Issue 010523 – Establishment of representative office

Dear Valued Clients,

A representative office (“RO”) is one of the types of dependent units of an enterprise in Vietnam. Based on the purposes and needs, Vietnamese enterprises or foreign traders can choose to establish an RO to facilitate their business activities.

In order to better understand the definition, functions, organizational structure, activities, and establish procedures for each type of RO according to the law, Valued Clients can refer to our below legal article.

1. Definition of RO

According to the general definition of Enterprise Law 2020, RO of an enterprise is its dependent unit which acts as the enterprise’s authorized representative, represents, and protects the enterprise’s interests.[1]

In addition, the Commercial Law 2005 provides the definition of Vietnam-based RO of a foreign trader as follows: Vietnam-based RO of a foreign trader means a dependent unit of the foreign trader, which is established under the provisions of Vietnamese law to conduct market survey and a number of commercial promotion activities permitted by Vietnamese law.[2]

Therefore, there are two types of Ros can be established and operate under two specialized law. The ROs of Vietnamese enterprises shall be established and operare under the Law on Enterprise, while ROs of foreign enterprises(foreing trader) shall be established and operate under the Commercial Law.

2. Functions of RO

Unlike the business location or branch of an enterprise, according to Article 44 of the Law on Enterprise: “Representative office shall not perform business functions of the enterprise”. The business function of an enterprise according to this regulation can be understood as the performance of business activities which bring profits for the enterprise within the business lines registered by the enterprise upon its establishment.

Accordingly, the RO will not be able to carry out any profitable business activities, and can only perform a number of activities as authorized by the enterprise such as:

(i) Representing the enterprise in lilaising with its partners and customers;

(ii) Conduct market research, analysis, assessments, and information collection.

In addition, according to the provisions of the Commercial Law 2005, RO are not allowed to directly carry out trade promotion activities, including: sales promotion; advertisement; display and introduction of products and services (except for display and introduction at the representative office); trade fairs and exhibitions. However, in case the RO is authorized by the enterprise, it may carry out trade promotion by executing a contract with a provider of the above-mentioned trade promotion services (except for the form of sales promotion, the RO is not allowed to perform sales promotion either directly or indirectly through a service provider).[3]

3. Organizational structure and operation of the RO

The RO has a simple organizational structure, including the head of the RO and the employees working in the office. Such lean organizational structure helps to reduce management costs, especially in the early stages of approaching and researching the market.

During its operation, the RO is not allowed to execute a contract, amend or supplement a signed contract, unless the head of the RO has a valid power of attorney from the enterprise, or the RO directly signs contracts in the following cases:[4]

(i)        Renting offices, renting or purchasing facilities and equipment necessary for the RO’s operations.

(ii)        Recruiting Vietnamese and foreign labors to work for the RO in accordance with the provisions of Vietnamese law.

(iii)       Opening a bank account to use such account for the operation of the RO (Please note: RO of foreign traders can only open accounts in foreign currencies or foreign currency-based Vietnam Dong at banks licensed to operate in Vietnam).

4. Establishment procedure

4.1. For ROs of Vietnamese enterprises

(i)         Licensing authority: Business Registration Office of the Department of Planning and Investment of the province or city where the RO is located

(ii)        Implementation steps:

–           Step 1: Prepare a application dossier for establishment of the RO;

–           Step 2: Submit the application dossier for establishment of the RO to the Business Registration Office through the National business registration portal[5];

–           Step 3: The Business Registration Office issues a Certificate of registration for operations of RO. In case the application is not valid, the Business RO shall notify in writing the contents that need to be amended or supplemented to the enterprise.

(iii)      Implementation time: 03 (three) working days from the date of submission of complete and valid dossier.

(iv)      Application dossier

4.2. For RO of foreign traders in Vietnam

(i)         Licensing authority:

–           Department of Industry and Trade of the province and centrally run city if the RO is located outside of the industrial parks, export processing zones, economic zones, and high-tech zones.

–           Management Boards of industrial parks, export processing zones, economic zones and high-tech zones in case the RO is located in an industrial park, export processing zone, economic zone or high-tech zone.

(ii)        Implementation steps:

–          Step 1: Prepare an application dossier for establishment of the RO of a foreign trader in Vietnam.

–           Step 2: Submit the application dossier directly or by post or online (if applicable) to the licensing authority.

–           Step 3: Within 03 working days from the date of receipt of the dossier, the licensing authority shall examine and request for admendment and supplementation if the dossier is incomplete or invalid.

If it is necessary to consult a specialized management ministry, the licensing authority shall send a written request to the relevant ministry within 03 working days from the date of receipt of a complete and valid application. Within 05 working days from the date of receipt of the written request for opinions from the licensing authority, the relevant ministry shall issue a written statement clearly stating its agreement or disagreement with the grant of a Certificate of registration for operations of RO.

–           Step 4: In case it is not necessary to consult a specialized management ministry, within 07 working days from the date of receipt of a complete and valid dossier, the licensing authority shall grant or refuse to grant a Certificate of registration for operations of RO for foreign traders.

In case it is necessary to consult the specialized management ministry, within 05 working days from the date of receipt of the opinion of the relevant ministry, the licensing authority shall grant or not grant a Certificate of registration for operations of RO for foreign traders.

(iii)      Implementation time: 07 (seven) working days from the date of submission of complete and valid dossier.

(iv)      Dossiers

As always, we hope you find this Legal Article useful and look forward to working with you in the future.

Kind regards,

ENT LAW LLC

The full version of this Legal Article can be found here.

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[1] Clause 2, Article 44 of the Enterprise Law 2020

[2] Clause 6, Article 3 of the Commercial Law 2005

[3] Article 91, Article 103, Article 118, and Article 131 of the Commercial Law 2005

[4] Article 17 and Article 18 of the Commercial Law 2005

[5] National business registration portal: https://dangkykinhdoanh.gov.vn/en/Pages/default.aspx