Writer: Ngan Nguyen
In the period of international integration, traders tend to expand their businesses not only within a country but to more territories across the world. They can establish branches in potential places while complying with the laws of such places on the establishment. In Vietnam, foreign traders are eligible to establish branches to do business under laws on commerce. However, such provisions require the foreign traders to follow some certain procedures and conditions to obtain approval from licensing authorities. Thus, if a foreign trader fails to satisfy such requirements, it shall not have the permission to establish a branch in Vietnam.
By this article, BLawyers Vietnam’s commercial lawyers would note you some legal restrictions for establishing a branch in Vietnam.
1. Legal restrictions on branch’s establishment in Vietnam
According to Decree No. 07/2016/ND-CP dated 25 January 2016, a foreign trader (or foreign entity) cannot establish its branch in Vietnam if not satisfying these following conditions:
- The foreign trader has been established and operating under laws of a country or territory. Such country or territory must be a party of treaties to which Vietnam is a signatory;
- The foreign trader has been operating for at least 05 year from the date of establishment or registration;
- The Certificate of business registration or equivalent documents should be valid for at least 01 year from the date of establishment;
- The scope of the branch’s operation is suitable to Vietnam’s commitments to market access under treaties to which Vietnam is a signatory; and
- The scope of the branch’s operation is consistent with the foreign trader’s business lines.
Besides, the licensing authorities could refuse to grant the license for branch establishment (“License”) to the foreign trader if they find out:
- The foreign trader applies for establishing a new branch within 02 years from the date of revocation of the prior License;
- It is subject to legal restrictions from branch establishment for the reasons of national defense and security, social order, social ethics and community health;
- The application dossier submitting to the licensing authorities do not comply with the requirements of Vietnamese laws. This might happen for notarization and/ or legalization of documents aboard; or
- The foreign trader does not submit additional documents or further explanation at the requests for supplementation or amendment from the authorities.
2. Legal restrictions on the head of a branch in Vietnam
Decree No. 07/2016/ND-CP also states that the head of a branch cannot concurrently hold the following titles:
- The head of a representative office of another foreign trader;
- The head of a representative office of the same foreign trader; or
- The legal representative of a business organization incorporated under laws of Vietnam (for example, a company).
3. Legal restrictions on the procedure for establishment of a branch in Vietnam
Of note, each foreign trader can only set up one branch within a province or a central city of Vietnam.
When receiving the full dossier from the foreign trader, the licensing authorities shall issue a result on branch establishment. This process might be within 07 working days as prescribed by laws. If needing a Minister-level approval before granting the License, it might take up to 13 working days.
In conclusion, foreign traders who want to expand business in Vietnam by branches should strictly follow Vietnamese laws when establishing branches here. Accordingly, they should check carefully legal restrictions as mentioned above.
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