LEGAL INFORMATION ABOUT INVESTMENT IN VIETNAM

1.      Policies and Guarantees on Investment

1.1. Guarantee of asset ownership

Under the Law on Investment, the Vietnamese State shall recognize and protect the ownership of assets, capital, income, other lawful rights and interests of investors. Lawful assets of investors shall not be nationalized or confiscated by administrative measures.

Moreover, the remittance of assets of foreign investors overseas is guaranteed. After all financial obligations to Vietnamese Government are fulfilled, foreign investors are permitted to transfer the following assets to abroad: (i) capital and liquidations; (ii) income from business investment; and (iii) money and other assets under the lawful ownership of the investors.

1.2. Guarantee of Business Investments 

Under the Law on Investment, investors are permitted to make at their discretion decisions on business investment activities in accordance with the Law on Investment and relevant laws; to have access to and use credit funds and support funds and use land and other resources in accordance with law.

Moreover, where a new legal instrument which is promulgated provides greater investment incentives than those which the investor currently is enjoying, the investor is entitled to enjoy the investment incentives in accordance with the new legal instrument for the remaining duration in which the project is entitled to incentives.

Where a new legal instrument which is promulgated provides lower investment incentives than those which the investor has previously enjoyed, the investor shall continue to be entitled to the investment incentives in accordance with the previous regulations for the remaining duration in which the project is entitled to incentives (except changed for reason of national defense and security, social order and safety, social morals, the health of the community or environmental protection).

2. Line of Business 

Prohibited business: In Vietnam, investors are entitled to conduct business investment activities in industries and trades which are not prohibited by the Law on Investment. There are some business activities in which investment is prohibited for both foreign and domestic investors, such as: business in narcotic substances, prostitution, humans or parts of human body, and some specific others.

Conditional business: In addition, there are a number of business activities in which the investment must satisfy certain conditions stipulated by the Government, such as: securities trading, insurance, casino business, logistics services, mineral trading, employment agency services, real estate trading, telecommunications services, and some specific others.

Incentives business: Conversely, the Vietnamese State shall encourage and have a policy of incentives applicable to investment in preferential investment sectors and geographical areas, such as:

• For preferential investment sectors: high-tech activities; production of new materials, new energy, clean energy, electronics, specific agricultural machinery, automobiles, information technology, software, and some others.

• For preferential investment geographical areas and stature: scale of capital being VND 6,000 billion; investment projects located in rural areas and employing 500 employees or more; areas with difficult socio-economic conditions; industrial zones, export processing zones, high-tech zones and economic zones, and some others.

3. Forms of Investment 

The Law on Investment stipulates some forms of investment in Vietnam, namely:

• Investment for establishment of economic organization;

• Investment in the form of capital contribution or purchase of shares or portion of capital contribution to economic organizations;

• Investment in the form of public private partnership contract (PPP Contract); and

• Investment in the form of business co-operation contract (BCC Contract).

We note that, for the investment in establishment of a business organization (enterprise), the foreign investor must have an investment project and apply for a Certificate of Investment Registration under Law on Investment.

In addition, when a foreign entity does not want to invest in Vietnam, but it desires to have a business presence in Vietnam, it can set up a branch or a representative office in Vietnam.

4. Types of Enterprises

Investors may establish an economic organization (enterprise) in accordance with Law on Enterprises, including the following basic types of enterprise:

• SOLE PROPRIETORSHIP is an enterprise owned by an individual who is responsible for its operation with all of his/her property.

• ONE MEMBER LIMITED LIABILITY COMPANY is an enterprise under the ownership of an organization or individual (the company’s owner) who is liable for the company’s debts and other liabilities up to the company’s charter capital.

• TWO AND MORE MEMBER LIMITED LIABILITY COMPANY is an enterprise under the ownership of organizations and/or individuals (the company’s members in the number of members does not exceed 50). The members are liable for debts and other liabilities of the enterprise up to the value of “contributed capital”. Stakes of members shall be transferred in accordance with the Law on Enterprises.

• JOINT-STOCK COMPANY is a enterprise under the ownership of organizations and/or individuals (the company’s shareholders in the minimum quantity of shareholders is 03). The shareholders are only liable for the enterprise’s debts and other liabilities up to the value of “contributed capital”. Shareholders are entitled to transfer their shares to other persons in accordance with the Law on Enterprises. Joint-stock companies are entitled to issue various types of shares to raise capital.

The enterprise shall be granted the Certificate of Business registration when The application for business registration is satisfactory under Law on Enterprises. In order to operate in the conditional business, the enterprise should satisfy the legal conditions and obtain the corresponding sub-license in accordance with the law of Vietnam.

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@ Copyright 2015 – Công ty Luật QNT – The article is written within and under the Law on Investment No. 67/2014/QH13 dated on 26 Nov 2014 and the Law on Enterprises No 68/2014/QH13 dated on 26 Nov 2014.

SOME THINGS TO KNOW ABOUT MANAGEMENT OF

ONE MEMBER LIMITED LIABILITY COMPANY

Law on Enterprises 2014 was passed by the National Assembly on 26 November 2014 and will officially take full effect as from 01 July 2015 (“LOE 2014”). This LOE 2014 has created significant changes on regulations and had continuously a vital role of forming favorable business environment for enterprises in Viet Nam.

In this connection, there are some important changes of LOE 2014, such as: simplification of license requirements; more than one legal representative permitted; lower quorum and voting thresholds in LLC and JSC; new reporting duties regarding change of managers; fewer restrictions on founding shareholders in JSC; etc.

Hence, QNT Law Firm would like to issue this Legal Update in order to assist the clients in catching some legislative changes under LOE 2014 relating to management of one member limited liability company (“One Member LLC”).

1. Rights and obligations of the Company Owner

Firstly, the definition of One Member LLC under LOE 2014 compared to LOE 2005 is a similar. One Member LLC is an enterprise owned by one organization or individual (“Company Owner”), the Company Owner is liable for all debts and other property obligations of the company to the extent of the amount of the charter capital of the company.

1.1. Rights of the Company Owner

Under LOE 2014, the Company Owner has the following typical rights[1]:

• To make decisions on the company’s charter, on developmental strategies and annual business plans, on projects for investment and development;

• To make decisions on the organizational and managerial structure of the company, and to appoint the company’s managers;

• To make decisions on increase in charter capital; on assignment of all or part of the charter capital;

• To make decisions on use of profit after fulfilment of tax obligations and other financial obligations of the company; on re-organization or dissolution and petition for bankruptcy of the company.

In addition, the Company Owner being an organization has other rights as follows:

• To approve loan agreements and other contracts as stipulated in the company’s charter valued at fifty (50) or more per cent of the total value of the company’s assets[2];

• To make decisions on sale of assets valued at fifty (50) or more per cent of the total value of the company’s assets[3].

We are especially noted that if the Clients do not want to perform directly the rights mentioned above, the Clients must authorize the chairman implement them via a Power of Attorney.

1.2. Obligations of the Company Owner

Under LOE 2014[4], Besides the basic obligation of the Company Owner such as: to contribute the charter capital; to comply with the charter and laws; to identify and separate assets of the Company Owner from assets of the company. We are especially noted that Company Owner may withdraw capital only by way of assignment of a part or all of the charter capital to other organizations and individuals; in the case of withdrawal of all or part of its contributed charter capital from the company in another form, the Company Owner and the organization or individual concerned must be jointly liable for debts and other property obligations of the company.

Furthermore, the Company Owner may not withdraw profit in cases where the company has not paid in full all debts and other property obligations which are due.

1. Organizational and managerial structure of One Member LLC

1.1. Managerial structure of One Member LLC owned by an organization

Under LOE 2014[5], One Member LLC owned by an organization shall be organized, managed and operate in either of the following models:

a. Chairman, General Director and Inspector(s)

b. Members’ Council, General Director and Inspector(s)

2.2. Management structure of One Member LLC owned by an individual

Under Law on Enterprise 2014[6], One Member LLC owned by an individual shall have a Chairman and a General Director. The Chairman may act concurrently or employ another person as the General Director.

3. Contracts and transactions of One Member LLC with the related persons

Under LOE 2014[7], any contract or transaction between One Member LLC owned by an organization and the following persons must be considered and decided by the Members’ Council or Chairman, Director/General Director and Inspector(s):

1. Company Owner and Related Person[8] of Company Owner;
2. A member of Members’ Council, Director/General Director and Inspectors;
3. Related Person of the persons stipulated in point (ii) mentioned above;
4. A manager of Company Owner, the person authorized to appoint such managers;
5. A related person of the persons stipulated in sub-clause (d) of this clause.

We are especially noted that:

• The signatory of the contract must notify Members’ Council or Chairman, Director/General Director and Inspectors of entities involved in such contract or transaction; and concurrently enclose the draft of such contract or main contents of such transaction.
• A contract or transaction shall be void and dealt with in accordance with law where it is not entered into in accordance with the relevant provisions, causing loss and damage to the company. The signatories to the contract and related persons being the parties to the contract must be jointly responsible for any loss arising and for returning to the company any benefit gained from the performance of such contract or transaction.
• A contract or transaction between One Member LLC owned by an individual and Company Owner or Related Person of Company Owner must be recorded and retained as a separate file of the company.

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[1] Article 75 of LOE 2014

[2] Or a smaller percentage or value as stipulated in the company’s charter

[3] Or a smaller percentage or value as stipulated in the company’s charter

[4] Article 76 of LOE 2014

[5] Article 78, 79, 80, 81 and 82 of LOE 2014

[6] Article 85 of LOE 2014

[7] Article 86 of LOE 2014

[8] Related Person is defined in Clause 18 Article 4 of LOE 2014

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@ Copyright 2015 – Công ty Luật QNT