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CHOOSE PARTNERS AND DETERMINE
CORPORATE FORM
First step: Choose your friends wisely
• Who can establish/contribute capital? The “negative approach”
principle
• Subjects are restricted/limited to contribute capital under the law on
bankruptcy and law on cadres and civil servants, etc.
Next step: Choose form of corporate:
What is corporate form?
• Limited liability company;
• Joint stock company;
• Partnership;
• Private enterprise;
What form of corporate should be chosen?
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SELECTION OF CORPORATE FORMS
Key criterion:
• Limited vs. unlimited liability;
• Capability to increase rights in ownership and capital transfer
• Easy to call any additional capital, i.e. listing
• Easy/complicated corporate management;
• Statutory requirements
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CAPITALISATION/FUNDING – KEY NOTES
• Types of capital; Equity vs. loan
• Legal capital, charter capital and initial investment
• Sources of capital: Loans or capital contribution from local/foreign
investors.
• Restriction on foreign investment and registration of offshore loans.
• Form and evaluation of capital contribution: Cash, gold, assets,
property rights
• Actual capital contribution of enterprises in Vietnam
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3. 3
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BUSINESS REGISTRATION PROCEDURES
• What are business registration procedures?
• Agree on major aspects of the to-be enterprise (e.g. – capitalization,
corporate form, etc.)
• Draft and prepare business documents
• Execute business documents
• Submit the application to business registration division
• Receive Business Registration Certificate
• Satisfy other business conditions
• Official operations
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BUSINESS REGISTRATION –
HIGHTLIGHTED ISSUES
• Business lines;
• Encouraged business sectors (Please see Slide 19 for further
information);
• Roles of important corporate documents such as charter,
shareholder/member agreements; and voting ratio, etc.
• Question: Should the charter follow the template?
• Business conditions? Why are they required?
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CORPORATE GOVERNANCE – OVERVIEW
• What is corporate governance and how it varies by corporate forms?
• Basic management levels (2 -3):
Ownership level: General Meeting of
Shareholders/Council’s Members
Governance level: Board of Directors/Members’ Council
Management level: Director/Managers of departments and
divisions
Supervision level: Board of Supervision and Supervisors
• Appointment of directors/officers of enterprises
• Roles of the memorandum of association and internal rules.
• Decision-making process
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4. 4
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CORPORATE GOVERNANCE – SOME
ISSUES
• Code of Ethics
• Principles of prudence, fidelity and loyalty for managers vs. crimes
under the Penal Code of Vietnam
• Related party transactions
• The “principal - agency” problems and solutions (bonus, penalty,
supervision)
• Piercing the corporate veil
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CORPORATE GOVERNANCE IN A MULTI-
MEMBER LLC
• Number of members range from 2 to 50 (max).
• Two governance levels are (i) Members’ Council including members
who contribute their capital and (ii) Director. There may be a
supervision board
• Governance is conducted by the owners (themselves or through
proxies)
• Principles of decision making: 65% and 75%
• External capitalization is permitted however without issuance of
shares or being listed on stock exchange.
• Right of first refusal
• Conclusion: Suitable for family business with close relationship
between members. Limited in capital mobilization.
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CORPORATE GOVERNANCE IN A SINGLE
MEMBER LLC
• Number of member: 01, an individual or organization/entity
• Two management levels are (i) members’ council/president and (ii)
managers. There may be a supervision board.
• Owner exercises his/her rights through his/her representatives (i.e.. –
members’ council vs. president).
• Decision-making process
• No reduction of charter capital.
• Conclusion: Convenient and flexible with high level of concentration
in management. Capital reduction is not however permitted.
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CORPORATE GOVERNANCE IN A JSC
• Number of shareholders (3 to n)
• 3-tier management: (i) general meeting of shareholders; (ii) board of
directors and (ii) officers (have or do not have supervision board)
• Issuance of shares to increase its capital. Diversified shares.
• Voting ratios: 65% and 75% in GMS level. Headcounts at the BOD
level.
• Shares are easily transferred => high liquidation
• Increase of capital: Convenient and easy
• High control mechanism => close governance is required
• Conclusion: Suitable for ventures that demand large capital and a
high level of management.
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RESTRUCTURE, DISSOLUTION AND
BANKCRUPTCY
• Capital transfer: Freedom vs. restrictions
• Merger, consolidation, division, split of enterprise
• Sale of assets/ business operation
• Dissolution
• Bankruptcy
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EMPLOYMENT
•
• Labor contracts are mandatory:
• Invalid labor contracts
• Internal labor rules and labor disciplines.
• Bonus and salary
• Working time and rest; overtime
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6. 6
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TAX
•
• Tax code
• Corporate income tax, value added tax, excise tax
• Tax rates
• Tax exemptions and reductions
• Administrative penalties with respect to tax/tax avoidance
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INTELLECTUAL PROPERTY
• What is intellectual property right? What is industrial property right?
• IP rights:
Copyrights and related rights
Plant variety rights
Industrial property rights
• Industrial property right
Trademarks (in comparison with “Trade names”)
Inventions and utility solutions
Industrial designs; Geographic indications
Designs of semi-conducting closed circuits
• Why must these rights be protected?
• Consequences if not protected (legal, business, etc.)
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PROTECTION OF INTELLECTUAL
PROPERTY RIGHTS
• Registartion procedure
• “First to file” and “priority” principles
• Registration timing: Theory and practice
• Term of protection and extention.
• Trade and speculation of domain names (not covered by Intellectual
Property laws)
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TECHNOLOGY TYPES TO BE SUPPORTED
• Renewable energy technology: wind power, biomass power, power
using solid waste
• Sustainable agriculture: pollution treatment and environmental
protection
• Energy efficiency: selection of technologies with high energy
efficiency
• Transportation technology: applying new technologies and material
for increase of contsruction quality and saving investment cost
• Water management and purification: Water supply in rural areas
• Adaptation technology: Reduction of greenhouse gases (“GHG”)
emission
• Other climate techonology businesses
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INCENTIVES
Basic incentives as follows:
• Taxation: Corporate income tax, export and import tax;
• Land approach: Land use fees or land rent shall be exempted or
reduced;
• Supports: Preferred loans from policy banks, Development
assistance funds, personnel training, market development, product
price support scheme, etc.
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PREFERENCE LEGAL INSTRUMENTS
• Prime Minister’s decision No. 37/2011/QD-TTg on supporting
mechanism for development of power generation projects using wind
in Vietnam;
• Prime Minister’s decision No. 24/2014/QD-TTg on supporting
mechanism for development of power generation projects using
biomass in Vietnam;
• Prime Minister’s decision No. 31/2014/QD-TTg on supporting
mechanism for development of power generation projects using solid
waste in Vietnam;
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PREFERENCE LEGAL INSTRUMENTS
• Government’s decree No. 210/2013/ND-CP on incentive policies for
enterprises investing in agriculture and rural areas;
• National Assembly’s Law No. 50/2010/QH12 on economical and
efficient use of energy;
• Prime Minister’s Decision No. 1210/2014/QD-TTg on approval of
restructure plan for transport sector in the cause of industrialization,
modernization and sustainable development until the year of 2020;
• Prime Minister’s Decision No. 131/2009/QD-TTg on a number of
investment preference and promotion policies and the management
and exploitation of rural clean water supply works.
• Prime Minister's Decision No. 2139/2011/QD-TTg on approving the
national strategy for climate change.
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DUANE MORRIS VIETNAM LLC
Thank you very much!
Duane Morris Vietnam LLC Duane Morris Vietnam LLC
Pacific Place, Unit V1307/08, 13th Floor, Suite 1503/04, Saigon Tower
83B Ly Thuong Kiet, Hoan Kiem District 29 Le Duan Street, District 1
Hanoi, Vietnam Ho Chi Minh City, Vietnam
Tel.: +84 4 39462200 Tel.: +84 8 3824 0240
Fax: +84 4 3946 1311 Fax: +84 8 3824 0241
Contact email: omassmann@duanemorris.com
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