1. OVERVIEW OF BUSINESS ESTABLISHMENT
Establishing a business is no longer a strange phrase in Vietnam. Basically, setting up an enterprise is a legal procedure that individuals and organizations must perform at the relevant state agency when they want to conduct business. To be able to carry out this procedure, it is necessary to prepare all conditions such as human resources, headquarters, capital, business name, etc.
Enterprises carry a very important meaning not only for the subject of establishment but also for the development of the economy, society and the country. Once an economic organization is established in accordance with the law, the enterprise will be recognized by the State and protected by the law to participate in production and business. Thereby contributing to enhancing the brand and promoting economic development.
So these Who has the right to set up a business?, prohibited cases from establishing a business in Viet Nam? The following article provides complete and detailed instructions on the conditions for setting up a business in Vietnam.
2. WHO HAS THE RIGHT TO ESTABLISH A BUSINESS?
Conditions for establishing a business (establishing a company) are generally the conditions under which organizations and individuals can register to establish an enterprise and are authorized by the competent authority (Department of Planning and Investment). issue a certificate of business registration.
The State encourages business investment and creates the most favorable conditions for all sectors to participate in business investment. Therefore, almost all organizations and individuals have the right to establish and manage businesses in Vietnam. However, the establishment of an enterprise must meet the following conditions.
a. Civil subject conditions
i) Personal case:
When an individual wants to establish an enterprise, that individual must have full civil act capacity. An individual's civil act capacity is an individual's ability to establish and perform civil rights and obligations by his/her own actions. It can be seen that, when having full civil act capacity, an individual is capable of taking responsibility for the enterprise he or she establishes or contributes capital to establish.
ii) In case of organization:
If the entity establishing an enterprise is an organization, that organization must have legal status. Because only when it has legal status, does an organization have independent assets and be able to take independent responsibility with that property.
b. Not falling into the cases of being restricted from establishing an enterprise under the Law on Enterprises
For various reasons, Vietnamese law also excludes the right to establish an enterprise for some individuals even though they have full civil act capacity or organizations with the following legal status:
According to the Enterprise Law, organizations and individuals have the right to establish and manage enterprises in Vietnam, except for the following cases that do not have the right to establish and manage enterprises in Vietnam:
a) State agencies and units of the people's armed forces use state assets to establish profit-making enterprises for their own agencies or units;
b) Cadres, civil servants and public employees according to the provisions of the Law on Cadres and Civil servants and the Law on Public Employees;
c) Officers, non-commissioned officers, professional soldiers, defense workers and officers in agencies and units of the Vietnam People's Army; officers, professional non-commissioned officers, public security workers in agencies and units of the Vietnam People's Public Security, except those appointed as authorized representatives to manage the State's capital contribution in enterprises. or management at a state-owned enterprise;
d) Professional leaders and managers in state-owned enterprises as prescribed at Point a, Clause 1, Article 88 of this Law, except for persons appointed as authorized representatives to manage the State's contributed capital in Vietnam. other enterprises;
d) Minors; persons with limited civil act capacity; persons who have lost their civil act capacity; people with difficulties in cognition and behavior control; organizations without legal status;
e) Persons who are being examined for penal liability, are detained, are serving prison sentences, are serving administrative handling measures at compulsory detoxification establishments, compulsory education establishments or are being prosecuted by the Court. ban from holding certain posts, practicing certain professions or doing certain jobs; other cases as prescribed by the Law on Bankruptcy and the Law on Anti-corruption.
At the request of the business registration authority, the enterprise establishment registrant must submit a judicial record card to the business registration authority;
g) Organizations being commercial legal entities are prohibited from doing business or operating in certain fields under the provisions of the Penal Code.
Note: The following restriction of the right to contribute capital by the Law on Enterprises also restricts the right to participate in the establishment of enterprises of the following subjects:
Organizations and individuals have the right to contribute capital, purchase shares or purchase capital contributions to joint-stock companies, limited liability companies and partnerships in accordance with the Law on Enterprises, except for the following cases:
a) State agencies and units of the people's armed forces use state assets to contribute capital to enterprises for their own profit;
b) Subjects not allowed to contribute capital to enterprises under the provisions of the Law on Cadres and Civil servants, the Law on Public Officials, and the Law on Anti-corruption.
c. Not in the cases where the establishment of an enterprise is restricted due to the following characteristics:
In addition to the above provisions, the right to establish an enterprise of an individual or organization is also restricted in a number of separate points as follows:
i) For private enterprises:
Each individual is only entitled to establish a private enterprise. The owner of a private enterprise cannot concurrently be the owner of a business household or a general partner of a partnership. And a private enterprise is not entitled to contribute capital to establish or buy shares or contributed capital in a partnership, limited liability company or joint-stock company. There is this regulation because in a private enterprise, the owner of the business will be responsible with all his assets. This means that the assets of the business owner cannot be separated from the assets of the business.
ii) For a partnership company:
General partners may not own private enterprises; may not be a general partner of another partnership unless otherwise agreed by the remaining general partners. And general partners must be individuals, responsible with all their assets for the obligations of the company. This is similar to the above, the union member will have unlimited liability with his/her assets to the company.
Failure to separate assets as above will affect the ability to be liable for other businesses as well as for the sole proprietorship or partnership. Because both the private business owner and the general partner have unlimited liability, it leads to certain difficulties for this person when he has to perform obligations for both parties at the same time.
3. IMPACTS OF BUSINESS LINES AND BUSINESS ESTABLISHMENT
Business & Investment is defined and identified as an organization with its own name, assets, transaction office, established or registered for establishment in accordance with the law for the purpose of doing business. Thus, the establishment of an enterprise is associated with the business lines that the enterprise conducts.
Meeting the business requirements is a prerequisite when considering setting up a business. The following guide will help clarify the business line requirements, detailed below.
a. Do not do business in industries that are prohibited from doing business
The following 8 industries and trades are prohibited from doing business:
a) Trading in narcotic substances specified in Appendix I of this Law;
b) Trading in chemicals and minerals specified in Appendix II of this Law;
c) Trading in specimens of wild plants and animals of natural origin specified in Appendix I to the Convention on International Trade in Endangered Species of Wild Fauna and Flora; specimens of endangered, precious and rare species of forest plants, animals and aquatic animals of Group I, derived from natural exploitation as prescribed in Appendix III of this Law;
d) Trading in prostitution;
dd) Buying or selling human beings, tissues, corpses, human body parts, human fetuses;
e) Business activities related to human cloning;
g) Trading in firecrackers;
h) Business debt collection services.
b. Conditions must be met if doing business in conditional lines
i) The enterprise to be established must satisfy the requirements on conditional business lines as prescribed in the following list of conditional business lines:
| List of conditional business lines under the Investment Law 2020 |
ii) Notes on conditional business lines:
+ For conditional business lines, the investor must satisfy the conditions for business investment as prescribed by law.
+ Business investment conditions are conditions that individuals and organizations must meet when conducting business investment activities in conditional investment and business lines.
+ Lines of conditional investment and business are lines of business in which the performance of business investment activities in such lines and trades must satisfy necessary conditions for reasons of national defense, security and order. , social safety, social ethics, community health.
In case there are different provisions between the Law on Investment and another law promulgated before the effective date of the Law on Investment in respect of industries and trades banned from business investment or conditional business lines, the following shall apply. accordance with the provisions of the Investment Law.
There are investment and business conditions you must meet in order to apply for a business establishment. Therefore, if you do not meet the requirements, you will not be able to establish a business.
However, there are business investment conditions that do not need to be proven during business establishment, but require you to maintain meeting investment and business conditions during operation. This leads to a number of cases of violation of investment law due to failure to meet regulations on conditional industries.
For example:
In order to conduct business in the Employment Service industry, after establishing an enterprise, a dossier of application for a license must be made, including the following:
- The enterprise's written application for a license;
- Certified copy of business registration certificate;
- Certified copy of Certificate of deposit of 300 million at the Bank;
- Documents evidencing eligibility for location as prescribed by law.
Within 15 days from the date of receipt (01 set) of dossiers, competent state agencies shall grant employment service operation permits.
Within 10 days from the date of issuance of the license, the state agency competent to grant the employment service license must notify in writing the People's Committee of the district where the enterprise's head office is located.
After carrying out the above procedures, the employment service company may conduct business activities in the employment service professions registered on the Business Registration Certificate.
Thus, even if you have established an enterprise, if you do not meet the regulations of that major, you are not eligible to do business.
4. APPLICATION OF INVESTMENT CONDITIONS TO ESTABLISH ENTERPRISES WHEN FOREIGN INVESTMENT
Foreign investors must meet the conditions on industries, trades and market access conditions for foreign investors, including:
a) Sectors and trades that have not yet had access to the market;
b) Lines and trades with conditional market access.
c) Rate of ownership of charter capital of foreign investors in economic organizations;
d) Form of investment;
e) Scope of investment activities;
f) Investor's capacity; partners participating in investment activities;
g) Other conditions as prescribed.
See the list of industries and occupations with restricted market access for foreign investors here:
| List of industries and trades with restricted market access for foreign investors |
Investment conditions to establish a foreign-invested enterprise have many separate regulations, if you need advice on specific cases, please contact Expertis for free support.
