HIGHLIGHTED FACTORS TO SET UP A COMPANY IN VIETNAM
When you take the initiative in establishing your own business, not only ideas and capital are factors that need to be mindful, but the process of establishing a business is also a thorny problem for any entrepreneurs and start-ups establishing a business at the first time. How to prepare official and regular documents? How is the adjunction condition of this? Also, where can we set up a company for convenience?
Pursuant to Article 7 of the Law on Enterprises 2014, the government allows enterprises to be free to conduct business in industries and trades that are not prohibited by law, self-employed and opt for the type of business entity. Hence, what do start-ups need to pay attention to set up a company promptly, safely and assist the company in operating effectively in the future?
- Opt for the right type of business entity:
Pursuant to the Law on Enterprises 2014, there are 5 types of business entity: sole proprietorship, single-member limited liability Company, multi-member limited liability company, Joint Stock Company and partnerships. The differentiation between the types of business base on the number of capital-contributed members and take responsibility on the debts and other asset obligations of the company in the scope of the capital-contributed in the company or their wholly assets:
|No.||Type of business entity||Number of capital contributors|
|1||Sole proprietorship||One contributor (individual)|
|2||Single-member limited liability company||One contributor (individual or organization)|
|3||Multi-member limited liability company||2 – 50 contributors (individual or organization)|
|4||Joint stock company||Minimum quantity of contributors is 3 (shareholders), the maximum quantity is not restricted|
|5||Partnership||Minimum: 02 general partners (individual)
May add in contributing partners (if any)
Depending on the oriented development and the number of capital contributors, Pham Consult will consult you – our potential clients to be able to seek the right type of business entity.
- Set the company’s name as the right regulations:
Your company’s name is the one of the most important factors so that your partners and consumers ease to identify your enterprises’ products and services. Some provisions under Article 38, 39 and 40 of Law on Enterprise 2014 related to the enterprise’s name that most of start-ups should focus on:
- The Vietnamese name of company consists of two elements: the type of business entity and the proper name with combined letter in the Vietnamese alphabet: F, J, Z, W, numbers in words, and symbols.
- The foreign name of company means the name translated from the Vietnamese into a foreign name that uses the Latin alphabet. When translating into a foreign language, the proper name of enterprise may be kept unchanged or translated into a word or phrase with a corresponding meaning.
- Abbreviated name of company may be derived from the Vietnamese name or the foreign name.
- Do not set the same or confused name with registered enterprise’s name .
- Do not use names of regulatory bodies, the armed forces, political organizations, socio-political organizations, socio-political-professional organizations, social organizations, socio-professional organizations as the whole or part of the enterprise’s proper name, unless permitted by those authorities or organization.
- Opt for the business line
When excusing the rights of free business, organizations/individuals should take note and make a consideration as the following issues:
- Is the intended business line subject to conditional business/prohibited business lines?
- Is the intended business line allowed to operate at the place where the business registers its business location?
- Is the business line in accordance with the plan of economic zones and economic development of each local government?
- Register business lines in accordance with current needs and future development directions.
In terms of business conditions, the business sector in Vietnam can be divided into 3 groups:
- Free business lines;
- Conditional business lines: Conditional business lines are the business lines in which the investment must satisfy certain conditions for reasons of national defense and security, social order and security, social ethics, or public health.
The list of business lines with current conditions is stipulated in Appendix 4 of Law No. 03/2016/QH14 – on amendment and supplement to article 6 and annex 4 on the list of conditional business lines stipulated in the Law on investment 2014.
- Prohibited business lines as stipulated in Article 6 of the Law on Investment 2014.
- Charter capital and legal capital:
- Pursuant to Clause 29, Article 5 of the Law on Enterprise 2014, charter capital means the total value of assets that are contributed or promised to be contributed by members/partners when establishing a limited liability company or partnership; or the total face value of shares that are sold or registered when setting up a joint-stock company.
- Legal capital: is the minimum capital required to set up an enterprise. The legal capital is fixed by the Competent Authority. The legal capital will vary depending on the business sector and business line.
- The laws do not stipulate the minimum and maximum charter capital for normal business lines. However, there are a number of industries that require a minimum legal capital that companies must register to be able to establish businesses, such as: real estate business (VND 20 billion), debt collection service (VND 2 billion), services of sending laborers to work abroad (VND 5 billion), auditing services (VND 5 billion), telecommunications (VND 5, 30, 100, 300 billion depending on the size of business),…
- In addition, based on the schedule of service commitments of Vietnam when joining the World Trade Organization (WTO), some industries have limited capital contribution ratio of foreign investors: services related to agriculture, hunting and forestry (CPC 881) up to 51%, telecommunications services up to 49%, or 51%, or 65%, or 70% depending on the industry; Movie screening service up to 51%…
- Duration of charter capital contribution: 90 days after being granted Enterprise Registration Certificate based on Law on Enterprise 2014.
- Company’s Charter
The Law on Enterprise 2014 does not specifically define the Charter of company and only regulates the main form and content of the charter in Article 25. Based on the relevant provisions, it is possible to understand the company’s charter as a “law documents” applied exclusively to the company, built based on the general provisions of the Law on Enterprise. The charter is also an agreement between the founders of the company on the principles of operation, division of work, profits and administrative rights in the company.
The company’s charter not only has the original legal meaning (is a part of the business registration application dossier), but also serves as a basis for solving problems arising in the process of administration and operation of the company. With such an important role, the founders need to research; discuss and reach agreement among the parties when developing company’s charter to avoid future problems.
- Procedures of set-up company:
- Pursuant to Articles 21, 22, 23, Law No. 68/2014/QH13 – Law on Enterprise 2014, business registration documents in Vietnam basically embrace:
- An application form for business registration
- Company’s Charter
- List of contributors
- Copies of the following documents:
- a) The ID card, passport or other ID papers of capital contributors/shareholder who are individuals;
- b) Certificate on decision to establish, business registration certificate or other equivalent documents of the organization and authorization document; Copies of ID card, passport or other ID papers of the authorized representative of a capital contributors/shareholder / foreign shareholder who are organizations.
- c) Investment registration certificate for foreign investors in accordance with the Law on Investment.
- Place of submission: the provincial department of Planning and Investment.
- Consultancy service for set-up company of Pham Consult
With a wealth of experience in consulting for setting up company and other legal issues after establishment such as taxes, labor, social insurance,… Pham Consult provides consulting services to set up companies with the price-competitive, assisting you in:
- Consulting conditions, procedures and other issues when establishing a business such as the name of the company, business line, location of operation, special conditions for foreign investors…;
- Preparing the establishment dossiers; setting up the company charter in accordance with the orientation and agreement between the founders, meeting the role as a law for the company;
- Being on behalf of clients for submitting and receiving the results at state agencies;
- Contacting agencies of translation and certificated docs
- Consulting, explaining to the state agencies in case of arisen problems (often in the establishment dossier of companies with foreign elements).
- Consulting procedures after establishment (Marking and registering stamp, initial tax declaration, social insurance registration).
Please feel free to contact us as the following mailing address as soon as you have any idea to set up a company. Pham Consult always desires and undertakes that shall let you experience the best service ever with the price-competitive.