Key Steps for Setting Up a Business in Vietnam
HCMC – Establishing a business in Vietnam is not simple, there are a number of important steps that must be taken in order to ensure proper compliance with the country’s laws. Key among these processes are the acquiring of an Investment Certificate, charter capital, and establishing the correct management structure of the company.
Due to the country’s complex legal processes, when establishing a company in Vietnam, we recommend that professional assistance be sought in order to help guide you through the setup procedures and to aid you in understanding the roles and responsibilities of key positions in the company. This will help ensure that your company is set up for success.
Following below, we discuss:
- Set-up Process
- Charter Capital
- Key Positions in Foreign-invested Entities
The first step in setting up a business in Vietnam is acquiring an Investment Certificate (IC), also known as a Business Registration Certificate. The time period required to acquire an IC varies by industry and entity type, since these determine the registrations and evaluations required:
- For projects that require registration, IC issuance takes about 15 working days.
- For projects subject to evaluation, IC issuance time is likely to vary. Projects not requiring the Prime Minister’s approval take 20 to 25 working days, while projects that do need such approval take approximately 37 working days.
It is important to note that during the IC application process, under Vietnamese law, all documents issued by foreign governments and organizations must be notarized, consular legalized, and translated into Vietnamese. Once the IC has been issued, additional steps have to be taken to complete the procedure and start business operations, including:
- Seal carving
- Tax code registration (within ten working days of the issuance of the IC)
- Bank account opening
- Labor registration
- Business license tax payment
- Charter capital contribution
- Public announcement of company establishment
As defined by Vietnamese law, charter capital is “the amount of capital contributed or undertaken to be contributed by shareholders in a certain period and stated in the charter of the company.” In an additional clarification of the definition, the Vietnamese government stated that “the charter capital of a shareholding company is the aggregate par value of the number of issued shares.”
Therefore, charter capital can be used as working capital to operate the company. It can be combined with loan capital or constitute 100 percent of the total investment capital of the company. Both charter capital and the total investment capital (which also includes shareholders’ loans or third-party finance), along with the company charter, must be registered with the license-issuing authority of Vietnam. Investors cannot increase or decrease the charter capital amount without prior approval from the local licensing authority.
In addition to the FIE’s investment certificate, capital contribution schedules are set out in FIE charters (articles of association), joint venture contracts and/or business cooperation contracts. Members and owners of Limited Liability Corporations (LLCs) must contribute charter capital within the capital contribution schedules of their chosen method of business establishment.
In order to be able 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. This type of account allows money to be transferred to current accounts in order to make in-country payments and other current transactions.
Key Positions in Foreign-invested Entities
The key positions in foreign-invested entities vary by entity type. Here, we’ll discuss the management structure of an LLC.
The management structure of a multiple-shareholder LLC consists of:
- The Member’s Council and its Chairman
- The General Director
- The Board of Supervision (when the LLC has more than ten members)
The Member’s Council is the highest decision-making body of the company and serves a management role under its Chairman. In an LLC with multiple owners, each member participates in the Member’s Council. If the owner of the LLC is a business entity, that entity can appoint representatives to serve on the Member’s Council.
The Member’s Council must convene at least once a year, however, the Chairman or a shareholder holding at least 25 percent of the share capital can request a meeting at any time. The Chairman is responsible for preparing meeting agendas, convening meetings, and signing documents on behalf of the Member’s Council.
The General Director oversees the daily business of the company and implements resolutions of the Member’s Council.
In the case that an LLC has more than ten members, the creation of a Board of Supervision is mandatory. The formation, operation, powers, and functions of the Board of Supervision are not stipulated in law, but are instead prescribed in the company’s charter (articles of association).
For any questions regarding establishing a business in Vietnam, please send your inquiries here.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
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