Acquisition and merger between companies today bring benefits to both parties, especially for those who would like to make an entry to a foreign market. One of the advantages is to create greater financial power and more influence. As a result, foreign companies incorporating financial services are researching and finding ways to incorporate in Vietnam, which can meet the demand of money circulation, meet the cash flow needs and measure all financial situations in enterprises. This article will provide you with how to incorporate a business in Vietnam in general and how to incorporate financial services in particular.
What is the incorporation of a company?
The incorporation of a company refers to the legal process that is used to form a corporate entity or a company. An incorporated company is a separate legal entity on its own, recognized by the law. These corporations can be identified with terms like ‘Inc’ or ‘Limited’ in their names. It becomes a corporate legal entity completely separate from its owners.
Everyone knows how great are benefits that a corporation brings to the owner. Furthermore, there are other reasons why the corporation proves to be an attractive vehicle for carrying on a business. Let’s examine them:
- Owners are protected from personal liability from company debts and obligations.
- Corporations have a reliable body of legal precedent to guide owners and managers.
- Corporations are the best vehicle for eventual public companies.
- Corporations can more easily raise capital through the sale of securities.
- Corporations can easily transfer ownership through the transfer of securities.
- Corporations can have an unlimited life.
How to incorporate a company in Vietnam?
For many foreign investors whose targets are in Vietnam, the knowledge of incorporation procedures is strictly required to subject to. In Vietnam, a business founder has to follow four main steps of procedures for business establishment and registration as follows:
Step1: Prepare information for your business profile
2. Prepare notarized copies of your ID card or passport. Notarized copies of ID card no longer than 3 months and its validity period is not more than 15 years.
3. Determine your company’s name and address of your office. The founder of the company must not name the enterprise that is identical or confusingly similar to the name of another company registered in the national enterprise registration database, except for dissolved or court entities. bankruptcy declaration (according to the provisions of Clause 2, Article 42 of the Law on Enterprises).
4. Determine the regulation of capital.
5. Determine the title of the company representative (e.g the manager or director).
6. Determine the main business lines. You need to specify whether your business needs additional conditions (legal capital, other regulations, etc).
Step 2: Conduct the incorporation phase
1. Compile the company profile
The necessary company profile includes:
- Application form for business registration
- Draft of Company’s regulations
- Shareholders and Founders list
- Authenticated papers of members, legal representatives
- Valid personal identification papers of authorized representatives and legal representatives
- Legal capital certificate
- A valid copy of the practising certificate and ID card of the person who has a practising certificate for enterprises conducting business lines that require a practising certificate.
2. Submit a company file at the provincial business registration office.
3. In case of authorization to submit, a letter of authorization is required.
4. To be granted an enterprise registration certificate after 5 days after receiving the dossier.
Step 3: Procedures for registering the entity seal
1. Take a copy of the enterprise registration certificate to an agency that has the function of carving the seal to perform the seal of a legal entity for the company.
2. The legal entity seal will be transferred to the provincial/municipal police agency for checking the registration and giving the seal to the enterprise.
3. When receiving the seal, the representative of the business brings the enterprise registration certificate (the original) and presents the ID card.
Step 4: Procedures after the business incorporation
1. Conduct the initial tax return
2. Register a tax return via the internet.
3. Submit the return and license tax.
4. Submit the notice of the application of value-added tax calculation method.
5. Conduct procedures for purchasing and ordering invoices.
6. Post or hang the invoice templates at the company headquarter.
7. Prepare all business conditions for conditional business lines.
How to incorporate financial services in Vietnam
Firstly, it must be affirmed that the process of setting up a basic financial company must base on the procedures of incorporating a business in Vietnam. However, since its business items are financial services, there are still some conditions required for the founders of the organization. With the first step of determining the type of your business, you should take a look at these five following types of finance companies:
Types of financial services
1. State-owned finance company: a finance company with state capital investment, establishment, and organization of business management.
2. Joint-stock finance company: a finance company being jointly contributed, established and organized by a business organization or individuals.
3. Finance company affiliated to credit institutions: a finance company established by a credit institution with its own capital and owner as prescribed by law, independent accounting and legal entity status.
4. Joint Venture finance company: a finance company established by contributing capital between Vietnam and foreign parties on the basis of a joint venture contract.
5. 100% foreign-owned finance company: a finance company established with a capital of one or more foreign credit institutions under the provisions of Vietnamese law.
Basically, procedures of incorporating a finance company bases on the general rules of incorporating a company. Nevertheless, there are compulsory conditions are required by the Vietnamese government to ensure the performance of the strict management of this business type.
Conditions for founders who are foreign credit organizations
1. Having total assets of more than US $ 10 billion at the end of the year prior to the time of filing, unless otherwise provided for by the bilateral investment agreement between Vietnam and the home country.
2. Business activities are healthy and safe; profitable in the year immediately preceding the year of proposing the establishment of financial company
3. In case a foreign credit institution is a bank, in addition to the above conditions, it must be a reputable bank, ranked by the international rating organization from average and stable level upwards, with bad debt ratio less than 3%.
For Vietnamese credit organizations
1. Maintain prudential ratios in operation as prescribed by law after contributing capital to financial companies;
2. Having total assets Having at least VND 50,000 billion, the ratio of bad debts to total outstanding loans is less than 3% at the time of applying for capital contribution to incorporate a financial company;
3. Not breaching the prudential regulations in operation according to the regulations of the State Bank of Vietnam for 6 consecutive months before the time of requesting the establishment of a financial company;
4. Business activities are healthy and safe; profitable in the year immediately preceding the year of proposing the establishment of a financial company.
In addition, you can understand about Vietnam FDI guide: 2019 – 2020 to get your needed pieces of information.
In conclusion, financial companies are making great contributions to the economy with the potential to provide flexible financial services that meet the growing demands of the economy. Therefore, the potential of establishment and development of these businesses is large, but it comes with the trouble if not following the process properly. It is believed that setting up your financial company will be smooth if you pay attention to this article.