According to the provisions of Article 188 of the Enterprise Law 2020:
1. A sole proprietorship is an enterprise owned by a single individual whose liability for its entire operation is equal to his/her total assets.
2. A sole proprietorship must not issue any kind of securities.
3. An individual may only establish one sole proprietorship. The owner of a sole proprietorship must not concurrently own a household business or hold the position of general partner of a partnership.
4. A sole proprietorship must not contribute capital upon establishment or purchase shares or stakes of partnerships, limited liability companies or joint stock companies.
It can be understood that the above regulation does not clearly state whether individuals who own private enterprises are required to be Vietnamese nationals or foreign nationals. Therefore, the Enterprise Law 2020 does not prohibit or restrict foreign investors from establishing private enterprises in Vietnam.
Currently, the law does not have any specific documents guiding procedures for establishing private enterprises of foreign investors. In addition, there are no regulations guiding the measure of liability for all assets of foreign investors when their assets are abroad.
II. How is the Law on Investment regulated?
According to the provisions of Article 21 of the Law on Investment2020, there are 05 basic forms of economic investment of investors, including:
1. To invest in the establishment of economic organizations.
2. Investment in capital contribution, purchase of shares, purchase of contributed capital.
3. Implementation of investment projects.
4. Investment in the form of BCC contract.
5. New forms of investment and types of economic organizations according to the Government’s regulations.
The concept of “economic organization” is specified in Clause 21, Article 3 of the Law on Investment 2020; then organizations established and operating in accordance with the provisions of Vietnamese law, including enterprises, cooperatives, cooperative unions, and other organizations carrying out investment and business activities.
According to this regulation, a private enterprise is a type of enterprise belonging to an economic organization according to the above regulations.
III. Can foreign investors establish sole proprietorship?
According to the provisions of Clause 22, Article 3 of the Law on Investment 2020, the concept of “Foreign-invested economic organizations” is stated as follows: “Economic organizations with foreign investors as members or shareholders”.
According to the provisions of the Law on Enterprise 2020: A private enterprise is an enterprise owned by an individual and is solely responsible with all his assets for all activities of the enterprise. Therefore, there is no case of a private enterprise established by a foreign investor in which the strange founder is a member or shareholder of that enterprise.
Therefore, it is impossible to have foreign-invested economic organizations with the type of private enterprises owned by foreigners.
Before establishing an economic organization in accordance with the Law on Enterprises, foreign investors must have investment projects and carry out procedures for applying for an Investment Registration Certificate in accordance with the provisions of the law on investment.
Therefore, foreigners cannot carry out procedures for applying for an investment registration certificate; to proceed with the establishment of a private enterprise.
From the above bases, although the current law does not prohibit foreigners from establishing private enterprises in Vietnam, there are no specific guidelines on foreigners being allowed to establish private enterprises in Vietnam.
IV. What is a partnership?
According to the provisions of Article 177 of the Law on Enterprise 2020, a partnership is:
1. A partnership is an enterprise in which:
a) There are least 02 partners that are joint owners of the company and do business under the same name ((hereinafter referred to as “general partner”). There can be limited partners in addition to general partners;
b) A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets;
c) Capital contributors are organizations and individuals and are only responsible for the company’s debts to the extent of the amount of capital committed to contribute to the company.
2. A partnership has legal status from the date of issuance of the Certificate of Business Registration.
V. Can foreign investors establish a partnership?
According to the provisions of Section 26, Article 4 of the Law on Investment 2020, “Foreign investors are individuals and organizations in accordance with the Law on Investment”.
Accordingly, Clause 19, Article 3 of the Law on Investment 2020 stipulates that “Foreign investor means an individual with foreign nationality or an organization established under foreign law that carries out business investment activities in Vietnam”.
The establishment of economic organizations for foreign investors is specified in Clause 1, Article 22 of the Law on Investment 2020 as follows:
Investors shall establish economic organizations according to the following provisions:
a) Domestic investors establish economic organizations in accordance with the law on enterprises and laws corresponding to each type of economic organization.
b) Foreign investors establishing economic organizations must satisfy market access conditions for foreign investors specified in Article 9 of Law on Investment 2020;
c) Before establishing an economic organization, foreign investors must have investment projects, carry out procedures for issuance and adjustment of investment registration certificates, except for the case of establishment of innovative start-up small and medium-sized enterprises and innovative start-up investment funds in accordance with the law on support for small and medium-sized enterprises.
Therefore, when foreign investors want to invest in Vietnam, they must have investment projects, carry out procedures for issuance and adjustment of investment registration certificates and establish economic organizations .
At the same time, according to the provisions on the enterprise registration dossier in Article 20 of the Enterprise Law 2020, for the type of partnership, there are specific provisions in the establishment dossier that a copy of the Investment Registration Certificate for foreign investors must be present.
From the above bases, if a foreign investor wants to establish a partnership in Vietnam, he just can participate in the form of capital contribution to the partnership.
To save time learning about the law, filling out forms, and submitting documents, you can contact HTLaw for consultation and legal services related to Enterprise Law – Investment Law.
Contact us
- Email: hue.truong@htlaw.vn
- Phone number: +84 935 439 454