In the current era of globalization and rapid economic development, there are many startups all over the world including Vietnam. Do you want to start a business in Vietnam, but feel overwhelmed by the challenges and difficulties awaiting you. So how to start a business in Vietnam?

There is no doubt that there are many opportunities here in Vietnam, it is actually one of the fastest-growing economies in the world. It can, however, be challenging starting a business in Vietnam.

So let’s take a quick look at the steps to set up a business.

Basic steps to open company in Vietnam

1. Check your Business Conditions

2. Rent a Business Location

3. Select a Company Type

4. Decide on your registered capital

5. Apply for an Investment Registration Certificated

6. Apply for an Enterprise Registration Certificated

7. Open Business Bank Account

8. Post – incoporation Requirements

However you need to notice something

You need a Vietnamese business partner. It must be 51% ownership by a Vietnamese national. The costs of setting up a business are high. There is a lot of “red tape” and I will get overcharged for everything. All of the above are in most cases incorrect. There is not as much “red tape” and people trying to swindle you as you may think. The absolute crucial part of starting a business in Vietnam is to find and work with good services providers.

It might be surprising, but there are black and white rules for setting up a business in Vietnam. And yes, not all plans and projects will fit the requirements, but with accurate information and knowledge, you can reassess and adjust your plans accordingly and strategically.

What are the challenges of starting a business in Vietnam?

During the process of business operation and development, foreign businessmen often face many challenges including:

Completing legal procedures: Vietnam is known as one of the most complex start-up environments because foreigners must complete many procedures to start a business in the country. Some of these procedures are quite unfamiliar to foreign businesses such as registration of the seal-sample at the Police Department.

Paying business taxes: This is something that is difficult in any foreign country as taxes, rules and regulations differ from country to country, dealing with taxes matters is considered a burdensome process, however, having a competent accountant can make things dramatically easier and relatively stress-free.

Applying for construction permits: On the occasion, you would like to construct on land, the process takes around 110 days as well as 11 legal procedures to obtain construction permits in Vietnam. This is only for external construction that is not already approved. 

Company set up process in Vietnam

An LLC, or 100% Foreign-Owned Enterprise, generally requires 3 to 4 months to establish in Vietnam. A Representative office can generally be set up in half that time.

For LLCs, while some sectors may require a ‘Pre-Investment Approval’, most skip to their service provider directly applying for the required Investment Registration Certificate (IRC), which requires 15 working days, unless the sector of intended operation is not governed by the WTO, in which case it may take longer.

With the IRC in hand, an organization may pursue the subsequent steps, including securing a physical business address, applying for an Enterprise Registration Certificate (sometimes referred to as a Business Registration Certificate).

How to get a Legal Representative for a Company in Vietnam

In Vietnam, a company may have only one person to act as the company’s legal representative. In particular, under Article 141.4 of the Civil Code of Vietnam dated 14 June 2005, the legal representative of a legal entity must be the head of that legal entity.

To put it simply, only the legal reps. can bind the company, act on behalf of the company in legal matters as well as perform other rights and obligations of the company.  The legal rep. must be involved in business activities such as application of business licenses, registered capital adjustments, and corporate bank account opening. Details of the legal representative are recorded in the business registration certificate of such company, and government authorities tend to recognize the individual whose details are recorded in the business registration certificate. Thus, the legal representative is usually an individual of a management role or higher.

Requirements for legal representatives in Vietnam

First of all, the legal representative is required to have labor contracts. There are some cases that foreigners can have Work permit exemption like the owner of a company. If you wish to register one legal rep. that needs to have a work permit, he/she needs to reside in Vietnam for a total of at least 183 days per year and cannot leave the country for more than 30 consecutive days. 

For foreign investors who are not able to reside in Vietnam permanently to be the legal representatives of the company, engaging a nominee director provides a solution. A Nominee Director is a dedicated and chosen representative of the company. This person can be of any nationality but is required to reside in Vietnam full time.

Companies incorporated in Vietnam must at all time have at least one legal representative residing in Vietnam. When such individual is absent, he/she must authorize in writing another person (agent) to exercise the rights and perform legal obligations. Upon expiration of the authorization period, if the legal rep. has yet to return to Vietnam, the authorized agent continues to represent the company within the scope of authorized rights and obligations until the legal rep returns.

Responsibilities and Roles of the legal representative

Under the Civil Code only the legal representative of a company or a person authorized by the legal rep. can act on behalf of and make decisions that bind the company. However, since there is no apparent authority doctrine under Vietnamese law, more often than not the court does hold a contract signed by a person who is not properly authorized by the legal representative enforceable against such company. 

A limited company or a joint stock company may have one or more legal representatives. The company’s charter specifies the number, managerial position, rights, and obligations of the legal rep. (Clause 2, Article 13 of the Law on Enterprises 2014). Enterprises can decide for themselves the number of their legal representatives in the exercise of rights and obligations arising from business transactions.

Article 14 of the Law on Enterprises 2014 stipulates that the legal representative of an enterprise assumes the following responsibilities:

Implement the assigned rights and obligations in an honest, careful and best manner to ensure the legitimate interests of the enterprise;

Loyal to the interests of the business; not using information, know-how or business opportunities of the enterprise; not to abuse the position, position or assets of the company for self-interest or for the benefit of other organizations or individuals;

Promptly, fully and accurately notify the company of the ownership of such representatives and their related persons, with dominant shares and contributed capital in the enterprises.

The legal representative of the enterprise is personally responsible for any damage caused to the enterprise by the breach of the above obligations.

In short you can see the challenges and difficulties of start a business in Vietnam

So, you should comply with the provisions of the law if you want to start a safer and faster business in Vietnam because Vietnam is a country with a very strict legal system. Of course, no matter what country you are from, you can start a business in Vietnam.

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