Since Vietnam has opened its gates to foreign investments with the purpose of attracting capital, it could be useful to understand how to do business in this country.
With this article we would like to introduce you to the wide range of business forms provided by Vietnamese Law for foreign investors.
There are seven different types of foreign investment in Vietnam:
1. Joint-Venture Enterprise (JV): This form of investment is characterized by the presence of at least one Vietnamese member and one foreign investor. According to the law, the maximum duration of the JV is 50 years (70 years under special circumstances). The Law allows partners to choose the form of Limited-Liability Company or Join-Stock Company. For this form of investment it is required by law to have a resident as Legal Representative and a capital account with a local bank. In order to invest in Vietnam, foreigners shall obtain the Foreign Investment Certificate (FIC).
2. Wholly Foreign Owned Enterprise (WFOE): This form of investment is characterized by foreign partners only. Also in this case the law provides two types of company models that could be used, a Limited-Liability Company and a Join-Stock Company.
To set a Limited Liability Company it isn’t necessary for the owners to be resident in Vietnam; although, if the Directors are foreigners, they’d need a work permit and, moreover, they shall provide proof of one-year experience in a managing role. One of the requirements for setting up a company is to communicate a registered address in Vietnam and to provide a certificate from a bank which proves the capital-amount deposit.
3. Business Cooperation Contract (BCC): For investing in Vietnam, a foreigner doesn’t have to establish a new legal entity; indeed, there is the chance to invest with a Business Cooperation Contract between a foreign investor and a local counterparty to accomplish a common business project.
Please note that this type of investment undertakes unlimited liability for debts as a consequence.
4. Branch Office: This form of investment actually is not very common in Vietnam and can be allowed only in some determined sectors. According to the law, even if the Branch Office is not an independent legal entity, it is authorized to carry out commercial activities. The Law requires the evidence that the company interested in opening a Branch Office in Vietnam has been engaged in business abroad at least for five years.
5. Representative Office: This form of investment represents the most ordinary way to introduce a company in a new market. With the Representative Office a company can perform market researches and promote the business of the parent company in Vietnam without carrying out commercial activities. It is required by law that the parent company shall be engaged in business abroad for at least one year.
6. Public and Private Partnership (PPP): Foreign investors who want to invest in infrastructure projects usually choose this type of investment, which gives them the chance to institute a direct relationship with the Government.
7. Capital Contribution: Foreign investors have the possibility to invest in different ways in companies that are already operating in Vietnam, for example, by buying shares.
D’Andrea & Partners will keep you updated about Vietnam and its forms of investments. For any further information, don’t hesitate to contact us via info@dandreapartners.com
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