WHAT TYPES OF ENTERPRISES CAN FOREIGN INVESTORS CHOOSE TO ESTABLISH A COMPANY IN VIETNAM?

In order to meet the needs of doing business in Vietnam, the law of Vietnam has allowed foreign investors to choose types of enterprises in accordance with their development strategy and financial capacity. So according to the Law on Enterprises, what types of enterprises in Vietnam can foreign investors choose to establish a foreign-invested enterprise? Find out with OTIS LAWERS in the article below

Legal grounds

The Law on Enterprises No. 59/2020/QH14, dated June 17, 2020

Decree No. 47/2021/ND-CP dated April 01, 2021 of the Government  elaborate some articles of the Law on Enterprises 

SOLE PROPRIETORSHIPS

A sole proprietorship is an enterprise owned by a single individual whose liability for its entire operation is equal to his/her total assets.

The sole proprietorship has not  the status of a juridical person

An individual may only establish one sole proprietorship. The owner of a sole proprietorship must not concurrently own a household business or hold the position of general partner of a partnership.

The sole proprietorship must not issue any kind of securities. And it must not contribute capital upon establishment  or purchase shares or stakes of partnerships, limited liability companies or joint stock companies.

The sole proprietorship’s owner is the legal representative of sole proprietorship. And she/he has total authority to decide all of its business activities

SINGLE -MEMBER LIMITED LIABILITY COMPANIES

A single-member limited liability company is an enterprise owned by a single organization or individual. The owner’s liability for the company’s debts and other liabilities shall be equal to the company’s charter capital.

A single-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

Single-member limited liability companies may issue bonds in accordance with this Law and must not issue shares except for equitization

The owner shall contribute adequate and correct assets as promised when applying for enterprise registration within 90 days from the issuance date of the Certificate of Enterprise Registration. 

In the case charter capital is not fully contributed by the deadline, the owner shall register the contributed capital as charter capital within 30 days from the deadline. In which case the owner shall be responsible for the financial obligations incurred by the company during the period before the change in charter capital is registered in proportion to the promised capital.

A single-member limited liability company may increase its charter capital when its owner contributes capital or raises capital from other persons. In case of raising capital from other persons, the company shall be converted into a multiple-member limited liability company or joint stock company. 

A single-member limited liability company may decrease its charter capital in the following cases:

• Part of the contributed capital is returned to the company’s owner after the company has operated for at least 02 consecutive years from the enterprise registration date and the company is able to fully pay its debts and other liabilities after the return of capital;
• Charter capital is not fully and punctually contributed by the owner as prescribed in Article 75 of this Law.

MULTI-MEMBER LIMITED LIABILITY COMPANIES

A multiple-member limited liability company means an enterprise that has 02 – 50 members that are organizations or individuals.

A multiple-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

Multiple-member limited liability companies must not issue shares and may issue bonds in accordance with this Law and relevant laws

The members shall contribute sufficient and correct assets as promised when applying for enterprise registration within 90 days from the issuance date of the Certificate of Enterprise Registration. During this period, the members shall have rights and obligations that are proportional to their promised contribution. The members may only contribute assets that are different from the promised ones if the change is approved by more than 50% of the remaining members.

A member’s liability for the enterprise’s debts and other liabilities shall be equal to the amount of capital that member contributed to the enterprise. In the cases, the members fail to contribute or fully contribute capital, the company shall register the change in charter capital and the members’ holdings within 30 days from the deadline for contributing capital.

JOINT STOCK COMPANIES

 A joint stock company is an enterprise in which:

• The charter capital is divided into units of equal value called shares;
• Shareholders can be organizations and individuals; the minimum number of shareholders is 03; there is no limit on the maximum number of shareholders;
• A shareholder’s liability for the company’s debts and liabilities is equal to the amount of capital contributed to the company by the shareholder;
• Shareholders may transfer their shares to other persons except for the cases the ordinary shares of founding shareholders may be transferred to other founding shareholders within 03 years from the issuance date of the Certificate of Enterprise Registration and other cases of restriction specified in the company's charter
• A joint stock company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued. And it may issue shares, bonds and other kinds of securities.
• The joint stock company’s charter capital is the total face value of the shares sold. The initially registered charter capital of a joint stock company is the total face value of subscribed shares and shall be written in the company's charter.

Organizational structure of a joint stock company

Unless otherwise prescribed by securities laws, a joint stock company may choose one of the following models:

• The General Meeting of Shareholders (GMS), Board of Directors, Board of Controllers and Director/General Director. If the joint stock company has fewer than 11 shareholders and the shareholders that are organizations hold less than 50% of the company’s total shares, a Board of Controllers is not mandatory;
• The GMS, Board of Directors and Director/General Director. In this case, at least 20% of the members of the Board of Directors shall be independent members and there has to be an audit committee affiliated to the Board of Directors. The organizational structure, functions and duties of the audit committee shall be specified in the company's charter or the audit committee’s operating regulations promulgated by the Board of Directors.

PARTNERSHIPS

A partnership is an enterprise in which:

• There are least 02 partners that are joint owners of the company and do business under the same name ((hereinafter referred to as “general partner”). There can be limited partners in addition to general partners;
• A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets;
• A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.

A partnership has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued. And it must not issue any kind of securities.

A general partner has the rights to manage the partnership’s everyday business and take joint responsibility for any damage to the enterprise  for the company’s debts and liabilities.

Limited partners do not participate in administration of the partnership and do not do business in the partnership’s name. They have the rights to receive distributed profits in proportion to their holdings. 

CONSULTING SERVICE ON ENTERPRISES 

The above are the current types of enterprises in Vietnam. We hope that the information about these types of enterprises will help foreign investors in establishing a foreign-invested enterprise in Vietnam.

OTIS is always proud to be a professional unit in the field of operation of the organization, enterprise. With a team of highly qualified lawyers, extensive experience, and dedication to clients, we believe that we will provide investors with the most professional services, at a reasonable cost and the fastest processing time. We commit that all client information is confidential and client interests always come first. Don't hesitate to pick up the phone and contact OTIS immediately to be advised and supported

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