As a foreign investor looking to do business in Vietnam, you will need to make a multitude of important decisions. One of the first is to choose which type of company is the best fit for your business. This guide will introduce and compare the company types in Vietnam, then what they mean for your business.

Know the types of companies in Vietnam

There are 3 common types of companies in Vietnam: One Member Company Limited, Multi-Member Company Limited, and Joint Stock Company. Now let’s take a closer look at the features of each company type:

1. One Member Company Limited

A One Member Company Limited (“One Member Co., Ltd“), also known as Công Ty TNHH Một Thành Viên in Vietnamese, is a legal entity owned by an Organization, or an Individual Member (“Company Owner“). The Company Owner is liable for the debts and other liabilities of the company to the extent of the amount of the charter capital of the company. 

One Member Company Limited’s features are:

• The Company Owner has autonomy with regard to decisions made about the company, such as amending the Company’s charter, deciding business plans, appointing directors, restructuring the company, enjoying profit, and dissolving the company;
• The company may reduce its charter capital; or raise capital by the owner contributing additional capital, or issuing private bonds, but not issuing shares.

It also has fewer corporate formalities and is the simplest management structure among 3 company types:

• Model 1: President and (General) Director; or
• Model 2: Members’ Council and (General) Director.

2. Multi-Member Company Limited

A Multi-Member Company Limited, also known as Công Ty TNHH Hai Thành Viên Trở Lên in Vietnamese, is a legal entity owned by from 02 to 50 capital contribution members, which may be Organizations and/or Individuals (“Company Members“). The Company Members are liable for the debts and other liabilities of the company to the extent of the capital amount contributed or committed to contributing to the company. 

Multi-Member Co., Ltd’s features are:

• Company Members may transfer a part of a whole capital contribution to another member(s). Current members have a priority “Right of First Refusal” and “Right of First Offer”;
• The company can raise capital by increasing the contributed capital of members, raising the contributed capital from new members, or issuing bonds;
• The company may reduce its charter capital;
• A resolution of the Members’ Council shall pass when it is approved by the number of members owning at least 65% of the charter capital.

A Multi-Member Co., Ltd has a simpler management structure than a JSC, which is: Members’ Council, President of the Members’ Council, and (General) Director.

3. Joint Stock Company 

A Joint Stock Company (“JSC“), or Công Ty Cổ Phần in Vietnamese, is a legal entity whose charter capital is divided into shares held by three or more Organizations and/or Individuals (“Shareholders“). Shareholders are responsible for the debts and liabilities of the company to the extent of the amount of their contributed capital. A JSC may issue stock in order to raise capital, and it may list on the Vietnam Stock Exchange.

Types of shares of a JSC are: ordinary shares, dividend preference shares, redeemable preferred shares, voting preference shares, and other preferred shares as prescribed in the company’s charter and the Law on Securities.

A JSC has a complex and complete management structure. The JSC may choose an organization to manage and operate according to one of the following two models:

• Model 1: The General Meeting of Shareholders (“GMS“), Board of Directors (“BOD“), Supervisory Board (if any), and (General) Director. In case the JSC has less than 11 shareholders and the shareholders that are organizations holding less than 50% of the total shares of the company, it is not required to have a Supervisory Board;
• Model 2: The GMS, BOD, and (General) Director. In this case, at least 20% of the members of the BOD must be independent members and have an Audit Committee under the BOD.

The annual GMS shall be held if the attendance rate is at least 51% of the total number of voting shares. If the first meeting fails to meet this attendance rate, the rate for the second meeting is at least 33% of the total number of voting shares. If the second meeting fails to meet this rate, the third meeting will be held irrespective of the attendance rate.

Resolutions on the following matters shall be passed if they are approved by the number of Shareholders representing at least 65% of the total votes of all attending Shareholders:

• Types of shares and the total number of shares of each;
• Changing scopes of business;
• Changing the organizational or management structure;
• Invest in projects, or sell assets with a value of 35% or more of the total value of assets recorded in the company’s latest financial statement;
• Reorganization, dissolution of the company;
• Other matters are provided in the company’s charter.

For other matters, resolutions of the GSM are passed at the meeting if they are approved by a number of Shareholders representing greater than 50% of the total votes of all attending shareholders.

Comparison between company types

How to set up a company in Vietnam?

These are 8 steps to form your company:

1. Decide on your business scope
2. Rent a business location
3. Select a company type
4. Decide on a company name and capital structure
5. Apply for an Investment Registration Certificate
6. Apply for Enterprise Registration Certificate
7. Open business bank accounts
8. Complete all post-incorporation requirements 

Conclusion

Choosing which type of company in Vietnam to incorporate is very simple. It mainly depends on the number of investors and the management structure you require. In addition, the regulations here in Vietnam do not differentiate the tax treatment based on the structure of companies. In practice, company limited is the best fit for small and medium businesses due to its simple management structure and lower corporate compliance costs.

Learn more: Vietnam Company Set Up Services