Company Formation in Vietnam: A Comprehensive Guide

Overview of Company Formation in Vietnam

Foreign investors looking for opportunities in the Vietnam market are presented with several options for company formation in Vietnam. It’s crucial to conduct thorough research and seek professional guidance to ensure a smooth and compliant company formation process.

Forms of Investment: Company Formation in Vietnam is Most Popular

Vietnam’s economic landscape offers a variety of investment opportunities, with company formation being a primary avenue for foreign direct investment.

The process of company formation in Vietnam is governed by the Investment Law.

Firstly, investors can establish economic organizations, which is the most straightforward method of setting up a business presence in the country, besides other forms of investment, being capital contribution to existing entities, purchase shares, implement investment projects, Business Cooperation Contract, or other new forms introduced and regulated by the government. 

To ensure a fair and orderly business environment, all investment activities within Vietnam must comply with the Investment Law and other relevant legislation.

These laws dictate a framework within which investors operate, providing rights and responsibilities that ensure both investor security and national interests are safeguarded.

Investment Policies in Vietnam

Vietnam’s investment policies are designed to foster a conducive business climate while safeguarding national interests.

Investors are granted the liberty to undertake business activities in any sector that is not explicitly prohibited. However, for those sectors deemed conditional, investors must satisfy specific business investment conditions as outlined by law.

Investors are bestowed with the autonomy to make informed decisions concerning their investments, provided they align with Vietnamese law.

This autonomy extends to the utilization of financial resources, including credit and land. However, the law stipulates that any investment activities detrimental to national defense or security will be subject to suspension or termination.

The state plays a pivotal role in safeguarding the interests of investors by recognizing and protecting ownership rights over assets and income.

Moreover, the state strives to ensure equitable treatment of all investors, advocating policies that bolster favorable investment conditions and promote sustainable economic development.

Vietnam also respects its international commitments by adhering to investment treaties it is a party to, ensuring that foreign investors can rely on Vietnam’s compliance with global investment standards.

Prohibited and Conditional Investments in Vietnam

The Investment Law also outlines specific industries and trades where business investment is prohibited.

These include the trading of narcotics, certain chemicals and minerals, wildlife specimens, as well as involvement in the prostitution business, human trafficking, and related illegal trades. Additionally, activities concerning human cloning and trading in firecrackers are banned, along with the provision of debt collection services.

For certain sectors, referred to as conditional business investment lines, investors must meet predetermined conditions. These conditions are set to protect national defense, public order, social morality, and community health. The Investment Law provides a comprehensive list of these conditional sectors in its appendices.

The conditions for engaging in these conditional investments are subject to strict regulation to ensure transparency, objectivity, and cost-effectiveness for investors.

The law details the application process, the form of conditions, and the administrative procedures required to comply with these conditions. Furthermore, the effective duration of any licenses or approvals is clearly defined to avoid any ambiguity.

Implementation of Investment Conditions in Vietnam

The investment conditions are enforced through various forms such as licenses, certificates, and written approvals. Importantly, these conditions and the list of conditional business investment lines are made publicly available on the National Enterprise Registration Portal, ensuring that investors have easy access to the information they need.

The government retains the authority to detail the announcement and control of these business investment conditions, thereby maintaining a well-regulated and transparent investment environment.

In conclusion, forming a company in Vietnam involves navigating a comprehensive legal framework that balances the interests of investors with national priorities.

By adhering to the Investment Law and its associated regulations, investors can capitalize on the numerous opportunities available within Vietnam’s dynamic market while contributing to its economic development.

Procedures in Company Formation in Vietnam

Foreign investors aiming to establish or expand their businesses must navigate through the process of obtaining crucial certifications: the Investment Registration Certificate (IRC) and the Enterprise Registration Certificate (ERC) for company formation in Vietnam.

These certificates are foundational for legally conducting business in Vietnam, each serving distinct purposes. The IRC is required for foreign investors to commence business operations, while the ERC is necessary for both foreign and domestic businesses to be recognized as legal entities.

This outlines the procedures to apply for these essential documents, ensuring a smoother entry into Vietnam’s dynamic market.

Investment Registration Certificate (IRC)

The IRC is a prerequisite for foreign investors intending to invest in Vietnam. It outlines the scope, scale, and nature of the investment, providing legal grounding for the investment project. 

Here’s how to apply Investment Registration Certificate (IRC) in Vietnam

1.Preparation of Application Dossier

2. Submission to the Department of Planning and Investment (DPI)

3. Evaluation Process

4. Issuance of the IRC

1.Preparation of Application Dossier: Investors need to compile a dossier including a written request for project execution, copies of the investor’s legal documents, investment project proposals, and other documents depending on the specific requirements of the investment sector.

2. Submission to the Department of Planning and Investment (DPI): The complete dossier must be submitted to the DPI where the project will be located. The DPI acts as the primary body reviewing and approving investment projects.

3. Evaluation Process: The DPI evaluates the dossier based on legal compliance, the feasibility of the investment project, and its alignment with Vietnam’s development plans. This process typically takes about 15 working days.

4. Issuance of the IRC: Upon approval, the DPI issues the IRC to the investor. This certificate specifies the investor’s rights, obligations, and conditions pertaining to the investment project.

Enterprise Registration Certificate (ERC)

The ERC is essential for establishing a legal business entity in Vietnam or in other words company formation in Vietnam. It is applicable to both domestic and foreign-owned businesses. 

The application Enterprise Registration Certificate (ERC) process involves:

1. Preparation of Required Documents

2. Submission to the Business Registration Office (BRO)

3. Review and Approval

4. Issuance of the ERC

1. Preparation of Required Documents: The application for the ERC includes a request for business registration, company charter, list of shareholders (for joint-stock companies), and legal documents of the founders.

2. Submission to the Business Registration Office (BRO): The completed application dossier must be submitted to the BRO under the DPI where the business will be headquartered.

3. Review and Approval: The BRO reviews the application for compliance with Vietnamese business law. This process is relatively quick, with the ERC often issued within three working days from the submission of a complete and compliant dossier.

4. Issuance of the ERC: Once approved, the BRO issues the ERC, officially recognizing the company formation in Vietnam as a legal entity authorized to conduct business activities in Vietnam.

Obtaining the Investment Registration Certificate and Enterprise Registration Certificate is a critical step for company formation in Vietnam.

While the process of company formation in Vietnam requires meticulous preparation and understanding of Vietnamese legal requirements, it paves the way for investors to access and thrive in one of Southeast Asia’s most dynamic economies.

By following the outlined procedures, businesses can ensure compliance and set the foundation for successful operations in Vietnam.

About ANT Lawyers, a Law Firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi,  and Danang, and will help customers in doing business in Vietnam.