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Form of e-commerce management consulting services in Vietnam

Currently, there are many companies operating in the field of e-commerce that plan to expand their operations in the Vietnamese market. The objective of these companies is to advise and manage sales channels of sellers who are individuals and organizations with Vietnamese nationality on e-commerce platforms in Vietnam (such as Shopee, Lazada, Tiki, …) based on products provided by the seller. In the following article, Viet An Law will provide preliminary legal advice on options to implement e-commerce management consulting services in Vietnam.

E-commerce business

Legal bases

  • Vietnam’s commitments in the WTO.
  • Investment Law 2020.
  • Enterprise Law 2020.
  • Decree 31/2020/ND-CP of the Government details and guides the implementation of a number of articles of the Law on Investment.
  • Decree 52/2013/ND-CP of the Government, amended and supplemented by Decree 85/2021/ND-CP on e-commerce.

Conditions for accessing the market of e-commerce management consulting services in Vietnam

E-commerce management consulting services are usually manifested through two main activities:

  • Provide a platform to help sellers perform warehouse management tasks; statistics on the status of receiving and processing orders;
  • Guide, ideate, design publications, plan and report advertising campaigns for the activities of the seller.

Therefore, this service can be classified as Management Consulting Services (CPC 865).

According to the WTO Schedule of Commitments, the forms of trade presence allowed in the field of management consulting (CPC 865)  include: (1) BCC contracts, (2) Joint venture enterprises, (3) 100% foreign-owned enterprises. In addition, foreign service providers are allowed to set up representative offices and branches in Vietnam.

Conditions for investment in e-commerce management consulting services in Vietnam

According to the provisions of Article 9 of the Law on Investment 2020, management consultancy is not in the industry that restricts market access for foreign investors, so foreign investors are entitled to apply market access conditions as prescribed for domestic investors. At that time, investors only need to note some of the following legal issues:

Forms of investment:

Pursuant to Article 21 of the Law on Investment 2020 stipulates that foreign investors invest in Vietnam in the following forms:

  • Invest in the establishment of economic organizations.
  • Investment in capital contribution, purchase of shares, purchase of contributed capital.
  • Investment in the form of BCC contract.

Thus, foreign investors are allowed to invest in management consulting services in e-commerce in Vietnam in all the above forms.

Percentage of ownership of charter capital of foreign investors in economic organizations: not restricted.

Scope of investment activities

About the scope of fields of activity and industries:

Investors should note that management consulting services in accordance with Vietnamese law do not include: Design computer software for auditing systems; Legal advice and representation; Accounting, auditing, tax consulting activities; Architecture, other technical and technological consulting; Advertising activities; Market research and public opinion polling; Job placement and consultancy services; Educational consultancy activities.

In terms of territorial scope, customers:

Due to the lack of restrictions imposed by law, foreign investors in Vietnam can provide management consulting services in cross-border e-commerce to sellers from other countries, provided that the conditions for accessing the market for trade and services of that country are met.

Form of providing e-commerce management consulting services in Vietnam

As mentioned in market access conditions, foreign investors are allowed to provide management consulting services in Vietnam in two forms:

  • Cross-border service provision: there is no restriction on supply through direct contracts with sellers who are individuals and organizations with Vietnamese nationality.
  • Establishment of economic organizations: Vietnam does not restrict the investment form of management consulting services, so investors are entitled to invest in the establishment of economic organizations as prescribed in Clause 1, Article 21 of the Law on Investment 2020.

Provision of cross-border services

Advantageous

  • Save time and costs associated with establishing and operating new businesses in Vietnam.
  • Easy to change business market (leaving Vietnam market).

Difficult

  • It is difficult to grasp domestic information such as market information, information about legal disputes arising. In the event of a dispute, it is difficult for the parties to choose a dispute settlement agency.
  • Risks related to international payments and foreign exchange regulations arise.

Recommendations

If there is a long-term market goal, investors should choose another method that is more stable and structured.

Establishment of economic organizations

When establishing an economic organization, investors must comply with the provisions of the Investment Law for foreign investors.

If an enterprise is established by an investor, if it is a foreign-invested economic organization (according to Clause 1, Article 23 of the Law on Investment 2020), it is mandatory to carry out procedures for issuance of an Investment Registration Certificate before carrying out procedures for enterprise establishment. Enterprises established in Vietnam have legal status from the date of issuance of the Certificate of Business Registration. The establishment of an economic organization will incur costs for business establishment (Circular 47/2019/TT-BTC), license fees (Decree 136/2016/ND-CP amended and supplemented by Decree 22/2020/ND-CP), CIT, PIT and management costs incurred during business operation.

To establish an economic organization in Vietnam, foreign investors can choose one of the following three forms:

Joint Stock Company

  • Advantageous
    • Joint stock companies have the ability to raise the most diversified capital from many different sources through the issuance of shares and bonds. During operation, enterprises can increase charter capital by issuing shares to call for investment, which is not available in other types of enterprises.
    • The transfer of contributed capital is done freely, the transfer procedure is simple and unlimited number of shareholders, so it attracts many individuals and/or organizations to contribute capital to the company.
  • Risk
    • For this form of investment, investors do not have full self-determination over the company’s activities but are governed by other shareholders. From there, the decision-making process is complicated, time-consuming with different sequences and procedures.
    • The company’s organizational structure is complex with a large number of shareholders, so it is also more difficult to manage and run a joint-stock company. Moreover, many shareholders may not know each other and there may be a divergence into groups of shareholders in the company that oppose each other in terms of interests.
    • Business and financial confidentiality is limited because the company must disclose and report to shareholders at annual meetings.
    • The tax rate is relatively high because in addition to the tax that the company has to fulfill its obligations to the state budget, shareholders are also subject to additional income tax from dividends and share interest in accordance with the law.
  • Recommendations
    • In case investors need to mobilize a large capital source or intend to expand their scale in the future, establishing a joint stock company is a suitable choice. However, investors should pay attention in managing and operating the company with a complex structure and a large number of shareholders. In addition, investors also need to find at least 2 reputable organizations/individuals with sufficient financial potential and suitable for business lines to be co-founding shareholders.
    • To take control of the company, investors must obtain a minimum of 65% of the total votes in the joint stock company to make a full decision – through all ordinary and important decisions in the business operation of the enterprise.

One-member limited liability company

Investors can choose to establish a 100% foreign-owned one-member limited liability company and operate as a subsidiary in Vietnam.

  • Advantages
    • Investors have the full right to exercise their business investment plans without being influenced or influenced by business decisions at the company by any other entity.
    • Investors are entitled to enjoy all profits from the company’s operations.
    • Currently, Vietnamese law does not set regulations on minimum charter capital for limited liability companies operating in the field of management consulting in e-commerce.
    • The company structure is simple and flexible, choosing according to two models in Article 79 of the Enterprise Law 2020.
  • Risk
    • The investor shall be fully responsible for the business operation including all risks incurred.
    • With regard to capital, a one-member limited liability company does not have the right to issue shares, but only the right to issue bonds. Accordingly, the company must still comply with the Securities Law, and other relevant laws.
    • When mobilizing additional capital contributions from other individuals or organizations, procedures for changing the type of enterprise must be carried out.
  • Recommendations

Investors need to make specific strategies to anticipate the amount of charter capital, avoiding the implementation of many procedures for adjusting charter capital to implement large business plans.

Limited liability companies with two or more members

  • Advantages
    • Limited liability companies with two or more members have the ability to raise capital from many capital contributors. During operation, investors can increase capital and business size by calling for new investors or old investors to increase capital.
    • Investors are only responsible for debts and other property obligations of the enterprise within the scope of contributed capital, so the level of risk will be reduced compared to a one-member limited liability company.
  • Risks
    • It is more difficult to find a reliable cooperative organization or individual to establish this type of company than a domestic one.
    • The type of limited company will not be issued shares, so the ability to raise capital still faces many limitations compared to joint stock companies.
    • The transfer of contributed capital of this type of company is strictly limited due to the strict and complicated transfer process.
  • Recommendations

If you choose to establish this type of company, investors should find one or more other co-founders who are individuals or organizations that have trust, sufficient financial resources and are suitable for the business line. In order to take control of the company, the capital contribution structure of investors in the limited company must reach at least 75% of the charter capital structure of the limited company in order to make full decisions – through all ordinary and important decisions in the business operation of the enterprise.

General recommendations

The establishment of a new one-member limited liability company is a recommended form of investment for investors to carry out management consulting activities in e-commerce. This is the type of company chosen by many foreign-invested enterprises to provide management consulting services, because of the following advantages:

  • The organizational structure and establishment procedures are simpler than the type of 2-member limited liability company and joint stock company.
  • The owner of a one-member limited liability company is only responsible for the company’s activities to the extent that the amount of capital contributed to the company should be riskier.
  • The most important advantage of this type is that the way of running the economic organization is completely dependent on the investor based on the absolute level of ownership in enterprises. At that time, investors have the right to receive all profits earned from the company’s operations and easily control and decide all activities of the company without the opinion of another party.

If you have any questions or concerns related to investment in e-commerce management consulting services in Vietnam, please contact Viet An Law for the best advice.

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