Forms of Company to be Set-up in Vietnam

According the Vietnam Law on Enterprises, there are four common types of companies:

-Private enterprise is an enterprise owned by an individual who is liable for all of its operations with his/her entire property;

-Partnership is an enterprise in which (i) there are at least two partners who are co-owners of the company, jointly conduct business under one common name; in addition to general partners, there may also be limited partners; (ii) general partners to a partnership must be individuals who are liable for all obligations of the partnership with his/her own entire property; (iii) Limited partners shall be liable for debts of the partnership only to the extent of their capital contribution to the partnership;

-Joint stock company is an enterprise where (i) Its charter capital is divided into equal portions known as shares; (ii) Shareholders may be organizations and/or individuals; the minimum number of shareholders shall be three and shall not be restricted to any particular maximum number; (iii) Its shareholders shall be liable for debts and other property liabilities of such enterprise within the limit of the value of their capital contribution to the enterprise; (iv) Shareholders shall be entitled to freely transfer their shares according to the provisions of law;

-Limited liability company (multi-member limited liability company and single-member limited liability company). A one-member limited liability company is an enterprise which is owned by one organization or individual (hereinafter referred to as the company owner); the company owner is liable for debts and other property liabilities of the company within the charter capital of the company. A limited liability company is an enterprise of which: (i) Members may be organizations and/or individuals; the total number of members shall not exceed fifty; (ii) Members are responsible for debts and other property liabilities of the enterprise within the amount of capital that they have committed to contribute to the enterprise; (iii) Capital shares of the members may only be transferred in accordance with the provisions of law.

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Attraction from Industrial Parks in Phu Yen

Phu Yen is gradually moving its economic structure from a purely agricultural province to industry, tourism and services. In order to achieve this goal, thousands of hectares of industrial parks have been prepared, along with infrastructure investment with full facilities to attract projects and foreign investors to invest in Vietnam and in Phu Yen province.

In May 1974, at the An Phu Industrial Zone in Tuy Hoa, Phu Yen province, the electronic component factory was kicked off, marking the presence of the high-tech industry in Phu Yen. This is the first electronic component factory to be built in Phu Yen, with a capacity of 500 million pieces per year, with such main products as RF coils and electromagnets. Total investment for the factory is over 5.7 million USD, 100% of products will be exported. The establishment of a factory in Phu Yen province is part of Coilcraft Corporation’s production development in Asia.

The Vice Chairman of Phu Yen People’s Committee welcomed the Coilcraft Corporation for investing in Phu Yen, contributing significantly to the socio-economic development and the industrialization and modernization process of the province. At the same time, it is suggested that the Management Board of Phu Yen Economic Zone and investors continue to have connections and promote the industrial potential of Phu Yen to other investors.

The appearance of electronic component factory invested in An Phu Industrial Park, besides the glass production factories of Hoang Hai Trading Co., Tan Phat Canned Food Joint Stock Company and the project of CCIPY Vietnam limited liability company., as well as bottled water , soft water plants, and seafood processing plants (in Hoa Hiep 1 Industrial Park) of Xin Bang Co., Ltd have made the investment situation in Phu Yen’s industrial zones more diverse and exciting.

Besides implementing the policy of economic restructuring towards industrialization, the Party and Phu Yen authorities have made many appropriate policies in order to mobilize internal resources in the province and attract foreign investment. At the same time, completing investment in infrastructure of approved industrial zones and clusters; promote the efficiency of investment and the role of industrial zones and clusters in economic restructuring of the industry, contributing to the economic restructuring of the province.

Currently, Phu Yen province plans to build industrial parks, attracting hundreds of investment projects. In particular, it is concentrated in Hoa Hiep 1 Industrial Park, Hoa Hiep 2, An Phu, North East Song Cau 1 and North East Song Cau 2.

One of the favorable conditions for the management board of Phu Yen economic zone to carry out the plans of promoting and attracting investment in line with the industries and sectors in the industrial parks. That is Phu Yen Provincial Industrial Development Plan up to 2020, with vision to 2030, which has been approved by the provincial People’s Committee.

The plan identifies groups of industries with priority given to development till 2020 with a vision to 2030, including: processing of agricultural, forest and aquatic products; medicine; textile; products from new technology; software industry and digital content; chemistry; energy; electronic equipment, telecommunications equipment and information technology; mechanical engineering; supporting industry.

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How to distinguish a Limited Liability Company and a Joint Stock Company?

Vietnam Law allows the establishment of a company in Vietnam in various forms. It is an important step in investment process.

Investors could choose different forms depending on the needs and capacity on the ability to raise capital and sharing the risk in business as well as the management and operating costs. Each form will have its own organizational structure, operating mechanism, rights and obligations specified under Law on Enterprise 2014.

Currently, Limited Liability Company (“LTD”) and Joint Stock Company (“JSC”) are two popular enterprise forms operating in Vietnam.

What is the difference between these two forms of companies?

I. Organizational Structure

Number of members/shareholders:

LTD

-Single member LTD: Having only one member (member can be an organization or an individual);

-Multi members LTD: Having at least 2 members and not exceed 50 members (member can be an organization or an individual).

JSC

Joint Stock Company has at least 3 shareholders and not limit the maximum number.

Management structure

LTD

-Single member LTD

Single member LTD owner by an organization shall be organized under two models: Company president, Director/General director and Supervisor; (OR) Members Council, Director/General director and Supervisor.

Single member LTD owner by an individual shall be organized as follows: Company president, Director/General director.

-Multi members LTD

Multi members shall be organized by: LTD Council members, Chairman of the Members Council and Director/General director;

Multi members LTD having 11 members or more shall establish the Board of Supervisors.

JSC

JSC can be organized under two models: General Meeting of Shareholders, Board of Directors, Board of Supervisors and Director/General director; (OR) General Meeting of Shareholders, Board of Directors (Board of Internal Supervisors under Board of Directors) and Director/General director.

II. Capital Contribution

Raising capital

LTD

-Single member LTD: Owner increases charter capital

-Multi members LTD: Members increase their charter capital, or increasing the number of capital contributors

JSC

Different from LTD, JSC can raise its capital by various methods as follows: Selling shares to existing shareholders; Selling shares individually to non-shareholders; Issuing shres on the stock market.

Transfer of contributed capital

LTD

-Single member LTD: Owner transfers a part of contributed capital to other persons and this could lead to changes of the type of business or other procedures if all capital is transferred (for instance in a M&A deal).

-Multi members LTD: Offer the stakes to other members in proportion to their stakes in the company under the same conditions; The stakes could only be transferred to other persons if the members do not buy or do not buy completely within 30 days from the offering date.

JSC

The shareholders of JSC are free for transfer their contributed capital after 03 years from the establishment.

Having said that, LTD is a type of enterprise that the capital contribution is not the only link between the members of the company but they are also linked together by relationship. They may be acquaintances and trust each other to jointly contribute capital to establish an enterprise. Therefore, the management of the LTD is as complicated as JSC. With the larger the number of shareholders, the level of capital mobilization, voting power to decide on issues of the company based on the ratio of capital contribution of each shareholder, the management and operation of the JSC is more complex.

The ability to raise capital of a JSC is higher than a LTD. Because, JSC can issue shares to the public in the form of securities. When the stocks are listed on stock exchange, the information of company’s business operations must be public and more transparent.

The procedure to set up a company in form of an LTD or a JSC has not much differences.

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What Procedures an Enterprise Complies on Publishing Business Information?

Provisions on announcing of business information are stipulated in the Law on Enterprise and other decrees which company has to comply as part of compliance procedures.

After being granted an enterprise registration certificate, under the Enterprise Law, an enterprise must publicly announce it on the National Business Registration Portal according to the order, procedures and pay fees as required. The application for publication of enterprise registration information is a compulsory procedure, made at the time an enterprise submits its enterprise registration dossier. Information about publication of enterprise registration information is posted on the National Business Registration Portal. The content to be published includes the contents on the enterprise registration certificate and the lines of business. In addition, for joint stock companies with foreign investors, a list of founding shareholders and foreign investors is required. In case of changes in enterprise registration contents, the corresponding changes must be publicly announced on the National Business Registration Portal.

Provisions on form, time and content of announcement are different from those in the Law on Enterprise, specifically, within a period of thirty days from the date of being granted an enterprise registration certificate, an enterprise must publish information in one of the forms posted on the business information network of the business registration agency or one of the written or electronic newspapers in three consecutive issues. The main content to be published includes: Company’s name; Address of the head office of the enterprise, branch or representative office; Lines of business; Charter capital of limited liability company and partnership company; number of shares and value of contributed capital and number of shares to be issued with joint stock company; initial investment capital for private enterprises; legal capital for enterprises conducting lines of business requiring legal capital; Full name, address, nationality, ID card number, passport or other legal personal identification number, establishment decision number or business registration code of the owner, member or shareholder foundation; Full name, permanent address, nationality, ID card number, passport number or other legal personal identification of the legal representative of the enterprise; Place of business registration.

For publication fees, according to the provisions of Circular no. 47/2019/TT-BTC stipulating the rates, collection, payment, management and use of information provision charges of enterprise information that takes effect from the date of On September 20, 2019, the enterprise registration fee and the enterprise registration content announcement fee are VND 100,000/time, instead of the VND 300,000/time as stipulated in Circular no. 215/2016/TT-BTC regulating the rates, collection, remittance, management and use of charges for provision of enterprise information and enterprise registration fees.

In addition, there are some enterprises that do not need to publish their business information on the National Business Registration Portal before going into operation, but make other forms of announcement. For example, for a law-practicing organization, within thirty days after being granted operation registration papers, law-practicing organizations must publish on daily newspapers of central or local registry of law practice or newspaper for three consecutive issues. For credit institutions, foreign bank branches, representative offices of foreign credit institutions and other foreign institutions engaged in banking activities, they must be published on the State Bank’s media, and in a daily newspaper written in 03 consecutive issues or an electronic newspaper of Vietnam at least thirty days prior to the scheduled date of operation of opening information as prescribed in Article 25 of the Law on Credit Institutions 2010.

In addition to disclosing corporate information, there is also a procedure for disclosure of information on the stock market that is applicable to public companies and bond issuers (except for government bond issuers and bonds), government-guaranteed bonds and local government bonds), securities companies, fund management companies, branches of foreign fund management companies in Vietnam, public funds. These companies and organizations must comply with the law on securities in the Securities Law announcing on the company’s website and information disclosure system of the State Securities Commission.

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