ABC of the Limited Liability Company (LLC) in Vietnam

At PCA, we ask our Founder(s) to consider three factors helping them to decide how much capital they want to contribute.

►        The legal capital is the required by law for your specific business line(s) related to the activities you wish to start in Vietnam. It is the minimum capital that the Founder(s) must contribute that has been decided by decree by the Vietnamese legislator and prescribed by the Investment law. Most business lines (activities) will require no minimum capital i.e. the Founder(s) may decide to register the company with a marginal capital. Common activities such as management consultancy, restaurants, software development are typical activities requiring no minimum capital by law. Others, such as real estate development or tour operator will require a minimum legal capital and other “license(s)” called sub-license(s).

►        The credibility capital is the one that will grant the Founder(s) credibility towards stakeholders. Among these, we distinguish banks, clients, suppliers, landlords, the authorities, etc. The level of credibility of your company will indeed be set by the level of capital you decide to contribute. Depending on your business, you may not require to be “credible”, but one should be vigilant about the governmental agencies. For instance, a low capital may not allow the Founder(s) to sponsor work permits, business visas and temporary resident cards.

►        The working capital of a business is the capital that is available to pay for its day-to-day operations and to fund its future growth before sales can take over. Once the legal and the credibility capitals are sorted out, it is time to consider your business needs. It is necessary to calculate the capital i.e. the working capital in our case to make sure the business will not miss cash before the sales can cover the expenses. Operations such as loan agreement and/or capital raise are expensive to make compliant and we would like to avoid our Clients to go that way. We advise the Founder(s) to careful calculate the need in working capital before deciding an amount.

Shareholders will typically share the profits and the losses and limited legal responsibilities.

Who will take care of the daily management and represent the company?

That would be your Director(s)/Legal representative(s). Vietnam Law will allow up to an infinite number of Directors in a limited liability company and up to 50 shareholders. If you are shareholder and wish to work, nothing easier, investors are eligible for an exemption of work permit if they invest over 3 billions VND since July 2020 in their company. Shareholders are also eligible for a Temporary Resident Card from 1 to 5 years depending on how much capital they contribute. PCA Company Services will take care of both for you if you wish so! Since January 2021, the immigration and labor law has been amended (once again) and the minimum capital per shareholder in an LLC to receive an investor visa and a work permit exemption has risen to VND3.000.000.000, roughly US130.000. For investors who invest less than the minimum capital decided the new decree, there are still solutions to remain and work in Vietnam. Typically applying for a work permit and a Temporary Resident Card of a maximum validity of two years.

TIPS:  Once the company is incorporated, it will come with a standard approved-by-law shareholders’ agreement and company charter. It is advised for our investors to work on an agreement that will suit best their needs. It is often key to settle the terms of exit of shareholders before it actually happens.

You will need an address! Not necessarily to run your business but to receive mails, notifications from the government and other notices. There are 4 commonly accepted types of locations allowed to register a business.

1. Town house / villa

2. Office building

3. Ground floor of a real estate development (i.e. shop houses)

4. Office-tel in a condominium

Yes, PCA will assist the Founder(s) with bank accounts opening from A to Z. 

Before Covid, it took 26 days from the start to delivery of the company.

Since Covid, please safely count between 1 and 3 months depending on how fast we receive the documents to be collected (passports, signatures, etc.).

No, there is no hidden fee.

Our Incorporation proposal is clear and precise. It includes everything you need to start your business from bank accounts creation to initial tax registration. We also include token subscription with the Government. 

Once the company is incorporated you will need:

1/ an accountant

2/ pay the Registration tax starting year 2

3/ an audit firm to audit your accounts yearly

PCA can help, please contact us. We have preferential rates for companies incorporated by us.

Yes, it definitely is. 

The law in Vietnam is the same as in any other countries.

For corporations:

Once a company has settled all its obligations in terms of salaries, taxes, social insurances, debts, etc. and has prepared the right compliance document(s) to support the transaction, the remaining cash can be wired back to the shareholders under the form of dividend (0% dividend tax) when there is profit and under the form of liquidation surplus when a company is dissolved. These are usual transactions.

For individuals:

A foreigner has all the rights to wire back his or her cash to any accounts in Vietnam or abroad as long as he or she can justify where the money is from. The confusion here comes from the fact that Vietnamese citizens are allowed to wire cash out of Vietnam under very restrictive conditions. These do not apply to foreigners. For instance, a foreign shareholder of a Vietnamese LLC receives dividends at the end of the year. Those dividends, taxed at either 0% or 5%, will be paid to his Vietnamese bank account. From there, the shareholder may wire that cash anywhere.

No, the contributed capital is not frozen.

Unlike in other countries, the capital that has been contributed can be used to run the company i.e. to settle daily operations and expenses such as salaries, rents, office furniture, etc. 

The capital shareholders contribute is therefore not blocked nor frozen. 

Yes, you may but under certains circumstances.

Once the capital is contributed, the cash has entered the books of the company.

If you wish you withdraw them physically from the bank, it will be possible.

But if you wish to remove them from the accounting books, you will need to provide supporting elements such as company expenses, goods, salaries, etc.

Contributed capital is company cash and all expenses must be justified and supported by accounting and compliance documents. 

Yes, all attributes (shareholders, name, address, legal representatives, business lines, contributed capital, etc.) may be amended except the tax number that will always remain the unique identifier of a company. Please contact us for more information.

Yes, it is indeed a necessity. 

Drafting a proper shareholder’s agreement is the root of any sane business relationship. 

It is preferable to handle tough matters such as exit, incapacity, entry, roles and responsibilities of all shareholders at the beginning in order to ensure its viability and its success. 

PCA is definitely able to help, please contact us. 

There are many reasons why you might want to dissolve your limited company. Perhaps you experienced early success, but the market has now shifted, or maybe your business is still successful but you are approaching retirement and there is no one available to take over from you. Whatever your reasons for closing you company, you should explore the range of options open to you, as reversing this decision can be costly.

There are two ways to end a limited company.

1/ Company dissolution: 

To dissolve a company, also known as ‘striking off’, essentially means removing the name of the business from the official Company Registry. After dissolution, the company ceases to legally exist. The dissolving of a company is often a voluntary process; however the Company Registry can dissolve companies that have not kept up with their accounting responsibilities such as filing accounts and tax returns.

In order to proceed with voluntary dissolution, all loose ends, including the payment of outstanding taxes and creditors, must be tied up. Due to this, dissolution is only an option for solvent companies and should not be seen as a way to evade creditors. There are certain conditions that must be met before a company is eligible for dissolution.

2/ Company liquidation: 

Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due. As company operations end, the remaining assets are used to pay creditors and shareholders, based on the priority of their claims. 

PCA is able to help, please contact us.