How does a foreign companies establish subsidiaries in Vietnam? It can be seen that in recent years, many foreign companies have chosen to establish foreign-invested companies or establish subsidiaries in Vietnam. To be able to establish a subsidiary in Vietnam, a foreign company needs to understand the process and procedures for establishing a subsidiary in Vietnam? If you want to establish a subsidiary in Vietnam for a foreign company but do not understand the procedures, please follow the instructions here.

1. What is a subsidiary?

According to the provisions of the Enterprise Law 2020, a company will be considered the parent company of one or more other companies if it falls into one of the following cases:

• Own > 50% of the charter capital or > 50% of the total common shares of that company;
• Have direct or indirect authority over the decision to appoint the majority or all members of the Board of Directors, Director or General Director of that company;
• Has the right to decide on amendments to the Charter of that company.

Unlike a branch or representative office of a foreign company, the parent company and subsidiary are two independent entities, they have their own legal status. However, the parent company will have certain economic benefits over the subsidiary (also known as the parent company’s capital contribution in the subsidiary); Depending on the type of business of the subsidiary, the parent company will exercise its rights and obligations as a member, shareholder or owner in relation to the subsidiary; The parent company has the right to influence the decisions of its subsidiaries in many ways.

2. What documents do foreign companies need to establish a subsidiary in Vietnam?

To operate under the parent company and subsidiary model, a foreign company will usually appoint a representative and contribute capital to establish a subsidiary. According to Decree 122/2020/ND-CP and Decision 1523/QD-BKHDT, the application for establishing a subsidiary is similar to the corresponding procedure for registering a new enterprise, including:

– Application for registration to establish a business.

– Draft charter of the subsidiary.

– List of members for a 2-member limited liability company or list of founding shareholders for a joint stock company.

– Valid copy of one of the following personal identification documents:

For individuals: ID card, passport or valid citizen identification card.
For organizations: Certificate of business establishment registration for organizations and accompanying documents for personal authentication for the authorized representative of the organization.

Note: The above business establishment documents must show that the parent company is a shareholder or capital contributing member owning more than 50% of the total common shares or charter capital.

In addition to the above documents, the foreign parent company must submit the following documents:

– Decision of the owner or chairman of the board of members or board of directors on appointing people to contribute capital or manage the subsidiary.

– 01 copy of identity card or citizen identification card or passport of the person appointed by the parent company abroad to contribute capital and manage.

– 01 copy of the parent company’s Business Registration Certificate.

3. How does a foreign companies establish subsidiaries in Vietnam?

The procedure for establishing a subsidiary is the same as the procedure for establishing a new business. The parent company must own more than 50% of the total common shares or charter capital to be eligible to establish a subsidiary. When foreign companies establish subsidiaries in Vietnam, they usually contribute investment capital to establish economic organizations in Vietnam. Procedures for a foreign company to establish a subsidiary in Vietnam are carried out as follows:

3.1 Procedures for issuance of Investment Registration Certificate

If a foreign company wants to establish a subsidiary in Vietnam, whether the company accounts for 1% or up to 100% of the company’s capital in Vietnam, it still needs to carry out procedures to apply for a registration certificate from a competent authority. investment sign. Dossier to apply for an Investment Registration Certificate for a subsidiary includes:

• Written request to implement an investment project;
• Proposal on investment projects;
• A statement of financial capacity attached to confirmation of the balance in a bank account of investment capital as stated in the charter capital or attached to the financial statements of a foreign company (with interest corresponding to the charter capital contributed in Vietnam)
• Explanation of meeting the conditions;
• Decision on establishing a subsidiary in Vietnam;
• Certificate of land use rights in Vietnam or house rental contract in Vietnam
• Copy of the foreign company’s Business Registration Certificate;
• Charter of the foreign company;
• Passport of investor representative;
• Introductory letter for application submission.

3.2 Procedures for issuance of business registration certificate

The foreign company (parent company) will submit an application to establish a subsidiary to the Department of Planning and Investment of the province where the subsidiary will be headquartered. Documents to establish a subsidiary in Vietnam for a foreign company include:

• Application for registration to establish a subsidiary.
• Decision on the establishment of a subsidiary of a foreign company;
• Minutes on the establishment of a subsidiary of a foreign company;
• Notice of establishment of a subsidiary of a foreign company;
• Draft of company charter;
• Document confirming legal capital of a competent state agency or organization for companies doing business in industries and professions that according to the law must have legal capital.
• List of members, copies of ID cards, citizen identification cards, passports or other legal personal identification documents of members.
• Practicing certificates of company members and other individuals for companies conducting business in industries and occupations that are required by law to have a practicing certificate.

The Department of Planning and Investment receives and checks the documents. Within 10 days from the date of receiving complete and valid documents, the Department of Planning and Investment will issue a Business Registration Certificate to the subsidiary.

3.3 Procedures for announcing business registration content and engraving legal entity seal

Announcement of business registration content:

– The time limit required for a subsidiary to publish company information is 30 days from the date of obtaining the company establishment license.

– Specifically, after being granted a Business Registration Certificate, a subsidiary must publicly announce the content on the National Business Registration Portal according to the process and procedures and must pay fees according to regulations. determined.

– The published content will include: Business registration of the subsidiary; List of founding shareholders and shareholders who are foreign investors in joint stock companies.

– If you do not comply with the legal regulations on content and deadline, the subsidiary will be fined depending on the severity of the violation from 1,000,000 VND – 2,000,000 VND.

Engrave the subsidiary’s seal:

– Subsidiary companies will need to have their own seal for their company. Therefore, the subsidiary must quickly engrave the seal after having a tax code.

– The form of the seal is decided by the subsidiary, however, it must ensure that there is all the necessary information about the company name as well as the business code.

– After engraving the seal, the subsidiary announces the legal entity seal sample that will be used publicly on the business registration portal.

4. Rights, obligations and responsibilities of the overseas parent company towards its subsidiaries

Pursuant to Article 196 of the Enterprise Law 2020, the rights, obligations and responsibilities of a foreign parent company towards its subsidiaries are as follows:

– The parent company will exercise its rights and obligations as a member, shareholder or owner in relations with its subsidiaries according to the corresponding legal provisions of the Enterprise Law 2020 and other relevant laws. relevant legal  regulations.

– Contracts, transactions and other relationships between the foreign parent company and the subsidiary must be established and implemented independently and equally according to the conditions applicable to independent legal entities. create.

– The parent company will be responsible for the company’s damages in case of intervention beyond its authority and forcing the subsidiary to carry out business activities contrary to normal business practices or to carry out other acts. Unprofitable activities without reasonable compensation in the relevant financial year, causing losses to the subsidiary.

In that case it is necessary to note:

+ The parent company manager will be jointly responsible for the damage with the parent company.

+ In case the parent company does not compensate the subsidiary, creditors or members and shareholders who own at least 1% of the subsidiary’s charter capital will have the right to act on their own behalf or on behalf of the subsidiary. for the subsidiary to request the parent company to compensate the subsidiary for damages.

+ In case the business activities performed by a subsidiary bring benefits to another subsidiary of the same parent company, the subsidiary that benefits will have to cooperate with the parent company in making a refund. the benefit that he is entitled to for the damaged subsidiary.

In addition, for issues related to establishing foreign businesses in Vietnam, you can immediately contact Viet My for free foreign investment advice.

5. Frequently asked questions about foreign companies establishing subsidiaries in Vietnam

5.1 Are parent companies and subsidiaries correct types of businesses?

Parent companies and subsidiaries are not types of businesses.

5.2 Can a subsidiary buy shares of the parent company?

Subsidiaries are not allowed to invest to buy shares or contribute capital to the parent company. Subsidiaries of the same parent company are not allowed to simultaneously contribute capital or buy shares for cross-ownership according to Clause 2, Article 195 of the Law on Enterprises 2020.

5.3 Does the subsidiary have the same tax code as the parent company?

The subsidiary will have a tax code independent of the parent company.

5.4 Can a subsidiary transfer its profits to the parent company?

Subsidiary companies are not allowed to transfer business profits to the parent company but will have to pay corporate income tax at the company headquarters.

5.5 How is the parent company responsible for its subsidiaries?

The parent company has only limited liability for its subsidiaries. The parent company will have basic rights and obligations towards its subsidiaries according to the provisions of Article 190 of the Law on Enterprises 2020.

Above is how a foreign companies establish subsidiaries in Vietnam? of Viet My. If you have difficulty establishing a subsidiary in Vietnam for a foreign company or other related issues, please contact VIET MY LAW AND ACCOUNTING.