KNOW YOUR CUSTOMER - DUE DILIGENCE PROCEDURES

ENTERPRISE’S LEGAL STATUS IN VIETNAM

“Know your customer” (KYC) – Due Diligence Procedures on local business partner can help to avoid invalid business transactions and prevent many other potential risks that may happen in advance, ensure your successful transactions.

KNOW YOUR CUSTOMER 

TYPE OF ENTERPRISE’S LEGAL STATUS IN VIETNAM 

1. “Business Suspension” means the enterprise’s legal status during its business suspension as prescribed in the Law on enterprises. Starting date of “business suspension” status is the date of business suspension registered by the enterprise. Ending date of “business suspension” status is the ending date of business suspension period as notified by the enterprise or the date of resumption of business ahead of schedule registered by the enterprise.
2. “Not Operate At Registered Address” means the enterprise’s legal status showing that, through inspection or verification, tax authorities and relevant agencies find that the enterprise does not operate at its registered address. The tax authority shall provide information about the enterprise that no longer operates at its registered address to the business registration authority. Change, update and starting and ending dates of the enterprise’s status shall be decided by the tax authority. The tax authority shall update and notify the “Not operate at registered address” to the business registration authority through the tax registration information system which relates to the National Enterprise Registration Information System. The business registration authority shall record and update the enterprise’s legal status as notified by the tax authority on the National Enterprise Registration Database.
3. “Revocation Of Enterprise Registration Certificate Due to Tax Decision Enforcement” means the legal status of the enterprise whose enterprise registration certificate is revoked according to a decision issued by the Business Registration Office at the request of the tax authority for enforcement of tax administrative decisions. The starting date of the “revocation of enterprise registration certificate due to tax decision enforcement” status is the date on which the Business Registration Office issues a decision to revoke the enterprise registration certificate. Ending date of the “revocation of enterprise registration certificate due to tax decision enforcement” status is the date on which the Business Registration Office restores the enterprise’s legal status at the request of the tax authority in accordance with regulations of the Law on tax administration.
4. “Undergoing Dissolution, Fully Or Partially Divided, Consolidated Or Merged” means the legal status of the enterprise that is subject to a dissolution resolution or decision as prescribed in  the Law on enterprises; whose enterprise registration certificate is revoked according to a decision issued by the Business Registration Office, unless it is revoked due to tax decision enforcement; that is dissolved according to the court decision as prescribed in the Law on enterprises; that has been fully or partially divided, consolidated or merged and is following procedures for statement and transfer of tax obligations with the tax authority. starting date of the “undergoing dissolution, fully or partially divided, consolidated or merged” status is the date on which the Business Registration Office notifies that the enterprise is following dissolution procedures on the National Business Registration Portal, or the transferee enterprise, consolidated enterprise or acquiring enterprise is issued with the enterprise registration certificate.
5. “Undergoing Bankruptcy Proceedings” means the legal status of an enterprise that is subject to a decision to initiate bankruptcy proceedings issued by the court in accordance with regulations of the Law on bankruptcy. starting date of the “undergoing bankruptcy proceedings” status is the date on which the Business Registration Office updates the enterprise’s status on the National Enterprise Registration Database.
6. “Dissolved, Bankrupt Or Cease To Exist” means the legal status of the enterprise that has completed dissolution procedures and has its status updated by the Business Registration Office according to  the Law on enterprises; that is subject to a decision to declare bankrupt issued by the Court in accordance with regulations of the Law on bankruptcy; or that ceases to exist due to full division, consolidation or merger according to  the Law on Enterprises. starting date of the “dissolved, bankrupt or cease to exist” status is the date on which the Business Registration Office updates the enterprise’s status on the National Enterprise Registration Database.
7. “Operating” means the legal status of the enterprise that has been issued with the enterprise registration certificate and does not have the legal status prescribed in the Decree on enterprise registration.

DUE DILIGENCE PROCEDURES ON ENTERPRISES IN VIETNAM

1. Business entity – legal status: Legal documents in business, history of establishment and development, core business activities, achievements, and prospects of the Company; goodwill resulting from reputation, customer confidence, location, products, and commercial advantages.
2. Corporate administration: Information system; regulations – processes – internal management and governance; financial management; human resources management; leadership, organizational structure, and key personnel
3. Corporate Finance: Financial Statements and business performance; Financial ratios; Credit history in CIC; Credit history with the suppliers; Obligations to state authorities; Enterprise valuation documents (including tangible and intangible assets); Assets – validating value, status and ownership; Cash flows; Enterprise value according to accounting books – Actual value of the enterprise (i.e., the total actual value of tangible and intangible assets owned by the enterprise at the market price at the time of valuation).
4. Customers and suppliers: Commercial factors such as retailers, dealers and distributor networks, product trademarks, business licenses, patents and research and development competencies. The enterprise’s business advantage value is the added value created by advantages such as geographical location, brand, market and domestic and foreign market shares of the enterprise. Technology, production methods and distribution channels. Strategy and plan for growth and development.
5. Risk management – Factors affecting survival and profit growth: Changes in government policies; Taxes and other payables to the State Budget; Foreign exchange risks; Changes in interest rates; Reliance on key staff; Reliance on a small number of customers, suppliers or intra-company projects; Changes in raw material prices; Consolidation of competitors or new participants into the industry; Specific disputes initiated or brought to court; Outlook for the relevant industry(ies) affecting its core businesses.
6. Business records management and compliance according to required legal procedures at relevant State authorities: Tax obligations, compulsory insurances, accounts payable, accounts receivable…

Please contact VIVA Business Consulting should you need to ensure any of your investment or important transactions with local partners in Vietnam.

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