How legally a no-legal-provision business model works in Vietnam?
Vietnam’s economy has been rapidly growing in recent years, positioning itself as one of the fastest-growing economies in Southeast Asia. The country’s business environment is highly dynamic, making it an attractive destination for entrepreneurs and investors worldwide. In the other words, Vietnam’s market is highly competitive, and many businesses are introducing new and attractive business models to stay ahead of their competitors. These companies often task their personnel with creating innovative business models that will generate higher profits.
However, the constant development of new business models often means that they operate in a legal gray area, which can be a concern for foreign investors. Foreign investors often have concerns about the risks associated with conducting business in Vietnam. They may wonder about the legal framework surrounding their business model and which Vietnamese laws will apply to their company. If there is no specific provision in Vietnamese legislation that applies to their business model, they may be uncertain about how it will be affected and if it will be in compliance with Vietnamese laws.
Therefore, when developing these new business models, they also prioritize compliance with Vietnamese laws to avoid any legal risks. They strive to ensure that their business models are legally sound and adhere to Vietnamese regulations. In this article, we will discuss the above in the following:
Some Practically Recommendations in Vietnam
Choosing a suitable business line and comprehending the legal framework of Vietnamese laws for that specific business line is the initial and crucial step. This helps to determine the legality of the business model, which options can be implemented, and whether the foreign ownership ratio needs to be adjusted.
Furthermore, consultation with legislators and relevant ministries can be helpful to gain insight into whether there is a clear foundation for implementing the business model. These consultations can be conducted on a no-name and unofficial basis to avoid any potential legal complications.
If the chosen business line has no restrictions on foreign ownership ratio, the registration process involves adding the new business line at the provincial Department of Planning and Investment.
If restricted by the foreign ownership ratio, investors have two options. They can either partner with a local individual or a Vietnam-owned entity to operate the business line and then convert their current company form. Alternatively, they can partner with a local entity to establish a new company, in which both parties will own shares/capital contributions in proportion to their agreement. The new company can be established as either a multi-member limited liability company or a joint-stock company, depending on their mutual decision and objectives. This will enable them to operate the business model in compliance with Vietnamese laws.
In order to proceed with the above proposal, investors may need to follow certain procedures, including but not limited to:
(i) Preparing corporate internal approvals for doing the company’s new business;
(ii) Preparing sets of relevant documents and application dossiers to implement the new business model;
(iii) Registering to add the new business line at the provincial Department of Planning and Investment;
(iv) Transforming the corporate form of the company or incorporating a newly established company;
(v) Obtaining the necessary approvals, permits, and licenses from the competent licensing authorities before its commencement of operation.
Depending on the corporate form chosen, the highest-level administrative body will make decisions and assign a legal representative to prepare the application dossiers for submission to the competent licensing authorities. This administrative body can be the owner of a single-member company limited, the members’ committee of a multi-member company limited, or the general shareholders of a joint-stock company. The application dossiers will be submitted to the provincial Department of Planning and Investment or other competent licensing authorities as required.
In Conclusion
Understanding the legal framework for new business models in Vietnam is essential for entrepreneurs and investors who want to maximize the potential benefits of their ventures. By complying with registration and licensing requirements, and guiding and governing legislations, businesses can minimize legal risks and ensure long-term success.
In addition, it is important to stay informed about legal developments and changes in the regulatory environment. Vietnam is a rapidly changing market, and new laws and regulations are being introduced on a regular basis. By staying up-to-date on these changes, businesses can adapt to new legal requirements and take advantage of new opportunities as they arise.
Overall, the legal framework for new business models in Vietnam is complex but manageable. By working closely with legal professionals, regulators, and other stakeholders, businesses can navigate the regulatory environment and successfully launch and operate their ventures. With the right legal strategy and compliance plan in place, entrepreneurs and investors can take advantage of the tremendous growth potential of the Vietnamese market.