Intro to Vietnam Law, Business Set-up and Structuring hosted by SHIELD - Startup Hub for Investment, Education, and Leadership Development Key considerations prior to setting up business in Vietnam Scope of business and operations, including key sectors of consideration Corporate governance Financial + technical capacity Representative Offices Overview Procedures for set-up Case study(ies) Limited Liability Companies Overview: one-member or two-member Procedures for set-up (Vietnamese) Procedures for set-up (foreign) Corporate governance Case study(ies) M&A Brief overview Procedures for simple M&A Case study(ies)

1. 8.09.15
Prepared for
Presentation by
Designation Lawyer
Contact details
Doing Business in Vietnam
Setting Up
SHIELD
Logan Leung
Foreign Counsel
logan.leung@rajahtannlct.com
© Rajah & Tann LCT LAWYERS.

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Logan Leung
Foreign Counsel
• Dispute Resolution
• Co-head, International Arbitration sub-practice
• Corporate and M&A
• Head of Pro Bono
LL.B., B.Com., P.Cert.Arb., University of Adelaide, Australia
Admitted Lawyer, Supreme Court of New South Wales, Australia
Registered Foreign Lawyer, Vietnam
Member, Chartered Institute of Arbitrators (MCIArb)

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Rajah & Tann LCT Lawyers
 Co-headed by Chau Huy Quang and Vu Thi Que
 Regional office of Rajah & Tann Asia in Vietnam
 Offices in Ho Chi Minh City and Hanoi with
Vietnamese qualified lawyers
 More than 40 experienced associates and
professionals led by 6 partners.
 Developed strategic partnerships with Vietnamese
authorities and leading legal experts in Asia

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Overview of Rajah & Tann Asia
Regional footprint in nine Asian
Jurisdictions giving you Home
Advantage
Highly regarded for its
leading lawyers and practices
Largest legal network in Southeast Asia

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Regional Offices
Regional Desks
Affiliate/ Associate Firms
Overview of Rajah & Tann Asia

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Admiralty & Shipping
Appeals & Issues
Banking & Finance
Business Finance &
Insolvency
Capital Markets
Commercial Litigation
Competition & Antitrust
and Trade Law
Construction & Projects
Corporate Real Estate
Employment & Executive
Compensation
Energy & Resources
Entertainment & Media,
Family, Probate & Trusts
Financial Institutions
Funds and Investment
Management
Hospitality
Insurance & Reinsurance
Integrated Regulatory
Intellectual Property,
Sports and Gaming
International
Arbitration
Medical Law
Mergers &
Acquisitions
Private Client
Project Finance
Tax
Technology, Media &
Telecommunications
White Collar Crime
Practice Areas

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Our Key Clients -- Notable Startups

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Our Key Clients -- Funds

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Topics Covered
• Key considerations prior to setting up
• Representative offices
• Limited liability companies
• Introduction to acquisitions

10. Setting Up
Key Preliminary Considerations

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Considerations Prior to Set-up
Have a business plan prior to setting up. From legal
perspective, consider the following:
• Business lines of the company
• Scope of services of the company
• Proposed capital input and scale
• Proposed location(s)
• Members and corporate governance

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Business Lines
• Vietnam’s WTO Commitments – first point of call in
determining whether foreigners can set up or not.
• Foreigners may incorporate a company (be 100% investor) in most
key business lines under the WTO Commitments. Examples:
• Software development and IT services
• Management consulting
• Restaurants (F&B)
• For business lines not committed in the WTO Commitments,
acceptance will be on a case-by-case basis. Examples:
• Debt collection
• Recruitment services

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Business Lines
• Note some businesses are conditional
While foreigners may be permitted to set up companies in these
areas, it will be subject to certain approvals or additional
requirements from the relevant authorities. For example:
• Trading (e.g., import into Vietnamese market)
• Manufacturing of certain products (e.g., fertilisers)
• Educational institutions (e.g., school, colleges, language centres)
• For trading companies, note the extent of approvals required may
depend on the goods to be traded

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Business Lines
• Foreign ownership caps may sometimes apply – i.e., foreigners
cannot incorporate a company by themselves in certain business
lines, and will require a Vietnamese partner (via joint venture).
Examples:
• Travel (including as a travel agency)
• Advertising
• Logistics
• Note that even if no caps apply, having a joint venture with a
Vietnamese partner may streamline the incorporation process.

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Capital Requirements
• Except for certain businesses (e.g., travel and real estate), there is
no minimum start-up (charter) capital requirement under law for
incorporating a company.
• However, for foreigners, as part of the licensing authorities’
assessment process to grant the license for the investment project,
sufficient capital is required
• This depends on the authorities’ discretion
• It also depends on the type of business (e.g., will it be capital intensive?)

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Location
• Having a head office location is required prior to setting up!
• For foreign companies, this can be evidenced by a lease agreement, MOU,
letter of offer, etc. for premises.
• The choice of location can also affect the speed of the
incorporation process:
• In practice, it may be faster to incorporate a company in Binh Duong Province
compared to Ho Chi Minh City due to different internal procedures.
For manufacturing companies, it may be even faster if it is to be located in an
industrial zone.

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Members and Corporate Governance
• The directors / decision makers of the company will need to be
determined prior to setting up, depending on company form.
Example:
• Who will be the legal representative(s)?
• If applicable, who will be the general director?
• If applicable, who will be on the board of directors?
• Ensure that you know the function of each decision-maker in the
establishment to avoid internal disputes.

18. Representative Offices
Structuring and Setting Up

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What is a Representative Office?
• Dependent unit of the establishing entity – i.e., it is not an
independent legal entity in Vietnam
• It is not a profit-making entity and it is prohibited from directly
engaging in profit-making activities (e.g., sales)
• Its funding comes from its establishing entity for operating expenses
• Scope of activities permitted under law:
• Operating as a contact/liaison office
• Promoting cooperation projects in Vietnam
• Researching the market to increase commercial opportunities
• Supervising contracts signed by the foreign company with Vietnamese
partners or relating to the Vietnamese market

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Representative Office Set Up (1)
Overseas
Company
Representative
Office
Market research
Overseas
Company
Representative
Office
Profit-making
activities
Company
Establish
and fund
Closure Incorporate

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Representative Office Set Up (2)
Overseas Trading
Company
Representative
Office supervise/monitor
(e.g., customer support)
Customer
Establishment
and funding
Contract
Invoicing
Payment

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Case Study
• One of Japan’s largest trading company, with a variety of products
traded in Vietnam
• Representative office in Ho Chi Minh City and Hanoi
• How can it do business in Vietnam if it cannot directly engage in
profit-making activities?

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Setting Up
• Prerequisites to establishing a representative office:
• The foreign company must be properly established in its home country
• The foreign company must have been lawfully established for at least one year
• Application dossier
• Application form for the establishment of the representative office
• Foreign company’s business registration certificate (or equivalent)
• Audited financial statement of the foreign company for the past year (or
equivalent)
• Foreign company’s corporate charter
• Proof of premises leased (e.g, lease agreement)
• Under law, after submission, the authorities will issue the representative
office license within 15 days.

24. Limited Liability Companies
Setting Up and Corporate Governance

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What is a Limited Liability Company?
• Independent legal entity
• Owners are liable for debts/liabilities of the company up to the
value of the capital they contribute to the company
• Contrast to private companies or partnerships.
• Form of LLC depends on the number of owners:
• One-member LLC for the case of one owner of the LLC
• Multi-member LLC in the case of 2 – 50 owners of the LLC
• Type of LLC affects matters of corporate governance

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Incorporation

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Introduction to the New Laws
• Law on Enterprises and Law on Investment
• Came into effect from 1 July 2015
• Implementing regulations (decree) not yet available
• Law on Enterprises governs matters of corporate governance,
corporate forms, and local company set-ups
• Law on Investment governs matters of foreign investment in
Vietnam
• Streamlining of processes?

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Steps to Setting Up – Former Law
Investor
Application
dossier
DPI
Relevant
Authorities
People’s
Committee
Investment
Certificate
Seeking of
opinions

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Steps to Setting Up – New Law
Step 3: Enterprise Registration Certificate (ERC)
3 working days
Step 2: Investment Registration Certificate (IRC)
5 working days (15 days if without Step 1)
Step 1: In-principle approval for investment project*
35+ working days
* only for certain projects (e.g., real estate projects or casinos), which are subject to approval
by the National Assembly, Prime Minister or Provincial People’s Committee

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Steps to Setting Up – New Law
• The Investment Registration Certificate (IRC) is unique to foreign
companies, and denotes approval of the foreign investor’s investment
project
• Proposals for use of capital to carry out investment activities
• The Enterprise Registration Certificate (ERC) perfects the incorporation.
• Both local and foreign companies have this – it is proof of a company’s
corporate existence
• Assuming no special approval required, the law states that the company
can be set up in about 18 days.
• In practice, likely to be longer.
• New laws anticipated to speed up process, but can it?

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Steps to Setting Up – New Law
• Getting the seal
• Getting the tax code
• Announcing the company’s establishment on a newspaper
• Opening capital contribution account

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Incorporation for Local LLCs
• Not required to go through the process of obtaining the IRC
• Only ERC is required (under law, issued within 3 working days)
• Therefore, generally not subject to licensing authority’s assessment of the
owner’s capacity to run the project
• Incorporation process is considerably faster
• To summarise, there are two sets of procedures for incorporating
an LLC in Vietnam:
• Foreign companies = IRC + ERC
• Local companies = ERC

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What is Classified as a Local LLC?
• What if a foreigner and a local Vietnamese jointly start up a company
together (i.e., multi-member LLC)?
Which procedure applies?
• If the company to be established has 51% or more of its equity held by foreign
investors or a company with foreign ownership of 51% or more, it must obtain an
IRC and ERC
• If the company to be established has less than 51% of its equity held by foreign
investors or a company with foreign ownership of 51% or more, it may only require
an ERC.
• Therefore, for example, a company with less than 51% of its equity held by
foreign investors may only be required to obtain an ERC.
• However, this is subject to the authorities’ views. Some authorities have required
companies with 1% foreign ownership to obtain an IRC, while some have no such
requirement.

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Corporate
Governance

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When must capital be contributed?
• Within 90 days from the date the ERC is issued, the company
must contribute its committed capital
• Otherwise, the company will be forced to decrease its charter
capital after the expiry date of contribution
• Within 30 days for one-member LLCs
• Within 60 days for multi-member LLCs

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Corporate Structure: One-member LLC
General Director
Director
Chairman or Board of
Members
Inspector(s)**
Owner
* if Owner is an individual, Chairman required. Otherwise, optional
** if Owner is an individual, Inspector(s) not required

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Corporate Structure: Multi-member LLC
* if there are 11 or more owners
Members’ Council
Inspection
Committee*
General Director/
Director
Chairman of the
Members’ Council

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Managerial Positions Defined
• Owner or Members’ Council is the highest decision making authority of
the company
• Decides on all matters of key importance to the company (contents of the charter, annual
business plans, organisational structure, etc.)
• Chairman or Board of Members is the next highest decision making
authority of the company
• Director or General Director implements matters regarding the day-to-
day operations of the company
• Deciding on operational matters, implementing decisions of the Chairman or Board of Members,
etc.
• Inspectors or Inspection Committee supervises the affairs of the
company
• Inspecting conduct of management, verifying financial and business reports, etc.

39. Acquisitions
Fundamentals

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Acquisitions 101
• Share acquisition: 0ne company buys a part of or all of the
equity of the target company
• Buyer also acquires all liabilities!
• Asset acquisition: one company buys most or all of the assets of
the target company
• Buyer does not acquire liabilities
• However, there is a complex process in changing title in assets
• A share acquisition can sometimes be a ‘cleaner’ process

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Basic Steps in an Acquisition
Approaching the target company or assets
Framework Agreement
(LOI/MOU/Term sheet & NDA)
Due Diligence / Audit
Negotiation
Document preparation
Submission of application dossier
Approval by the licensing authorities (if required)
Closing

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Framework Agreement
• Comes in many forms, and sets out basic terms and overall
purpose of the acquisition
• Letter of Intent (to purchase)
• Memorandum of Understanding (MOUs)
• Term sheets and non-disclosure agreements (NDAs)
• Contains key terms, which are usually not binding:
• Indicative purchase price and payment method
• Indicative proposed equity stake acquired
• Conditions of purchase
• Subject to due diligence
• Indicative Closing date

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Due Diligence
• How does the buyer know whether there are any issues with the
company? Due diligence stage
• Legal due diligence
• Financial due diligence
• Tax due diligence
• For buyers, getting a legal, financial and tax adviser helps identify key
issues to help you to decide on whether to buy the company and how
much you should pay.
• For sellers, getting a legal, financial and tax adviser helps prevent you
from disclosing too much information, which may decrease the potential
price that you get.

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Negotiations and Document Preparation
• After due diligence, buyer has greater picture of the target
company
• Decision on whether to buy, whether to adjust purchase price, etc.
• Transaction documents (e.g., share/asset purchase agreement)
drawn up to reflect key terms
• Whether you are buyer or seller, do engage a lawyer to ensure your rights are
properly protected!

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Licensing and Implementation
• Licensing procedures likely required.
• For share purchase
• Obtaining approvals for the acquisition
• Amending ERC to reflect the buyer as a new owner
• For asset purchase
• Transfer title of ownership to the buyer of assets
• Special procedures required for real estate, intellectual property, etc.
• Contracts to be assigned
• Labour contracts to be terminated and fresh contracts signed

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Disclaimer
The material in this presentation is prepared for general information only and is not
intended to be a full analysis of the points discussed. This presentation is also not
intended to constitute, and should not be taken as, legal, tax or financial advice by Rajah
& Tann LCT Lawyers. The structures, transactions and illustrations which form the
subject of this presentation may not be applicable or suitable for your specific
circumstances or needs and you should seek separate advice for your specific situation.
Any reference to any specific local law or practice has been compiled or arrived at from
sources believed to be reliable and Rajah & Tann LCT Lawyers does not make any
representation as to the accuracy, reliability or completeness of such information.

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