Vietnamese or Offshore Companies
We provide experienced foreign investment, corporate, and business development services to SME foreign investors in Vietnam. This includes cost effective and reliable administrative support packages. We don’t just do the all important paperwork. We oversee and help develop businesses from the grass roots level.
Star undertakes the following corporate services: (Click on the headings to jump to the relevant section.)
- Incorporation and Licensing of foreign-owned companies in Vietnam
- Incorporation of Vietnamese Nominee Companies
- Opening of Representative Offices
- Nominee Owners/Directors (foreign and Vietnamese) and chief representatives
- Business Cooperation Contracts
- Mergers and Acquisitions
- Foreign Ownership of Real Estate
- Trademark Registration
- Company Secretary (Vietnam and offshore)
- Offshore Companies and offshore bank accounts
Incorporation and Licensing of Foreign-Owned Companies in Vietnam
In theory, under the WTO Treaty signed in January 2007, Vietnam allows for 100% foreign-owned companies in most areas of business. However, in practice, this does not always occur. Furthermore, in a rapidly developing economy where the laws evolve almost monthly, it can be difficult to keep abreast of the various regulations pertaining to incorporating companies in Vietnam. For this reason, it is always wise to seek the advice of experienced Star staff prior to deciding on a suitable investment vehicle.
This section covers the following topics:
- Background to foreign investment in Vietnam
- How to incorporate a company or open a representative office and obtain the appropriate licenses
Part 1: Background to Foreign Investment in Vietnam
Since 1 July 2006, all new investment and commercial dealings are now controlled by the latest version of the Foreign Investment Law (FIL) and the Enterprise Law (EL). Under this legislation individual foreigners, corporate entities, and Vietnamese can own and operate numerous types of businesses in Vietnam. However some activities, such as those related to defence, remain on the restricted list. Other occupations, such as opening most types of restaurants, small retail shops, bars, or schools, are very rarely if ever approved for foreign investors as they are not seen to be of benefit to the country. The legislation also governs non-profit and other quasi business structures.
Types of Corporate Entities Available for Foreign Investment
Basically, there are 4 types of corporate structures that can be used as vehicles for foreign investment in Vietnam:
- The single member limited liability company (LLC)
- The multiple member limited liability company (LLC) for 2-50 shareholders
- The Shareholding companies, or what used to be known, and still is to some extent, as Joint Stock Companies (JSC). These may or may not be capable of being listed on the public stock exchange in Vietnam. It depends if they pass the additional criteria of the securities legislation.
- Business Cooperation Contracts (BCC) which are mainly only used by major corporations such as telecommunications companies.
The World Trade Organisation Treaty
Within the FIL and EL there are clauses which state that various international treaties may affect how these two Laws are to be administered. The World Trade Organisation (WTO) treaty is the main legislation that affects and governs these domestic Laws. When it comes to investing in Vietnam, the stipulations of the WTO treaty always take precedence over all other legislation.
Ms Phuong: Corporate Services Manager
The Registration Process and the Application Dossier
The company registration process for foreigners and Vietnamese is different. Vietnamese can begin their registration process on-line. If one goes to register at a local branch of the Ministry of Planning and Investment (MPI) in Hanoi, or at the regional department level equivalents, such a Department of Planning and Investment (DPI), one can see that the Vietnamese nationals go to register at a separate location to foreigners. This is because Vietnamese nationals do not have to register via the FIL regulations that make the registration process much more complex since a foreign investment licence is required.
When it comes to obtaining a foreign investment licence, the mandatory commercial leases can be particularly troublesome to get approved if the paperwork is not exactly correct. Virtual offices (ie those having not official physical address) are not allowed for foreign investment in Vietnam, nor are apartment addresses. The company must be physically based at a villa or at an approved commercial premises.
Registration for foreigners means compiling a lengthy dossier of information for submission. Usually up to 5 copies of the dossier are required in both English and Vietnamese, depending on the type of business activities. Copies of the application dossier are dispersed by the MPI/DPI, which acts as a coordinating authority, to other interested ministries for their comments and approvals. However, the MPI/DPI does technically determine the merit of an application and ultimately has to approve and recommend the application dossier to the applicable People’s Committee for final stamping and issuing of the investment licence.
Officially, there are time limits by which the various Government Department recipients of the booklets must respond to the Ministry of Planning and Investment (MPI). Various versions of this time limit are given (usually it is 45 working days). At the front of the FIL booklet it strictly states that Government entities are not to obstruct applications. However, in actuality, the set time frames are rarely met, so the DPI branch where one registers may state some trifling reason to reject the application to start the clock ticking once again from the beginning; one presumes this is done for the sole purpose of protecting those errant departments that do not respond on time. In addition to the DPI’s assessment time frame, the People’s Committee may take another 3 weeks to officially stamp the investment licence, which is then returned to the MPI/DPI for issuing to the investor.
A Brief Overview of Branch Offices
Ms Thuy: Chief Accountant
Normally only large and specialist organisations such as banks apply for and are approved for having branch offices. A Vietnamese branch office is a bit like a subsidiary of a foreign company in that they are a registered legal entity; however, unlike a subsidiary, in many ways a branch office is treated as an extension of the foreign company rather than a legal entity in its own right. This is an important point since it means that the foreign company’s head office bears the ultimate responsibility for any liabilities arising due to the acts of commission or omission of the Vietnamese based branch office. Applying for a branch office is not an attractive option for SME businesses.
The branch office is required to submit its own audited accounts as well as that of its head office, which many foreign companies may not be comfortable with. The branch office wields a lesser commitment and is deemed to lack any long term vision. Thus securing investment and incentives is relatively difficult. Tax considerations play a major role in deciding the form of business that is appropriate. A branch office, though registered, is still treated as a foreign entity because the control and management is exercised outside Vietnam.
Part 2: Incorporating and Licensing
Phase 1: Star’s Initial Strategy Service
An initial strategy meeting is held to decide which region and corporate model are best for your business mission in Vietnam. This meeting may include discussions on the following:
- Determining best region in Vietnam for your investment, including assessing the need for a detailed reconnaissance and feasibility study
- Deciding on the best corporate structure and whether to chose a company, and which type of company ownership, or a representative office
- Deciding on the appropriate amount of investment funding (charter capital). This does not immediately have to be transferred to Vietnam, but must appear in a bank account in the home country to the value of any investor’s stated contribution
- Advising on the role of chairman, directors and the all important legal representative (or chief representative in the case of a representative office)
- If required, undertaking the detailed reconnaissance and feasibility study discussed at the Strategic meeting
- Via its Government Liaison Section, Star undertakes a final check with the Ministry of Planning and Investment (for companies), or the Ministry of Industry and Trade (for representative offices), for any final legislative updates, as these change very regularly in this rapidly developing investment environment
- Star provides a quotation to incorporate and obtain the foreign investment licence
Phase 2: Commissioning Star to Commence Incorporation and Licensing Process
- Client pays a deposit.
- Star sends the detailed Information Requirements, ie documents it will need from the client in order to prepare the application dossier in Vietnamese and English. Most documents need to be notarized and consularized in the home country
- Star drafts the company charter
- Star provides an outline of the business plan and assists with its preparation
- Star provides information on the charter capital
- Star provides information on the business scope and activities to be included in the licence
- Star assists with the all important mandatory lease and provides a Letter of Intent to Lease
- Client sends the documents to Star
- Star reviews all, undertakes the official translations, and complies a draft dossier for initial checking by the authorities. The compilation includes all WTO Treaty requirements and codes
- Star makes any final adjustments/ additions to the application dossier and officially submits the original dossier plus the required copies
- Star receives the business and investment licence on behalf of the client
- Client pays the residual fee on submission of the official dossier
Phase 3: Follow Up
- Star obtains the tax stamp, tax code and electronic submission device
- Star advertises the new incorporation in the newspapers as required by law
- Star assists with the opening of company and private bank accounts
- Star completes final official lease to replace the Letter of Intent to Lease after incorporation
All companies in Vietnam, whether foreign or Vietnamese owned, have similar corporate structures, ie they are single member, multiple member or shareholding companies (some of the latter being publically listed, some not). However, 100% Vietnamese-owned companies do not need a foreign investment licence, only a business registration certificate, which is far easier to obtain and much less restrictive in many areas of business. Therefore they are much quicker and cheaper to open. The downside is a foreigner has to pay a monthly nominee fee and it can be difficult to find a Vietnamese who will take on the responsibility of being a nominee. On top of this are the risks involved that the nominee will retain the company. To eliminate these issues, Star can provide its own corporate services staff nominees to selected clients.
The company licence or business registration certificate must always state exactly the business objectives of the company. Company activities must adhere strictly to these stated objectives. Often, for various very good reasons, particularly if the business activities are not favoured for foreign investment, it may often be far cheaper and operationally more beneficial to the investor to have the investment held by a Vietnamese nominee company.
Star opens RRO for clients. Foreign companies that are only interested in exploring the market or managing the company affairs without conducting any business activity of a profit yielding nature, can establish a representative office in Vietnam. A representative office is supposed to be a temporary setup without any legal persona. Therefore it cannot enter into any contract, engage in trading directly or on behalf of the foreign company, lease warehouses, raise invoices, open letter of credit, etc. Representative offices in Vietnam can only undertake market research, liaison activities, or undertake feasibility studies on behalf of its parent company.
The foreign company bears implicit liability for the activities of its representative office in Vietnam. The representative office must be headed by a Chief Representative, who can be either a Vietnamese national or a person from the foreign company’s head office. It can engage a small number of local support staff.
A representative office pays no tax in Vietnam, but its staff must pay income tax and it must pay a small staff levy to a Vietnamese government department. It must also provide an annual report on its activities. In general the costs and work are about the same work as a small company when it comes to administering and managing a representative office, while the representative offices has far fewer advantages. These days only large companies tend to be interested in opening representative offices in Vietnam.
So investors need to carefully bear in mind that a RRO can only represent the client’s head company that is based in the home country, it cannot do any business in its own right.
To be eligible to open an RRO, one of the basic requirements is for the head company to provide the last year’s audited tax report. To open a branch of a representative office, 3 years of audited tax accounts must be presented. Note, therefore that a foreign company operating for under one year and without substantial activities in that year, will not be approved to open a RRO.
Star can and does provide reliable foreign and Vietnamese nominee company owners / directors. The owners / directors can hold companies on behalf of foreign investors who may otherwise be severely restricted in their investment activities, or for companies that prove very difficult to open for foreign owners. Such companies may include those opened to manage schools, investment advisory services, security services, or retail ventures such as bars and restaurants.
Star can also provide chief representatives who conduct a purely administrative and corporate leadership function and who are divorced from the operational activities. This is a prudent way for foreign companies to protect their interests in the event of a locally appointed chief representative becoming disenchanted with the head company and undertaking actions such as seizing the office stamp, or refusing to stand aside for a new chief representative until a large compensation payment is made.
Mr Lam & Ms Hong: Star Support Staff
BCC need to obtain an investment licence. Star can draft your BCC and apply for the licence on behalf of the BCC partners. Usually BCC are untaken only by large foreign corporations such as telecommunications companies and State-owned companies or similarly large privately owned corporations in Vietnam.
Sometimes investors prefer to enter the Vietnamese investment market by acquiring or merging with an existing company. This may make the licensing process easier for their particular type of activity, such as in the case of a chemical company.
There are three main aspects usually involved in the M&A process in Vietnam. These are:
1. The valuation of the existing company, including efficiency audit, and due diligence processes.
2. The legal and commercial aspects of arranging the M&A.
3. The obtaining of necessary finance.
The President and CEO of Star spent many years as the owner of a 6 branch business broking company. As such he has excellent experience in the practical valuation and takeover of SME’s.
When it comes to M&A activity, Star focuses on the following:
- Current licence situation
- Current accounts situation
- Lease viability
- Management and staff viability and employment situation
- Initial valuation
- Financial due diligence
- Legal due diligence
- Practical takeover of the target company
- Orientation and support of new senior staff
Foreign Ownership of Real Estate
As with most permits and permissions, the regulations surrounding the foreign ownership of real estate are complex and relatively untried. However, Star is well versed in the procedures and can assist clients who wish to register to own real estate in Vietnam. Since 1 July 2015, a foreigner can own various types of real estate in Vietnam. Foreign companies can also own properties for the duration of the term of their foreign investment licence. Foreigners cannot own land or commercial property.
Star can assist you with your intellectual property needs including trademarks. brands, or the lodgement of copyright in Vietnam. For more detail about background to, and the requirements for, trademark registration see the main Vietnam Business menu. Then look heading Trademark in the section on Special Business Services.
Star can provide the following company secretary services for clients based in Ho Chi Minh City:
- Organise and prepare agendas for Board and Committee Meetings
- Advise on official corporate requirements and disclosures, notices etc
- Coordinate work to prepare, check, consolidate Board papers
- Take accurate minutes
- Liaise with regulators and auditors to ensure compliance with applicable codes and statutory requirements
- Monitor changes in relevant legislation
- Deal with correspondence, review daft resolutions, and ensure decisions made are communicated to relevant parties
- Maintain statutory books, records, and registers
Incorporation of Offshore Companies
Since the financial crisis many jurisdictions for offshore companies have been closed. However, Star can still successfully incorporate an offshore company suitable for investment in Vietnam. Our fees include all secretarial services for registering the new company, including First Directors’ Minutes, registration of members and directors, and issuing of share certificates.
Star can provide a range of offshore corporate options including companies incorporated in Hong Kong, Singapore, the British Virgin Islands (BVI), USA, Laos, Australia and India.
Once opened, we can provide a free on-going holding service and local corporate address for the company in Vietnam if required. There is no charge for anything unless some particular element of administration or annual renewal is required on a user pay basis.
Opening of Offshore and Local Bank Accounts
Be very wary if you try to open an offshore bank account. Do not attempt to do so over the internet as the vast majority of sites offering offshore facilities are scams. In addition, the staff of genuine banks rarely respond even to genuine requests.
Star can open an offshore account with an international bank for clients from HCMC. Note that we can obtain the Certificate of Incumbency tailored to the bank’s needs, which is a mandatory requirement to open a corporate account.
New businesses in Vietnam need a local bank account. Investors and foreign staff need personal accounts. There are many special banking rules and restrictions in Vietnam. We will help you to overcome these.
Essentially this means, for a very small cost, you can operate your corporate or representative office in HCMC very effectively and at very low cost.
Star Corporate Vietnam Business Service
If you are looking for a good, honest, and reliable company to represent your commercial and corporate investment and business interests in Vietnam, we offer you our extensive range of services. We can assist you throughout your ‘start up’ operations in Vietnam and provide you with prompt service and complete and accurate feedback regarding your progress. In this work involving detailed and professional corporate services, experience really does count.