How to set up a company in Vietnam

A unipersonal limited liability company.

A joint-stock company, which de facto is the only other alternative, requires in fact at least three shareholders.

With the exception of regulated industries (e.g. banking, insurance etc.), there is no statutory minimum share capital (called “charter capital” in the local jargon), but – and this can be tricky and even frustrating – foreign invested companies go through an approval procedure conducted at a Provincial level, in which officials assess if the charter capital is sufficient for the declared scope of business. In practical terms the charter capital is never below the equivalent in VND of USD50-100,000, entirely paid up, which of course can be used for the company’s expenses.

1. If the single member is a natural person, he/she is also the chairperson of the company and can of course hire others to hold executive positions. By default the single member is the legal representative of the company, but again he/she can delegate this role to someone else. There can be even more than one legal representative, but least one legal representative must be a Vietnamese resident (not necessarily citizen).
2. If the single member is a company or another legal person, there are possibilities:
• the member appoints a chairperson who by default is the legal representative of the company. As above, these roles can be delegated to thirds;
• the member appoints a board of directors of a minimum of three and a maximum of seven members must be appointed by the shareholder’s representative. The board of directors’ term is five years. At least one director must be a resident of Vietnam. The board votes on the appointment of the company’s chairperson, unless the latter is appointed directly by the member. By default, the chairperson is the legal representative of the company. As above, these roles can be delegated to thirds.

If the single member is a company, a supervisory board or a single supervisor must also be appointed by the single member itself. The supervisor cannot hold other positions in the company.

There are no particular requirements the single member must comply with, but, once it decides to establish a company in Vietnam, the main requisites are:

• not to invest in a business that is forbidden by the law;
• meet the specific requirements of so-called “conditioned” investments (e.g. banking, insurance, media, legal services etc.);
• in any case obtain an Investment Registration Certificate (“IRC”).
  

The single member needs to apply for two certificates:

• Investment Registration Certificate
• Enterprise Registration Certificate.

In order to obtain the IRC, if the investment is considered big or strategic, then pre-emptive approval by the Prime Minister’s office is necessary, after which the steps are the same. The single member needs to lodge its application together with the following documents:

• notarised and legalised copy of the passport of the single member or copy of the company registration certificate, in case of a single member which is a company;
• investment project proposal, which includes the name of the investor, location, objectives, scale of investment, charter capital, duration, milestones, labour requirements, socioeconomic and environmental impact evaluation, investment incentives sought after etc.;
• notarised and legalised copy of any among: single corporate member’s financial statements covering at least two years, letter of patronage, in case the single member has not been in existence for two years or it is a natural person, or it belongs to a group of companies where it is not the (top) holding. Essentially, financial capability must be demonstrated prior to investing;
• rental agreement or ownership certificate of the proposed location.

Upon obtainment of the IRC, the single member:

• first pays the charter capital in a dedicated bank account, called “direct investment capital account”, and then
• lodges the ERC application, attaching
• the so-called company charter (articles of association);
• again the notarised and legalised copy of the passport of the single member or copy of the company registration certificate, in case of a single member which is a company;
• the list of legal representative(s) and first directors;
• the IRC.
  

Clearly, the intricated procedures and even certain inconsistencies between the Investment Law, the Enterprise Law and tax regulations can be quite burdensome, and so is the determination of the charter capital, as explained above. Small procedural differences in various Provinces’ departments may also have an impact. Companies that wish to engage in retail also need to pay attention to the not-so-easy procedure for the obtainment of a trading licence. However, in 2021 a new Investment Law will be enacted and Vietnam, especially in these months of pandemic and following the execution of several free trade agreements, including the one with the EU, has shown a massive potential for both internal growth and foreign investors.