Tiếng Việt
Dear Valued Clients,
Incorporation is the first procedure to create a commercial entity to carry on business operations in an orderly and organized manner. To learn about the application files as well as the process and procedures for the establishment of an enterprise and, subsequently, post-licensing matters, investors may pay attention to our below guidance.
1. Application dossiers for enterprise incorporation[1]
At first, investors (who are supposed to be the owners of the enterprises to be established) should prepare an application to submit to the authorities for obtaining the Enterprise Registration Certificate (also known as the incorporation certificate of the company). Depending on the type of business, the business line that the application dossier for incorporation of enterprises varies from one another. Below are the common documents that most businesses must prepare when starting up:
| STT | Documents | Document Type |
| 1 | The application form for enterprise registration (The form prescribed in Circular 01/2021/TT-BKHDT regarding business registration) | Original |
| 2 | The company’s charter | Original |
| 3 | List of the members/ founding shareholders | Original |
| 4 | Copies of identity documents of the members/founding shareholders (one of the following documents: identity card, citizen identification card or passport) | Certified copy (If using a foreign passport, a notarized translation is required) |
| 5 | Legal documents in case the member/founding shareholder is an organization (Establishment decision or Enterprise Registration Certificate (“ERC”); valid copies of legal personal identification documents of the authorized representative managing stakes; and the power of attorney for the authorized person by the owner) | Certified copy (If using documents of foreign organizations must be consular legalized) |
| 6 | Power of attorney for the organizations/individuals carrying out the procedures for submitting enterprise registration documents (in case the person doing such procedures is not the legal representative of the enterprise) | Original
|
| 7 | Valid investment registration certificate if the enterprise involves foreign elements | Certified copy
|
| 8 | Other types of documents for conditional business lines (i.e. Import and Export License; Food Hygiene and Safety Certificate, etc.) | Certified copy
|
2. Enterprise registration procedures
Step 1: Prepare the enterprise establishment dossiers according to the content of Section 1.
Step 2: Submit the application for enterprise establishment and pay the fee for the publishing of enterprise information.
- Submit the application for the issuance of ERC via the National Business Registration Portal.[2]
- The procedures for paying the fee for the publishing of enterprise information will be carried out at the same time as the procedures for submitting the application for enterprise establishment.
Step 3: Receive the ERC
- After 03 working days from the date of receiving the application, the ERC shall be issued if the application is valid.
Step 4: Complete the procedures after the issuance of ERC:
- Engraved corporate seal.
- Open a bank account for the company.
- Register for electronic signature and register for online tax payment.
- Submit the license tax declaration and pay the license tax.
- Notice of issuance of electronic invoices.
- Hanging signboards at corporate headquarters.
3. Notes on choosing the type of enterprises
Depending on the purposes and needs, investors may choose the right type of enterprise. Currently, there are 05 common types of enterprises according to the Enterprise Law 2020: Sole proprietorships, partnerships, Single-member limited liability companies, Multi-member limited liability companies, and Joint-stock companies.
| Type of enterprises | Advantages | Disadvantages |
| Sole proprietorships [3]
|
– Lean organizational structure; Simple to manage and operate.
– The owner is the sole member, has full decision-making power over business activities and enjoys all profits.
– It has no legal status, so it is not subject to the strict management of the law. |
– The owner is subject to great risk as he bears unlimited liability with all his assets for all obligations regarding property of the enterprise
– The owner shall not concurrently be the owner of a household business/general partner of another partnership/owner of another sole proprietorship.[4]
– A sole proprietorship is not entitled to capital contribution for establishment or purchase shares or contributed capital in a partnership, a limited liability company or a joint stock company.[5]
– Poor ability to mobilize capital, can only mobilize capital from the owners or borrow capital from other organizations and individuals. |
| Single-member limited liability companies[6]
|
– For being juridical persons, they can enter into legal relationships independently. This gives enterprises more stability in legal life than sole proprietorships.
– The owner shall only bear limited liability to the extent of the company’s charter capital[7], limiting the owner’s risk in the business.
– The owner shall have full rights to transfer all or part of the charter capital of the company.[8] |
– The regulatory system is stricter than that of sole proprietorships.
– Restricted in mobilization of capital for being able to issuing shares. If they want to raise more capital contributed by individuals and other organizations, they shall have to carry out the procedures to convert the type of business into a Multi-member limited liability companies or a Joint Stock Company.
|
| Multi-member limited liability companies[9]
|
– The ability to mobilize capital is greater than that of a single member limited liability company due to its large number of members and the easier transfer of members compared to one member limited liability company.
– Company members are responsible for the activities of the company within the amount of capital contributed to the company, thus posing little risk to capital contributors.
– The members of the company have certain relationships with each other due to the limited number of participating members and are not “public” like a joint stock company.
|
– The management and operation of the company is relatively complicated due to the large number of members and the company’s business activities are under the strict management of the law.
– High tax on capital contribution transfer: 20%.[10]
– Shall not issue shares to raise capital from the public.[11] |
| Joint-stock companies[12] | – Easily expands in terms of personnel due to unlimited number of maximum members.
– The ability to raise capital is not limited because Joint-stock companies is allowed to offer a variety of securities to the public.
– The model is suitable for most fields and business lines. – Limited liability regime helps shareholders limit risks and freely contribute capital to invest in other companies. This is one of the characteristics that makes Joint-stock companies become an attractive business model for investors.
– The transfer of shares is relatively easy, most shareholders shall have the right to freely transfer their shares to others with the optimal transfer tax rate: 0.1%.[13] |
– The operation of a joint stock company is complicated due to the large number of shareholders and can be divided into groups of shareholders with opposing interests.
– Shareholders may freely transfer shares so that the company can be controlled /acquired by entities with great economic potential.
– Being strictly bound by the provisions of law, especially on the financial and accounting regime.
– Within the first 3 years of establishment, founding shareholders may not transfer their ordinary shares to other people other than founding shareholders in the company without the approval of the General Meeting of Shareholders.[14]
– Business and financial confidentiality is limited because the company must disclose and report to shareholders.
|
| Partnership[15] | – Combining the personal reputation of many people, thus easily creating the trust of business partners.
– The management of the company is not too complicated due to the small number of members. And as reputable people, they absolutely trust each other.
– Banks are easier to lend capital and delay debt. Due to the unlimited liability regime of general partners.
|
– Due to the unlimited liability regime,[16] the risk of the general partners is very high.
– May not issue any kind of securities.[17] If they want to raise capital, members may add their own assets or accept new members.
– General partners may not own private enterprises; may not be a general partner of another general partner unless otherwise agreed by the remaining general partners.[18]
– General partners who withdraw from the company are still liable for debts of the partnership arising before the date of termination of membership for a period of 2 years.[19]
|
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.
_____________________________
[1] Article 21-24 of Decree 01/2021/ND-CP regarding enterprise registration.
[2] Accessed on https://dangkyquamang.dkkd.gov.vn.
[3] Article 188 of Enterprise Law 2020.
[4] Article 188.3 of Enterprise Law 2020.
[5] Article 188.4 of Enterprise Law 2020.
[6] Article 74 of Enterprise Law 2020.
[7] Article 74.1 of Enterprise Law 2020.
[8] Article 76 of Enterprise Law 2020.
[9] Article 46 of Enterprise Law 2020.
[10] Article 11.1.b Circular 111/2013/TT-BTC of the Ministry of Finance guiding the implementation of the Law on Personal Income Tax, the Law amending and supplementing a number of articles of the Law on Personal Income Tax and Decree No. 65/ 2013/ND-CP of the Government detailing a number of articles of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax.
[11] Article 46.3 of Enterprise Law 2020.
[12] Article 111 of Enterprise Law 2020.
[13] Article 11.2.b(2) Circular 111/2013/TT-BTC of the Ministry of Finance dated August 15, 2013 guiding the Law on Personal Income Tax, the Law amending and supplementing a number of articles of the Law on Personal Income Tax and Decree No. 65/2013/ND-CP of the Government detailing a number of articles of the Law on Personal Income Tax and the Law amending and supplementing a number of articles of the Law on Personal Income Tax.
[14] Article 20.3 of Enterprise Law 2020.
[15] Article 177 of Enterprise Law 2020.
[16] Article 181.2.dd of Enterprise Law 2020.
[17] Article 177.3 of Enterprise Law 2020.
[18] Article 180.1 of Enterprise Law 2020.
[19]Article 185.5 of Enterprise Law 2020.
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