Legal Guidelines: Representative offices of foreign traders in Vietnam - From basic to specialized fields

PREFACE

In order to attract foreign capital flows, Vietnam currently has many open-door policies for many industries and investment fields for foreign investors, such as removing market access, increasing ownership limitation of foreign investors in Vietnam in certain industries, or specific investment incentives and support policies. However, from a foreign investor's perspective, investing in a new market also poses many risks, especially during a period witnessing uncertainty in the world economy in general and in Vietnam in particular today. Therefore, many investors that are companies operating abroad and wish to establish a Representative Office in Vietnam (the “RO”) to explore the market before deciding to have a long-term investment. Establishing the RO in Vietnam not only serves to research and understand the market before investing, but also to find partners and commercial promotion for the company's activities abroad.
With the characteristic of not being able to carry out activities for profit-generating purposes, the establishment, operation and management of the RO is also simpler than that of a branch of a foreign company or a company with foreign invested capital in Vietnam. However, in reality, many ROs still often encounter difficulties and obstacles during their operations related to their obligation to comply with the laws of Vietnam.
Understanding the difficulties and obstacles that foreign investors as well as personnel working at ROs encounter related to regulations on the establishment and operations of the RO of foreign traders in Vietnam. HM&P Law Firm (“HM&P”) has drafted and respectfully introduces to readers the Legal Guidance: Representative Offices of foreign traders in Vietnam – From basic to specialized fields, in order to help foreign investors wishing to establish the RO in Vietnam and also help ROs that currently operating in Vietnam for a better understanding of current legal regulations governing the operations of the RO of foreign traders in Vietnam.
We hope this publication will be well-received by readers and become a valuable document for ROs. Despite our best efforts, this document will still have shortcomings and cannot contain all the problems that businesses often encounter. Therefore, HM&P hopes to receive sympathy, feedback and suggestions from businesses and colleagues.

In case any issues arise regarding this document or the legal services that HM&P provides; you can contact us using the information below:

Managing Partner:

Nguyen Van Phuc

Phone number: +84 932 768 630

Email: phuc.nguyen@hmplaw.vn

HM&P Law Firm

Address: 7th Floor, ITAXA House, 126 Nguyen Thi Minh Khai, Vo Thi Sau Ward, District 3, Ho Chi Minh City, Vietnam

Phone number: +84 28 73080839

Email: counsel@hmplaw.vn

Website: hmplaw.vn

COMMON PROBLEMS
1.    The foreign traders are allowed to establish the RO in Vietnam in which Sectors and Sub-Sectors?

Foreign traders are allowed to establish the RO in Vietnam in the following sectors and sub-sectors:

*   The RO of foreign traders in the engineering services is not subject to specialized management. The establishment, organization and operations will comply with the provisions of Decree No. 07/2016/ND-CP.

2.    Overview of the procedure of issuing the License to establish the RO in Vietnam

3.    Application process

Note: Collecting opinions from specialized management ministries is carried out in cases where the scope of operations of the RO is not consistent with Vietnam's commitments or the foreign trader does not belong to the countries or territories participating in the international treaties to which Vietnam is a member and the establishment of the RO has not been regulated in specialized legal documents.

4.    What requirements that foreign traders must meet in order to be issued the License to establish the RO?
Foreign traders shall be issued the License to establish the RO if they meet the following requirements:
(i)    The foreign trader is incorporated and registers for doing business in accordance with provisions of the laws of the countries or territories participating in the international treaties to  which Vietnam is a member or is recognized by the aforesaid countries or territories;
(ii)    The foreign trader has come into operation for at least 01 year from the date of establishment or registration;
(iii)    The Business License or the equivalent document is valid for at least 01 more year from the date of submission of the application;
(iv)    The scope of operations of the RO is consistent with that in Vietnam’s Commitments to international treaties to which Vietnam is a member.
In the event that the scope of operations of the RO is not consistent with Vietnam’s commitments or the foreign trader does not belong to the countries or territories participating in the international treaties to which Vietnam is a member, the RO can be established only if relevant Ministers, Heads of ministerial agencies have given approval for establishment of the RO as mentioned in Section 3. 

5.    What conditions must the head of a RO meet?
Currently, the law does not specifically stipulate the conditions to be appointed and become the head of the RO, however, the head of the RO is the person who must be responsible to foreign traders for their operations and of the RO within the scope of authorization by foreign traders. Therefore, basically, the head of the RO must have full civil act capacity according to the provisions of civil law to be able to become authorized representative. Specifically, you must be 18 years of age or older and must not lose civil act capacity, have limited civil act capacity, or have difficulties in cognition and behavior control. In addition, according to the provisions of Clause 6, Article 33 of Decree No. 07/2016/ND-CP, the head of the RO of a foreign trader cannot concurrently hold the following positions:
•    The head of a branch of the same foreign traders;
•    The head of a branch of another foreign trader;
•    The legal representative of the same foreign trader or others;
•    The legal representative of a business organization incorporated in accordance with the laws of Vietnam.
Another issue that the head of the RO needs to pay attention to is that the head of the RO must have a written authorization for another person to exercise the rights and obligations of the head of the RO according to the laws when leaving Vietnam. This authorization must be approved by the foreign trader. The head of the RO is still responsible for implementing authorized rights and obligations.

6.    What type of paper can be the document that has the same value as the Business License of a foreign trader?
Depending on the regulations in the foreign trader's country of registration, the foreign trader may have a Certificate of Incorporation or a Business License or even both types of documents. In fact, according to the response of the Department of Industry and Trade of Ho Chi Minh city as well as our experience in implementing this procedure in practice in Ho Chi Minh city, only the Business License/Business Registration has equivalent value and is understood as the Business License specified in Point b, Clause 1, Article 10 of Decree No. 07/2016/ND-CP. However, if the Department of Industry and Trade of Ho Chi Minh city apply this understanding when considering application to establish the RO in Ho Chi Minh City, this will cause difficulties for foreign traders who only have a Certificate of Incorporation according to the regulations of the country of registration. At the same time, this is just the feedback from Department of Industry and Trade of Ho Chi Minh city, there is no official regulatory document and it is not generally applicable to other implementing agencies. For some Departments of Industry and Trade of other provinces and cities in Vietnam, HM&P found that these agencies still accept the Certificate of Incorporation or Business License during the license issuing process for foreign traders.

7.    Does changing the type of business of a foreign trader lead to an adjustment in the License to establish the RO?
According to Clause 1 Article 15 of Decree No. 07/2016/NĐ-CP, foreign traders shall apply for adjustments to Licenses to establish the RO in the cases of changing in the name of a foregin trader. Normally, the name of a foreign trader will contain the name of the type of business of the foreign trader. In this case, changing the type of business leads to a change in the name of the foreign trader and the foreign trader will have to carry out procedures to adjust the License to establish the RO. On the contrary, if changing the type of business of a foreign trader does not change the name of the foreign trader, the foreign trader will not have to carry out these procedures.