Types of Company in Vietnam for foreign investors

As a foreign investor, not all legal entities in Vietnam are opened to you. BBCIncorp has compiled a list including types of company in Vietnam that are available to foreigners.

1. Types of companies that are available to foreigners

In recent years, the Vietnam government has published a wide range of policies and guidelines to encourage foreign investors to establish a commercial within the country. As per the current law, there are 3 types of companies and 4 other legal entities that foreign investors need to know about.

1.1. Limited Liability Company (LLC)

A limited liability company is a legal entity that can be established by one or more owners by capital contributions to the company. Even though there are 2 forms of LLC in Vietnam: single-member LLC and multi-member LLC, to foreign investors, the category divided into 2 different sectors: wholly foreign-owned LLC and partly foreign-owned LLC.

Wholly foreign-owned LLC

An LLC in Vietnam can be set up with only one owner (or more) whose nationality could be any. This type of business has the same legal rights as that of domestic firms where most business activities are not restricted.

Another good news is the Vietnam government allows wholly foreign-owned to operate businesses in most sectors such as trading, manufacturing, information technology, and education. This type of LLC can also get the ball rolling with production operations, provide services trade with both Vietnam customers and foreign customers.

A glance at required documents to register for an LLC according to Law on Enterprises 2020 that takes effect from the beginning of 2021:

• An application form for business registration.
• The company’s charter.
• A list of members.
• Copies of:
  • ID card or other ID papers of members being individuals;
  • A decision on Establishment, Certificate of Business registration, or an equivalent document of the organization and the letter of authorization; the ID card or other ID papers of the authorized representatives of members being organizations.

If a member is a foreign organization, the copy of the Certificate of Business registration or an equivalent document must be consular legalized.

• The Certificate of Investment registration of the foreign investors as prescribed by the Law on Investment.

Partly foreign-owned LLC

Partly foreign-owned LLC can also be listed as a joint venture company where at least one of the members is a foreign investor. One big perk of establishing a joint venture in Vietnam is that foreign investors can be beneficial from having a domestic expert or being able to conduct business in certain industries.

Because this is also a form of limited liability company, the required documents are the same as that of the wholly foreign-owned LLC.

1.2. Joint-Stock Company (JSC)

Just like an LLC, JSC can be set up with wholly or partly foreign-owned whose nationality could be any. However, the minimum of shareholders is three and the maximum number is not restricted by law. One major difference to categorized a JSC and an LLC is that JSCs are allowed to issue shares to the public and be on the stock exchanges. With this type of company, shareholders are also allowed to transfer their shares as per the law. Required documents to register for a JSC in Vietnam as per the Law on Enterprises 2020 that comes in force on January 2021:

• An application form for business registration.
• The company’s charter.
• A list of founding shareholders and shareholders being foreign investors.
• Copies of:
  • ID card or other ID papers of founding shareholders and foreign investors being individuals;
  • A decision on Establishment, Certificate of Business registration, or an equivalent document of the organization and the letter of authorization; the ID card or other ID papers of the authorized representatives of founding shareholders and foreign investors being organizations.

If shareholders are foreign organizations, the copy of the Certificate of Business registration or an equivalent document must be consular legalized.

• The Certificate of Investment registration of the foreign investors as prescribed by the Law on Investment.

1.3. Partnership

A partnership is a firm that has at least two co-owners (or general partners) that jointly conduct business under one common name. Besides general partners, the firm also has contributing partners. Plus, with this form of legal entity, it can not issue any kind of shares.

Here is a list of required documents mentioned in the Law of Enterprises 2020 that will take effect in 2021 to register for a partnership in Vietnam:

• An application form for business registration.
• The company’s charter.
• A list of partners.
• Copies of the ID card or other ID papers of the partners.
• A copy of the Certificate of Investment registration of the foreign investors as prescribed by the Law on Investment.

2. Other legal entities for foreign investors

As per Vietnam’s current law, there are only 3 types of companies that are available to foreign investors. However, there also exist other legal entities that foreigners can invest in.

2.1. Branch

According to Decree No. 07/2016/NĐ-CP, foreign companies that have been operating for a period of 05 years or more are eligible to establish branches in Vietnam. Required documents according to the same Decree mentioned above to establish a branch in Vietnam include:

• An application form issued by the Ministry of Industry and Trade and signed by a competent representative of the foreign trader
• Copies of the Certificate of Business Registration or equivalent
• A letter of appointment off the head of the brand
• Copies of:
  • Audited financial statements or certificates of the fulfillment of tax liabilities/financial obligations of the previous financial year or equivalent as proof of existence and operation of the foreign trader issued or certified by competent authorities where the foreign company is established
  • Branch charter
  • Passport of the head of the branch
• Documents on the branch’s expected location: a memorandum of understanding (MOU) or leasing agreements or equivalent as proofs of the right to use a location as the branch

All copies shall be translated into Vietnamese and certified true following Vietnam’s Laws. As with the Certificate of Business Registration or equivalent shall be certified or legalized by overseas diplomatic missions or Consulates of Vietnam under Vietnam’s Laws.

2.2. Representative Office (RO)

A representative office can be established by foreign companies that have been operating for more than 1 year. A RO can help you to establish a local presence in Vietnam without being subject to local tax regulations and there is also a little reporting requirement to handle. Still, one of the downsides of a RO is that it’s not permitted to trade or conduct manufacturing operations. Required documents to establish a RO is similar to that of the branch office.

2.3. Business Cooperation Contract (BCC)

As per the 2014 Investment Law, a BCC is a cooperation contract between foreign investors with at least one Vietnamese partner to conduct a specific business activity. By this form of legal entity, foreign investors will avoid time-consuming and costly procedures for establishing a new legal entity.

In general, as mentioned in Law on Investment 2020 that take effect in 2021, a BCC should contain:

• Names, addresses, authorized representatives of parties to the contract; business address or project address
• Objectives and scope of business
• Contributions by parties to the contract and distribution of profits
• Schedule and duration of the contract
• Rights and obligations of parties to the contract
• Adjustment, transfer, termination of contracts
• Responsibilities for breaches of contract; method of dispute settlement

In terms of using assets derived from the business cooperation and other issues that do not contravene Vietnam’s Law, parties may reach an agreement during the execution of the BCC.

2.4. Public and Private Partnership Contract (PPP)

As per the Law on Investment 2017, PPP is a contract between the government authorities and project companies for investment projects to build, improve, upgrade, expand, manage, and operate infrastructure works; or to provide public services. The fields, conditions, and procedures for all projects under PPP contracts will be specified by the Vietnam Government.

However, according to the Law on Investment 2020, there are significant changes when it comes to PPP. The investment fields are narrowed down to 5: Transportations; Electrical Grid, Power Plant (except hydroelectric power plant and other cases according to Law on Electricity); Irrigation, Clean water supply, Waste, and Wastewater treatment; Health Care and Education; Information Technology Infrastructure.

The Vietnam Government has gone out of its way to welcome as many foreign investments to the country as possible. They introduced a pretty wide range of types of company as well as open policies and guidelines to support investors to establish their commercial presence in Vietnam. With the variety of choices, which type of legal entity you should choose is entirely up to your needs and business.