01 Feb DOING BUSINESS IN VIETNAM – GENERAL TERMS AND CONDITIONS
There is only a business law system for both local and foreigner investors to do business in Vietnam, deals with the establishment, organization, restructuring, dissolution, business regulations and relevant activities of enterprises, including limited liability companies, joint-stock companies, partnerships, sole proprietorships, and groups of enterprises.
It would be our pleasures to share with you for any query or question about the terms and conditions as well as practical cases which we have been experiencing since years 2000, where the first law on enterprise has allowed private sector to born and blooming.
DOING BUSINESS IN VIETNAM
GENERAL TERMS AND CONDITIONS
INTERPRETATION OF TERMS YOU NEED TO KNOW IN THE BUSINESS REGULATIONS OR BUSINESS OPERATION
Foreigner means any person who does not have Vietnamese nationality.
Shareholder means any individual or organization that owns at least a share of a joint-stock company.
Founding shareholder means any shareholder that owns at least an ordinary share and whose signature is on the list of founding shareholders of the joint-stock company.
Dividend means a net profit paid to each share in cash or other assets from the residual profit of the joint-stock company after all financial obligations are fulfilled.
Limited liability companies include single-member limited liability companies and multi-member limited liability companies.
National business registration portal means a website used for online business registration and access to information about business registration.
National Enterprise Registration Database means a collection of data about business registration nationwide.
Enterprise means an organization that has its own name, assets, office, and is registered in accordance with business law.
State-owned company means any enterprise of which 100% charter capital is held by the State.
Vietnamese company means any enterprise that is established or registered under Vietnam’s law and has its headquarter located in Vietnam.
Permanent residence means the address of the organization’s headquarter or address of the individual’s permanent residence, workplace, or another location that is registered by such person with the enterprise as contact.
Market price of a stake or share means the highest price on the market on the previous day, the price agreed between the seller and the buyer, or the price determined by a professional valuation organization.
Certificate of Business registration means a paper or electronic file issued by the business registration authority to the enterprise which contains information about business registration.
Capital contribution means the contribution of assets to form the company’s charter capital. Capital contribution is either contribution of capital to establish a new enterprise or contribution of additional capital to an existing enterprise.
National business registration information system comprises the National Enterprise Registration Database, national business registration portal, and the system infrastructure.
Valid application means an application that contains adequate documents as prescribed in this Law, and information on which are declared sufficiently as prescribed by law.
Business regulationsmeans the continuous execution of one, some, or all of the stages of the investment process such as manufacturing, selling products or services on the market to earn profit.
Related person means any organization or individual that has a direct or indirect relationship with the enterprise, including the following cases:
- The parent company, the manager of the parent company, and the person competent to designate such manager is a related person of subsidiaries in the same group;
- Subsidiary is a related person of the parent company in the same group;
- The person or a group of people who can influence the decision making and operation of the enterprise via a managerial body;
- The enterprise manager;
- Spouse, parents, adoptive parents, children, adopted children, brothers-in-law, sisters-in-law of the enterprise manager or the members/partners/shareholders who have the controlling stake or shares;
Enterprise manager is the manager of the company or manager of sole proprietorship, who is either an owner of a sole proprietorship, a general partner, the Chairpersons of the Board of members, a member of the Board of members, the company’s President, the Chairperson of the Board of Directors, a member of the Board of Directors, the Director/General Director, or a person holding another managerial position who is entitled to enter into the company’s transactions on behalf of the company according to the company’s charter.
Founder means any organization or individual that establishes or contributes capital to establish an enterprise.
Foreign investor means any organization or individual that is defined as a foreign investor according to the Law on Investment.
Stake means the total value of assets that a member/partner contributes or promises to contribute to a limited liability company or partnership. Stakeholding means the ratio of a member/partner’s stake to charter capital of the limited liability company or partnership.
Public services/products are services/products necessary for life and socio-economic conditions of the country or communities of certain areas that the State must provide to ensure common interests or National defense and security; the investment in manufacturing and supply of such services/products under market mechanism is not likely to be recouped.
Company member means any individual or organization that holds part or all of charter capital of a limited liability company or partnership.
Members of a partnership include general partners and capital contributors.
Enterprise restructuring is either a total division, partial division, consolidation, acquisition of an enterprise, or conversion of the type of business regulations entity.
Foreign organization means any organization that is established overseas under another country’s law.
Foreign investors’ holding means the total holding of voting capital of all foreign investors in a Vietnamese company.
Voting capital means the stake or shares under the ownership of a person who has the right to vote on the issues within the competence to decide the Board of members or the General Meeting of Shareholders.
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 establishing a joint-stock company.
STATE ASSURANCE ABOUT ENTERPRISES AND OWNERS OF ENTERPRISES – YOUR INVESTMENT, YOUR PROFIT AND ASSETS ARE RECOGNIZED AND PROTECTED
- The State recognizes the continued existence and development of types of business entities defined in this Law; ensures the legal equality of enterprises regardless of their forms and economic sectors, and acknowledges the legitimate profitability of the business.
- The State recognizes and protects the ownership of assets, capital, income, other lawful rights and interests of enterprises and owners of enterprises.
- Legitimate assets and capital of enterprises and enterprise owners shall not be nationalized and shall not be administratively confiscated.
- The State shall purchase or requisition enterprises’ assets for reasons of national defense and security, national interests, state of emergency, natural disaster response, and pay enterprises according to market prices at such times. The payment or compensation must ensure enterprises’ interests without discrimination between types of business entities.
POLITICAL ORGANIZATIONS AND SOCIO-POLITICAL ORGANIZATIONS WITHIN ENTERPRISES
- Political organizations and socio-political organizations within enterprises shall operate in accordance with the Constitution, law, and the organization’s charter.
- Enterprises must not obstruct the establishment of intramural political organizations or socio-political organizations and must not obstruct employees to participate in such organizations.
RIGHTS OF ENTERPRISES
- Right to Engage in the business lines that are not prohibited by law.
- Right to Exercise business autonomy; decide on organizational structure, business lines, and location; change the scale and business lines.
- Right to Decide on the method of raising and using capital.
- Right to Find markets, customers, and sign contracts proactively.
- Right to Engage in export and import.
- Right to Hire employees to serve the business.
- Right to Apply science and technologies to improve business efficiency and competitiveness.
- Right to Own, use, and dispose of assets of the enterprise.
- Right to Refuse to provide resources against the law.
- Right to Lodge complaints and denunciations in accordance with regulations of law on complaints and denunciations.
OBLIGATIONS OF ENTERPRISES
- Satisfy the conditions when engaging in the business lines subject to business regulations conditions as prescribed by the Law on Investment; maintain the fulfillment of such conditions throughout the business operation.
- Do accounting, make and submit truthful financial statements in a timely manner according to regulations of law on accounting and statistics.
- Declare, pay taxes and fulfill other financial obligation as prescribed by law.
- Ensure the lawful rights and interests of employees according to regulations of law on employment; do not show discriminatory behaviors or insult employees in the enterprise; do not employ children and forced labour; provide support for and enable employees to have professional training; buy social insurance, unemployment insurance, health insurance, and other types of insurance for employees.
- Ensure and take responsibility for quality of goods/services according to standards prescribed by law or registered/announced standards.
- Fulfill obligations pertaining to business registration, changes of business registration information, disclosure of information about the enterprise establishment and operation, and other obligations.
- Take responsibility for the truthfulness and accuracy of information in the application for business registration and reports; rectify incorrect information.
- Comply with regulations of law on national defense and security, social order and safety, gender equality, protection of natural resources, the environment, historic sites and natural monuments.
- Exercise the obligations pertaining to business ethics to protect the lawful rights and interests of customers and consumers.
RETENTION OF ENTERPRISE’S DOCUMENTS
- Depending on the form, the enterprise must retain the following documents:
- The company’s charter; internal rules and regulations; member register or shareholder register;
- Certificate of industrial property rights; Certificate of product quality registration; other licenses and certificates;
- Documents proving the company’s ownership of its assets;
- Minutes of meetings of the Board of members, the General Meeting of Shareholders, the Board of Directors; the enterprise’s decisions; The prospectus for securities issuance;
- Reports made by the Control Board; conclusions of inspection authorities; conclusions of audit organizations;
- Accounting books, accounting documents, and annual financial statements.
The documents must be kept at the headquarter or another location prescribed in the company’s charter. The retention duration shall comply with relevant regulations of law.
REPORTING CHANGES TO INFORMATION ABOUT THE ENTERPRISE’S MANAGER
The enterprise must notify the business registration authority of the changes to the name, address, nationality, ID number, passport number or other ID papers of the following persons within 05 days from the day on which such changes are made:
- Members of the Board of Directors of the joint-stock company;
- Members of the Control Board or controllers;
- The Director or General Director.
The legal representative of an enterprise is the individual that exercises the rights and fulfills the obligations on when making transactions on behalf of the enterprise, represents the enterprise as the plaintiff, defendant, and person with relevant interests and duties before the arbitral tribunal, the court, exercises other rights and fulfills other obligations as prescribed by law.
A limited liability company or joint-stock company may have one or multiple legal representatives. The quantity, titles, rights and obligations of legal representative of the enterprise shall be specified in the company’s charter.
There must always be at least one legal representative that resides in Vietnam. If the enterprise has only one legal representative, such person must reside in Vietnam and authorizes another person in writing to perform the legal representative’s right and obligations when leaving Vietnam. In this case, the legal representative is still responsible for the performance of delegated rights and obligations.
In case the legal representative does not return to Vietnam at the end of the authorization period and does not give another authorization:
- The authorized person of the sole proprietorship shall keep performing the legal representative’s rights and obligations within the scope of authorization until the legal representative goes back to work at the enterprise;
- The authorized person of the limited liability company, joint-stock company, or partnership shall keep performing the legal representative’s rights and obligations within the scope of authorization until the legal representative goes back to work at the enterprise, or until the company owner, the Board of members, or the Board of Directors decides to designate another person as the legal representative of the enterprise.
If the enterprise has only one legal representative and such person is not present in Vietnam for more than 30 days without authorizing another person to act as the legal representative, or such person is dead, missing, detained, sentenced to imprisonment, or legally incompetent, then the company owner, the Board of members, or the Board of Directors shall designate another person as the legal representative.
With regard to a limited liability company with two members, if the member who is the legal representative of the company is detained or sentenced to imprisonment, makes a getaway, is missing or legally incompetent, or is banned from practicing by the court for smuggling, producing counterfeits, running illegal businesses, tax evasion, fraud, or another crime defined by Criminal Code, the other member is naturally the company’s legal representative until the Board of members makes a decision on company’s legal representatives.
In some special cases, the Court is entitled to appoint the legal representative during the proceedings.
RESPONSIBILITIES OF THE ENTERPRISE’S LEGAL REPRESENTATIVE
- Perform the given rights and obligations in a truthful, careful manner to ensure the enterprise’s lawful interests;
- Act in the best interest of the enterprise; do not use information, secrets, business opportunities of the enterprise; do not misuse the position, power, or property of the enterprise for self-seeking purposes or serving the interest of other entities;
- Notify the enterprise of the representative and his/her related persons owning or having the controlling stake or shares in other enterprises.
- The legal representative of the enterprise is personally responsible for the damage caused by his/her violations against the obligations.
AUTHORIZED REPRESENTATIVES OF OWNERS, MEMBERS, SHAREHOLDERS BEING ORGANIZATIONS
The authorized representatives of owners, members, shareholders being organizations must be individuals authorized in writing to perform their rights and obligations prescribed in this Law on behalf of such owners, members, shareholders.
Unless otherwise prescribed by the company’s charter, the authorized representative shall be appointed as follows:
- A multi-member limited liability company that holds at least 35% of charter capital may appoint up to 03 representatives;
- A joint-stock company that holds at least 10% of ordinary shares may appoint up to 03 representatives.
If the owner, member, or shareholder being an organization appoints multiple authorized representatives, the stake/shares of each representative must be determined. If the owner, member, or shareholder fails to determine the stake/shares of each authorized representative, the stake/shares shall be split equally among the representatives.
Authorized representatives must be appointed in writing; the appointment of authorized representative must be notified to the company and is only effective when the company receives the notification. The letter of authorization must contain:
- Full name, enterprise identification number, address of the headquarter of the owner, member, shareholder;
- The number of authorized representatives and their corresponding holding of shares/stake;
- Full name, permanent residence, nationality, ID number, passport number of each authorized representative;
The duration of authorization of each representative, including the beginning date; Full names, signatures of legal representatives, owners, members, shareholders, and authorized representatives.
Authorized representatives must satisfy the conditions below:
- The authorized representative is legally competent;
- The authorized representative is not prohibited from establishing and managing enterprises;
- Members, shareholders being companies of whom >50% of charter capital is held by the State in the form of stake or shares must not appoint their spouses, parents, adoptive parents, children, adopted children, siblings of the manager or the person competent to appoint the company manager as authorized representatives of other companies;
- The authorized representative satisfies other conditions prescribed by the company’s charter.
RESPONSIBILITIES OF AN AUTHORIZED REPRESENTATIVE OF OWNERS, MEMBERS, SHAREHOLDERS BEING ORGANIZATIONS
- The authorized representatives of owners, members, shareholders being organizations shall perform the rights and obligations of owners, members, and shareholders on their behalf at the Board of members or the General Meeting of Shareholders in accordance with this Law. All restrictions imposed by owners, members, shareholders upon the authorized representative’s performance of the rights and obligations of being owners, members, and shareholders shall not apply to any third party.
- Authorized representatives must attend every meeting of the Board of members or the General Meeting of Shareholders; perform given rights and obligations in a truthful and careful manner to protect the lawful interests of the authorizing owners, members and shareholders.
- Authorized representatives are responsible to owners, members, shareholders being organizations for failure to fulfill the obligations. The authorizing owners, members, and shareholders are responsible for the third party for the responsibility pertaining to the rights and obligations performed by the authorized representatives.
- Issuing or refusing to issue the Certificate of Business registration; requesting business founders to submit additional documents against this Law; delaying, obstructing, harassing business founders or enterprises’ operation.
- Obstructing owners, members, shareholders of enterprises performing the obligations and rights prescribed in enterprise Law and the company’s charter.
- Doing business as an enterprise without registration; carrying on doing business after the Certificate of Business registration has been revoked.
- Providing untruthful information in the application for enterprise registration or application for adjustments to business registration.
- Declaring false charter capital; failure to contribute sufficient charter capital as registered; deliberately determining inaccurate values of contributed assets.
- Engaging in prohibited business regulations lines; engaging in business lines subject to conditions without satisfying all of the conditions as prescribed in the Law on Investment, or failing to maintain fulfillment of such conditions throughout the business operation.
- Money laundering, fraud.
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