects that require relocation of inhabitants; and,
- Projects that require re-purposing some types of forests, or rice crops.
Step 2 – Investment registration certificate application
The first step in the Vietnamese corporate establishment process is an application for an Investment Registration Certificate (IRC). This is required of all foreign owned investment projects and establishes the right of the foreign enterprise to invest within Vietnam.
To apply an investor must prepare:
- Application for implementation of investment project (this should include details of the project in Vietnam);
- Proposal of investment project (should include the details of the investment project, including lease agreements or land use needs);
- Financial statements (of the last two years of a company’s operation; additional information may be required to prove financial capacity);
- Legal papers of the investors and its authorized representative (in case the investor is an organization);
- Lease agreement or memorandum of understanding (MOU); and,
- Other documents relating to the investment project, and requirements on the eligibility and capacity of the investor in accordance with regulations of law (if any).
15 days from the date when documents are submitted. Exceptional cases where the sector of intended operation is not governed by the WTO, this process may take longer.
Step 3 – Enterprise registration certificate application
The Enterprise Registration Certificate (ERC) is required for all projects that seek to set up new entities within Vietnam. When obtained, the ERC will be accompanied by a number that will double as the tax registration number of the entity.
As part of the application process, the following information should be prepared:
- Application for enterprise registration;
- Company charter;
- List of all board members;
- List of legal representatives; and
- Letters of appointment and authorization
Three days from the date when documents are submitted.
Step 4 – Post licensing procedures
Once the IRC and ERC have been issued, additional steps have to be taken to complete the procedure and start business operations. This includes:
- Seal carving;
- Bank account opening;
- Labor registration;
- Business license tax payment;
- Charter capital contribution; and
- Public announcement of company establishment
Requirements to establish a company in Vietnam
Minimum capital requirements
For most sectors and business lines, Vietnam requires no minimum capital requirements. However, the registered capital will be assessed by The Department of Planning and Investment for whether it is adequate to cover the expenses of the business until it generates enough revenue to cover its costs. It is possible to setup a basic business services company with less than USD 10,000 in some cases, but in most cases it would be at or above this threshold, depending on the nature of the business.
It Is best to verify whether your business may require minimum capital investment however, given that some industry sectors (business lines) do have requirements. Examples include:
- Finance, Banking, Insurance and Fin-tech;
- Language centers or Vocational schools; and,
- Medical clinics.
Note that, the amount of registered capital that is selected and eventually approved, will be stated on your Business Registration Certificate, which will likely be viewed and known to companies that you do business with. Therefore, a higher amount of registered capital might in some cases bear positive effects for a firm, in terms of how a business is viewed by companies that it deals with. Changing the amount of registered capital after initial business registration, requires a formal application procedure to amend your corporation’s documents.
Charter capital and total investment capital
Charter Capital refers to the total value in capital and other assets that will be contributed by the owners of a company when establishing a company. The total investment capital of the company can combine both charter capital and loan capital. Charter capital and the total investment capital, including portions which are shareholders’ loans or third-party finance, as well as the company charter, must be registered with the licensing authority of Vietnam.
Once approved, investors can increase or decrease the charter capital amount with prior approval from the local licensing authority.
Capital contribution schedules
Under the laws of Vietnam, the investors must contribute capital within 90 days from the date of establishment of the FIE unless otherwise approved by the licensing authority.
Transferring capital to the FIE
To transfer capital into Vietnam, after setting up the FIE, foreign investors must open a capital bank account in a legally licensed bank. A capital bank account is a special purpose foreign currency account designed to enable tracking of the movement of capital flows in and out of the country. The account also allows money to be transferred to current accounts to make in- country payments and other current transactions.
Registered address and resident director
Company registered address
A business requires a legal address in Vietnam to incorporate a company in the country. Most businesses require that it have its own physical location, such as an office or building leased or acquired, particularly for manufacturing, distribution and trading, retail services, restaurants and entertainment venues, and more.
A virtual office address may be used for certain service-based businesses however, such as business or personal consulting companies or similar virtual services firms.
When registering a company, a company submits documents which serve as proof of the address that will be used as the location for the business to operate in once the incorporation is completed. This address may be checked during the incorporation process by The Department of Planning and Investment.
Company legal representative
A company is required to have at least one Legal Representative. The LR of a Vietnam-based company can hold a Company President, Director, or General Director position, depending on the company organization structure.
A qualifying legal representative requires a residential address in Vietnam. The residency status of the LR is preferable but should not be a qualifying requirement during the incorporation process; their residency status may be addressed separately.
Further, foreign nationals involved with the company will require a work permit for Vietnam which they may apply for during or after the incorporation process.