Types of foreign-invested companies in Vietnam

One issue that investors are always interested in when conducting investment activities in Vietnam is the choice of type of business. The choice of the right type of business will greatly affect the existence and development of the company later.

According to the provisions of the Investment Law 2020, there is no distinction between domestic and foreign investors in the selection of types of enterprises. Therefore, foreign investors can choose any type of enterprise by the Law on Enterprises 2020.

The following law, Viet An Law, would like to summarize the types of enterprises that foreign investors can choose as follows:

Legal basis

• Investment Law 2020
• Enterprise Law 2020
• Decree No. 31/2021/ND-CP dated March 26, 2021
• Decree No. 01/2021/ND-CP dated January 4, 2021

Types of businesses

Limited liability company with two or more members

A limited liability company with two or more members is an enterprise with 02 to 50 members who are organizations and individuals. The Member is responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise, except for the case of:

• In case a member has not contributed capital or has not contributed the committed capital, the company must register the change of charter capital, the ratio of the contributed capital of the members equal to the contributed capital within 30 days from the last day must contribute the full capital contribution as prescribed (The time limit for capital contribution is 90 days from the date of issuance of the Certificate of business registration). Members who have not contributed capital or have not contributed sufficient amounts of committed capital shall be responsible in proportion to the proportion of capital contributed to the financial obligations of the company arising in the period before the date the company registers the change of charter capital and the proportion of capital contributed by the member.

The member’s capital contribution is only transferred under the following provisions:

• Acquisition of contributed capital: The member of the company has the right to request the company to buy back the contributed capital if the member has voted in favor of the resolution or decision of the Member Council on the following issue:
  • Amending and supplementing the contents of the Company’s Charter relating to the rights and obligations of members and the Members’ Council;
  • Reorganize the company;
  • Other cases as prescribed in the Company’s Charter;
• Transfer of contributed capital: Company members have the right to transfer the contributed capital by the following provisions:
  • Offer to sell such capital to the remaining members at a proportion corresponding to their capital contribution in the company with the same conditions for offering;
  • Transfers with the same conditions for offering for sale for the remaining members specified in Point an of this Clause to non-members if the remaining members of the company do not purchase or do not buy them all within 30 days from the date of the offer.
• In addition, the member’s capital contribution can be handled in some special cases such as inheritance, donation, repayment of debts, members held in temporary detention, custody …

A limited liability company with two or more members has legal status from the date of issuance of the Enterprise Registration Certificate.

A limited liability company with two or more members may not issue shares, except for cases for conversion into a joint-stock company.

A limited liability company with two or more members may issue bonds by this Law and other relevant laws; The issuance of individual bonds must comply with the provisions of law.

One member limited liability company

A one-member limited liability company is a business owned by an organization or an individual (hereafter referred to as the company owner). The owner of the company is responsible for the company’s debts and other property obligations within the company’s charter capital.

A one-member limited liability company has legal status from the date of issuance of the Enterprise Registration Certificate.

One-member limited liability companies may not issue shares, except for cases for conversion into joint-stock companies.

One-member limited liability companies shall issue bonds by this Law and other relevant laws; the issuance of individual bonds by the law.

The charter capital of a one-member limited liability company when registering for the establishment of a business is the total value of assets committed by the company owner and stated in the Company’s Charter.

The owner of the company must contribute capital to the company insufficient and the right type of assets committed when registering the establishment of the enterprise within 90 days from the date of issuance of the Enterprise Registration Certificate, excluding the time of transporting and importing capital contribution assets, carry out administrative procedures for transferring ownership of property. During this period, the owner of the company has rights and obligations corresponding to the committed capital contribution.

Joint Stock Company

A joint-stock company is a business in which:

• Charter capital is divided into equal parts called shares;
• Shareholders may be organizations and individuals; the minimum number of shareholders is 03 and the maximum number is not limited;
• Shareholders are only responsible for the debts and other property obligations of the enterprise within the scope of the capital contributed to the enterprise;
• Shareholders have the right to freely transfer their shares to others, unless the following:
  • Within 03 years from the date, the company is granted the Certificate of Enterprise Registration, the common shares of the founding shareholders shall be freely transferred to other founding shareholders and may only be transferred to non-founding shareholders if approved by the General Meeting of Shareholders. In this case, the founding shareholders who plan to transfer common shares shall not have the right to vote on the transfer of such shares. (Clause 3, Article 120 of the Enterprise Law 2020)
  • Shares are freely transferred, except for the cases specified in Clause 3, Article 120 of the Enterprise Law 2020 and the Company’s Charter which restricts the transfer of shares. In case the company’s charter has restrictive provisions on share transfer, these provisions shall only take effect when clearly stated in the shares of the respective shares. (Clause 1, Article 127 of the Enterprise Law 2020)

A joint-stock company has legal status from the date of issuance of the Enterprise Registration Certificate.

The joint-stock company has the right to issue shares, bonds, and other securities of the company.

Partnership company

The partnership is a business in which:

• There must be at least 02 members who are the joint owners of the company, doing business together under the same common name (hereafter referred to as partnership members). In addition to partnership members, the company may have additional members contributing capital;
• The partnership member must be an individual, responsible for all of his or her assets for the obligations of the company;
• Contributing members are organizations and individuals and are only responsible for the company’s debts to the extent of the amount of capital committed to the company.

The partnership has legal status from the date of issuance of the Enterprise Registration Certificate.

The partnership may not issue any kind of securities.

Partnership members and contributing members must contribute sufficiently and on time the committed capital.

Partnership members who do not contribute enough and on time the amount of capital committed to cause damage to the company are liable for damages to the company.

In case a contributing member does not contribute enough and on time the committed capital, the amount of capital not contributed sufficiently is considered a debt of that member to the company; in this case, the member of the relevant capital contribution may be expelled from the company at the discretion of the Member Council.

Private enterprise

A private enterprise is an individual-owned enterprise that is solely responsible for all of its assets for all activities of the business.

Private companies may not issue any kind of securities.

Everyone is entitled to set up a private business. Private business owners must not be simultaneously business household owners or partnership members of partnership companies.

Private enterprises are not entitled to contribute capital to establish or purchase shares or capital contributions in partnerships, limited liability companies, or joint-stock companies.

The investment capital of the private business owner is self-registered by the business owner. Private business owners are obliged to accurately register the total investment capital, which clearly states the amount of capital in Vietnamese dong, convertible foreign currency, gold, and other assets; For capital equal to other

assets, it is also required to specify the type of asset, the amount, and the remaining value of each asset class.

All capital and assets including loans and leased assets used in the business activities of the enterprise must be fully recorded in the accounting books and financial statements of the enterprise by the provisions of law.

Services for establishment of foreign-invested companies of Viet An Law Firm

• Advising on conditions for the establishment of foreign-invested capital companies: the rate of capital contribution of foreign investors in Vietnam; business conditions for industries; project location; note the procedures before and after the establishment of a foreign-invested company;
• Advising on the selection of suitable types of companies for investors: Limited Company or Joint Stock Company;
• Advising on opening capital transfer accounts and capital contribution durations;
• Advising on guiding investors to prepare documents necessary to establish a foreign-invested company; · Advising and drafting dossiers of the establishment of companies for investors;
• Representatives of investors working with competent State agencies of Vietnam in the process of carrying out the procedures for establishing companies for investors (Apply for investment registration certificates, business registration certificates, business licenses, licenses according to specialized requirements, make legal marks, publish seal samples and procedures after the establishment of companies,…; · Comprehensive, regular consulting, accounting services, tax law package activities arising in the process of doing business in Vietnam for investors.