Legal notes when establishing a business in Vietnam

From a legal perspective, establishing a business is a legal procedure carried out by business owners at competent management agencies and state agencies to form a new business. This article provides some key issues that business owners must determine before registering to establish a business.

1. Determining the type of company 

Currently, Enterprise Law recognizes 05 types of businesses as follows:

– Limited liability company with 2 or more members;

– Limited liability company with 1 member;

– Joint stock company;

– Partnership company;

– Private enterprise individual.

Each type of business has its own nature, characteristics, and meeting conditions specifically stipulated in the Law on Enterprises 2020. When there is a need to establish a business, individuals/organizations that are business owners need to learn and evaluate the advantages and disadvantages of each of the above types to come up with the most suitable type to help the business promote its existing advantages, and at the same time, eliminate limitations that hinder the ability to develop. future business development.  

2. How to name a company

Based on Article 37 of the Law on Enterprises 2020, the law stipulates the structure of creating a business name based on 2 elements, specifically as follows:

Enterprise name  =  Enterprise type name  +  Proper name

In that:

– Name of business type It can be written completely or abbreviated according to the following regulations:

• • For limited liability companies, it can be written as: “limited liability company” or “limited company”;
  • For joint stock companies, it can be written as “joint stock company” or “joint stock company”;
  • For partnership companies, it can be written as “partnership company” or “HD company”;
  • For private enterprises, it is written as “private enterprise”, “DNTN” or “private enterprise”.

– Personal name must be composed of the Vietnamese alphabet, the letters F, J, Z, W, numbers and symbols.

Basically, individuals/organizations establishing businesses have the freedom to choose their business name but must still ensure the correct structure prescribed by law. However, to avoid negative consequences, Article 38 of the Law on Enterprises 2020 lists 03 prohibited cases in naming a business.

• • Case 1: Placing a name identical or confusing with the name of a registered enterprise.
  • Case 2: Using Using the name of a state agency, a unit of the people’s armed forces, the name of a political organization, a socio-political organization, a socio-political-professional organization, a social organization, a socio-professional organization as all or part of the enterprise’s proper name, unless approved by that agency, unit or organization.
  • Case 3: Using words, symbol that violates the historical, cultural, ethical and fine traditions of the nation.

3. Company headquarters address

According to Article 42 of the Law on Enterprises 2020, the enterprise’s headquarters is located in the territory of Vietnam, is the contact address of the enterprise and is determined according to the administrative unit boundaries; with phone number, fax number and email (if any).

Comparing with the above regulations, a valid head office address  must meet the following conditions:

• • Located in the territory of Vietnam
  • The address must be clearly identified according to 4 levels of administrative applications. Including: House number and street name + Ward/commune/town name + District/town/provincial city name + Central city/province name.
  • It is not allowed to place addresses in apartments or group houses without business functions.

4. Business lines

According to the provisions of the Law on Investment 2020, business investment policies allow businesses to carry out business investment activities in industries and occupations that are not prohibited by this Law. Therefore, individuals and organizations are free to choose their own business sectors and professions but are not allowed to invest in the following industries and professions:

(1). Trading in narcotics specified in Appendix I of the Investment Law;

(2). Trading in chemicals and minerals specified in Appendix II of the Investment Law;

(3). Trading in specimens of wild plants and animals originating from the wild as prescribed in Appendix I of the Convention on International Trade in Endangered Species of Wild Plants and Animals; Specimens of endangered, precious, and rare species of forest plants, animals, and aquatic animals Group I originating from natural exploitation specified in Appendix III of the Investment Law;

(4). Prostitution business;

(5). Buying and selling humans, tissues, corpses, human body parts, human fetuses;

(6). Business activities related to human cloning;

(7). Trading in firecrackers;

(8). Debt collection service business.

For conditional business lines, meeting the conditions prescribed by law is mandatory to serve common goals related to national defense, national security, social order and safety,… These conditions can be a Business License (sublicense), Business Qualification Certificate, practice certificate or legal capital. determined.

5. Declaring the company’s charter capital

According to the provisions of Clause 34, Article 4 of the Law on Enterprises 2020: “charter capital is the total value of assets contributed or committed to be contributed by company members and owners when establishing a limited liability company or partnership; is the total par value of shares sold or registered to buy when establishing a joint stock company.”

From the perspective of common interests, the registered charter capital partly represents the scale of operations and financial potential of the enterprise. Helps businesses easily access potential partners and customers to maintain and accelerate development when conducting business activities. From the perspective of personal interests, charter capital is important in determining the capital contribution ratio of owners and members of the company. This is the basis for dividing the rights and obligations of these subjects when participating in establishing the company.

Currently, there are no legal regulations on minimum or maximum levels when registering charter capital (except for conditional business lines). This means that individuals and organizations that declare their charter capital can still register their business. However, for some occupations, there are conditions, due to the sensitive nature and influence of these occupations on the domestic economy and society. The State agency determines the level of legal capital (minimum charter capital) that must be achieved to be able to do business. This regulation aims to create a stable and competitive business environment, prevent financial risks and protect both consumers and related partners.