Establishment of a multi-member LLC by foreign investors in Vietnam

Conditions for foreign investors to establish a multi-member LLC

Forms of investment

Foreign investors can choose one of the following forms of investment to establish a multi-member LLC in Vietnam:

• Direct investment: Foreign investors establish a multi-member LLC or wholly foreign-owned enterprise must meet the conditions set in Article 22 of Law on Investment 2020.
• Indirect investment: Foreign investors invest by contributing capital, purchasing shares, or purchasing capital contributions. The conditions for this form are stipulated in Clause 2, Article 24 of the Law on Investment 2020.

Eligible investors and nationality requirements:

For individual foreign investors:

• Must be at least 18 years old and not fall under any prohibited categories for company establishment or management in Vietnam under Article 17 of the Law on Enterprises 2020.
• Must hold the nationality of a WTO member country or of a country that has signed a bilateral investment treaty with Vietnam.

For foreign institutional investors:

• Must be legally established in a WTO member country or a country that has signed a bilateral investment treaty with Vietnam.
• Now, certain sectors are restricted to individual foreign investors only and only permit institutional foreign investors to register.

Procedures for establishing a multi-member LLC by foreign investors

Steps for this form of establishment including:

Step 1: Obtain an Investment Registration Certificate (IRC)

According to the Law on Investment, foreign investors must first apply for an Investment Registration Certificate before the establishment of a multi-member LLC. The registering procedure is performed as below:

Where no investment policy approval is required:

Foreign investors will submit the application dossier to the competent investment registration authority under Article 63 of Decree No.31/2021/ ND-CP. The application dossier is stipulated under Clause 1, Article 33 of the Law on Investment includes:

• Written request for implementation of the investment project of the establishment of a multi-member LLC has foreign capital;
• Proposal for the investment project;
• Documents for evidence for the financial capacity of the investor;
• Certified copies of identification documents for individual investors, or enterprise registration certificates for institutional investors;
• Lease agreements or documents proving legal use of business premises;
• Power of attorney for the person or organization submitting the dossier at the Department of Finance;
• Business Cooperation Contract (BCC) with investment project based on BCC.
• Land use demand explanation (if applicable);
• Explanation on the use of technology for projects using restricted technologies (if applicable).

The investment registration authority will review the application and issue the IRC within 15 working days from receipt of a complete and valid dossier.

Competent investment registration authorities:

• Department of Planning and Investment: For projects located outside of industrial zones, export processing zones, hi-tech zones, economic zones and for projects approved by the Prime Minister.
• Management boards of industrial zones, export processing zones, hi-tech zones, or economic zones: For projects located within such zones, and not under the Prime Minister’s approval authority.

Where investment policy approval is required:

Investors must submit an application for investment policy approval to one of the following authorities depending on the type of project:

• Ministry of Planning and Investment;
• Provincial Department of Planning and Investment;
• Management Board of relevant industrial or hi-tech zones.

Investors should consider the specific type of project they are investing in to submit their application to the correct authority. If the investment policy is approved, the investor is not required to submit an additional IRC application.

Step 2: Business registration for the multi-member LLC

Investors submit 01 set of business registration documents to the Business Registration Office under the Department of Planning and Investment where the company’s head office is planning to be located. Under Article 23 of Decree No.01/2021/ND-CP, the dossier includes:

• Application form for enterprise registration;
• Company charter;
• List of company members;
• Valid copies of legal documents with the evidence of the legal status of the organizational members or identification documents of individual members;
• Granted Investment Registration Certificate

Applications must be submitted both physically to the provincial Department of Finance and electronically through the National Business Registration Portal (dangkykinhdoanh.gov.vn).

After receiving the application, the Business Registration Office will issue the Enterprise Registration Certificate within 3 working days. If rejected, the authority must provide written notice stating the reasons for refusal.

Step 3: Post-establishment requirements

• Open a bank account and a direct investment capital account for capital contribution.
• Internal labor regulations registration: Carry out labor registration, report and apply for Work Permits for foreigners and social insurance for employees.
• Apply for additional business licenses: If the company operates in conditional business sectors.

Important notes for foreign investors establishing a multi-member LLC

• Vietnamese law currently does not impose restrictions on the ownership ratio of foreign investors in LLCs, except for certain specific business sectors subject to conditions regarding foreign ownership.
• Foreign investors must ensure that the intended business activities are not included in the list of prohibited investment sectors, and must meet any applicable conditions for foreign investment as prescribed by Vietnamese law.
• The charter capital is agreed upon by the members and it is responsible upon law. However, it is advisable to set a capital level appropriate to the company’s scale and business plan.
• A multi-member LLC may have one or more legal representatives. At least one of them must reside in Vietnam. In cases where there is only one legal representative and that person is absent from Vietnam for more than 30 days, the company must authorize another individual in writing to exercise the rights and obligations of the legal representative during their absence.
• Foreign-invested enterprises are obligated to declare and pay taxes in accordance with Vietnamese law.
• Foreign-invested companies are required to open a direct investment capital account for the purpose of receiving capital contributions from foreign investors. Funds must then be transferred from this account to a payment account to cover the company’s operating expenses.

Above is our advisory content of the establishment of a multi-member limited liability company by foreign investors. If you need assistance with company formation services, please contact Viet An Law Firm for the best support.