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Vietnam provides several options for market entry – below we outline the most common forms of corporate structure options for investors.

Representative Office

A representative office (RO) offers a low-cost entry for companies seeking to gain a better understanding of the Vietnamese market. As such, this option is among the most common for first-time entrants to the Vietnamese market and often precedes a larger presence within the country. Currently, ROs are permitted to engage in the following activities:

  • Conducting market research;
  • Acting as a liaison office for its parent company;
  • Promoting the activities of its head office through meetings and other activities that leads to business at later stages.

Vietnam’s Ministry of Planning and Investment (MPI) does not currently specify the required capital for ROs. While the MPI does not impose specified capital requirements, companies will be required to show that their capital contributions are sufficient to fund the activities of their operations. As a result, potential investors should prepare to commit a minimum of US$10,000 to fund their operations. ROs can be set up in between six to eight weeks.

Branch Office

A branch office (BO) can conduct business activities in Vietnam with the parent company’s business scope. To set up a BO, a parent company must have conducted business in its home country for at least five years. BOs are limited to certain types of service businesses, such as finance and banking. BOs can hire staff directly, make it easier to do contracts between the parent company and Vietnamese companies, and serve in similar ways to a liaison office.

BOs are permitted to engage in the following activities:

  • Rent offices;
  • Lease or purchase the equipment and facilities required for operations;
  • Recruit local and foreign employees;
  • Remit profits abroad;
  • Purchase and sell goods and commercial activities per licensing;
  • Set up accounting, marketing, and HR departments to represent the parent company.

The BO will need to obtain an establishment license and have a seal with the name of the parent company. The BO will also need to appoint a branch manager who is a Vietnam resident.

Foreign companies may appoint a manager from their countries of origin; however, this employee must get a Vietnam work permit to be hired as a BO manager.

The Ministry of Industry and Trade approves the registration of the BO after the company submits all the documents with the process typically taking 20 working days.

100 Percent Foreign-Owned Enterprise

A 100 percent foreign-owned enterprise (FOE) in Vietnam can operate under the following structure:

  • Joint-stock companies;
  • Limited liability companies.

Limited liability companies (LLC) are the most common form of investment for foreign investors due to their reduced liability and capital requirements.

LLCs can be broken down into single-member LLCs, where there will only be one owner, and multiple-member LLCs, where there will be more than one stakeholder. These owners can be private individuals or companies, depending on the requirements of a given investor.

The setup time for a 100 percent FOE ranges between two to four months on average.

Joint Venture

A joint venture (JV) entails the partnership of companies or individuals for a specific business purpose. JVs are not a unique corporate structuring option; partners usually establish an LLC for standard JVs and a joint-stock company (JSC) if there is a desire to list on Vietnam’s stock exchanges.

For investors purchasing stakes in state-owned enterprises equitized on Vietnam’s exchanges, the JSC structure is required. When entering the Vietnamese market, foreign investors can choose to enter into joint ventures as a majority (ownership more than 50 percent) or minority (ownership less than 50 percent) stakeholder.

The capital requirements for JVs are the same as for 100 percent FOEs.

 Unconditional sectors are not subject to specified capital requirements. However, Vietnam’s MPI does apply industry-specific capital requirements in many cases.

The percentage of ownership, and thus the amount of capital contributed, is the more important metric to use when evaluating the capital requirements for JVs in Vietnam. At present, statutory guidelines impose a foreign contribution floor of 30 percent for JVs, as well as a ceiling in specific conditional sectors. The government also mandates minimum contributions for domestic investors on an industry-specific basis. Set ups for JVs take about two to four months.

Public Private Partnership

A Public Private Partnership (PPPs) entails a partnership between a foreign or domestic enterprise and the government for the completion of key infrastructure projects. Vietnamese authorities are aggressively pursuing PPPs for a variety of infrastructure projects as a means of filling gaps left by a reduced role of state-owned enterprise, rising population, and increasing urbanization.

The five types of PPPs are Build-Transfer-Operate (BTO), Build Transfer (BT), Build- Operate- Transfer (BOT), Build-Own-Operate (BOO) and Build, Transfer and Lease (BTL).

FIE Structure Type

Common Purpose

Pros

Cons

Representative Office

  • Non-separate legal entity
  • Market research
  • Liaison with overseas parent company
  • Easy registration procedure
  • Cannot conduct profit making activities
  • Parent company bears liability

Branch Office

  • Non-separate legal entity
  • Commercial activity within parent company’s scope
  • Can remit profits abroad
  • Limited to certain industry sectors
  • Parent company bears liability

Limited Liability Company

  • Separate legal entity
  • Liability limited to capital contribution
  • No restriction on the scope of business
  • Cannot issue shares
  • Maximum of 50 shareholders

Joint-Stock Company

  • Separate legal entity
  • Liability limited to capital contribution
  • No restriction on the scope of business
  • Can issue shares and go public
  • Three or more shareholders required
  • Supervisory board required for most joint stock companies

Joint Venture

  • Partnership of companies or individuals for specific business purpose
  • Unconditional sectors not subject to specific capital requirements
  • Minimum contribution guidelines for domestic investors for industry specific cases
  • Two to four months to set up

Public Private Partnership

  • Entails partnership between foreign or domestic enterprise and government for infrastructure projects
  • Government aggressively pursuing PPPs to develop infrastructure
  • Several PPP models
  • Investors unsure of returns

Mergers and Acquisitions

Mergers and acquisitions (M&As) are an increasingly popular route for foreign investors looking to begin operations in Vietnam. With an M&A, investors can enjoy pre-existing access to consumers, locations, and distribution channels. This local knowledge can prove critical to successful operations within Vietnam’s vibrant but rapidly changing investment environment.

Investors that find it challenging to enter the Vietnamese market may find that the M&A route provides a unique solution to several obstacles.

Investors need to weigh the pros and cons of whether merging or acquiring complements their business strategy. A merger is when two companies join to form one company by transferring assets, rights, obligations, and interests to the merged company and therefore terminating the two separate companies.

Acquisitions require a change in ownership and are typically in the form of existing share purchases or new shares but also involve acquiring assets. For non-public companies, liability mainly stems from the failure to meet with the provisions set out in the agreement.

Investors that are interested in this route should recognize the legal foundation for M&As, and understand the procedures and restrictions associated with acquisitions.

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