Hong Kong: Vietnam - Legal Overview - Domestic Enterprises

Last Updated: 20 November 1995
Most Read Contributor in Hong Kong, October 2018
The laws of Vietnam are complex and new legislation is constantly being introduced. What follows is no more than an introductory overview that we hope will assist investors to decide which areas of law they will need to research further.

This summary is, necessarily, selective and is no substitute for detailed legal advice.

The main forms of domestic business enterprise are:

1.1 Private Enterprise

These are established under the Laws on Private Enterprises of 20 December 1990 as amended on I July 1994 and are businesses with legal capital contributed by an individual Vietnamese citizen over the age of 18 years, who is personally liable for the business to the extent of his own assets.

1.2 An individual wishing to establish an enterprise must lodge with the local People's Committee full details, including a business plan, setting out clear objectives for the enterprise and the level of capital invested.

1.3 If satisfied, the People's Committee will register the enterprise in the Business Register Book and issue a Certificate of Registration.

2.1 Limited Liability Companies and Shareholding Companies

These are established under the Laws on Companies of 20 December 1990 as amended on I July 1994.

2.2 In both, members contribute capital and share profits and losses in accordance with their capital contributions. Members have no liability beyond the limit of their capital contributions.

2.3 All Vietnamese citizens aged 18 or over, all domestic Vietnamese entities and social organisations can invest in a limited liability or shareholding company.

2.4 Like private enterprises they require to be registered with local People's Committee, at which time they are required to give details of the company's objectives, charter capital, method of capital contribution and programme for development of the company. They will also be issued with a Business Registration Certificate.

3.1 Limited liability companies

Capital is contributed in full by its members and the total capital invested stated in its charter. It may not issue shares.

3.2 Transfer of contributed capital, except to other members, requires the unanimous approval of members representing a minimum of 75% of the Charter capital.

3.3 Different rules apply for the operation of a limited liability company depending upon whether it has more or less than I 1 members.

4. Shareholding Companies

A shareholding company must have a minimum of seven (7) shareholders. Shares may be named or bearer. Bearer shares are freely transferable, but named shares may only be transferred with the consent of the Company's Board of Management. Members of the Board of Management may not transfer their shares until 2 years have elapsed after they ceased being members of the Board of Management.

4.2 At incorporation the founding members must purchase a minimum of 20% of issued shares with the remainder offered to the public under a set procedure.

4.3 A licence is required from the People's Committee for the issue of any new shares.

5. Overseas Vietnamese

The Law on the Promotion of Domestic Investment of 23 June 1994 states that it allows "Vietnamese organisations and citizens, Vietnamese residing abroad and foreigners residing for a long time in Vietnam" to invest in domestic enterprises.

Although further regulations have been issued, the scope of the law remains unclear, though it would appear not to apply to foreigners other than those settled with, for example, family in Vietnam. Although permitting individual Vietnamese residing abroad to invest it is not clear if the law also extends to overseas Vietnamese owned enterprises incorporated abroad. As yet there are no reports of investment by this route.

6. Foreign Investment in Domestic Vietnamese Enterprises

Apart from the special provisions mentioned above relating to foreigners and to overseas Vietnamese and recent rules regarding limited investment in domestic banks and insurance companies, foreign individuals and organisations are prohibited from investing in domestic enterprises.

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

If you would like further advice please contact: David Ellis, Johnson Stokes & Master, 16th Floor, Princes Building, 10 Chater Road, Hong Kong; Tel 2843 4226; Fax no. : 2845 9121. Alternatively do a text search "Johnson Stokes and Master" and "Business Monitor".

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