Foreign investors intending to set up or acquire a company in Vietnam should have good understanding of the types of enterprise, advantages and disadvantages of each type to determine which one to suit their needs and business development orientation.
Below are the types that foreign investors may choose from when doing business in Vietnam under the Enterprise Law 2014.
1. LIMITED LIABILITY COMPANY WITH ONE MEMBER
A limited liability company with one member is an enterprise under the ownership of an organization or individual (hereinafter referred to as the company’s owner); the company’s owner is liable for company’s debts and other liabilities within its charter capital.
This kind of company is suitable for foreign investors who are individuals or organizations wanting to organize a simple company structure, easy to manage and operate. A limited liability should pose less risk to its owner.
2. LIMITED LIABILITY COMPANY WITH TWO OR MORE MEMBERS
A two or more members limited liability company is an enterprise where:
Members are organizations and/or individuals whose number does not exceed 50;
Members are liable for debts and other liabilities of the enterprise up to the value of capital they contribute except for some cases as required by the law.
This type is suitable for foreign investors who want to have a comparatively simple and straightforward governance, management, and operational structure, posing less risk to members.
3. JOINT STOCK COMPANY
A joint-stock company is an enterprise of which:
Its charter capital is split into multiple units of equal value called shares;
Shareholders may be organizations and individuals; the minimum quantity of shareholders is 03, and the maximum is not restricted;
Shareholders are only liable for the enterprise’s debts and other liabilities up to the value of capital contributed to the enterprise;
Shareholders are entitled to transfer their shares to other persons except for some cases as required by the Law.
This type is suitable for foreign investors who want to mobilize large capital, or easily and flexibly to transfer their shares. Shareholders are only responsible for debts and other obligations of the company within their contributed capital. Therefore, the risk level is not high.
4. According to the provisions of Law on Enterprise 2014, foreign investors are currently only allowed to set up companies in Vietnam in accordance with the 3 types of enterprise above-mentioned.
Besides, the law of Vietnam also has kind of private enterprise and partnership, but these types of enterprise only apply to local investors. There have not been specific regulations applicable to foreign investors until now.
ALB & Partners Law Firm is pleased to give legal advice and assist foreign investors to set up business in Vietnam. In addition, we can also help to deal with every legal issue arising during their business operation on a basis of compliance with the law of Vietnam.
For further information on our legal services, please feel free to contact us!