According to the provisions of the current ‘Law on Enterprise’, enterprises have the right to conduct any business that is not prohibited by the law. Accordingly, enterprises have the right to register multiple different business lines at the same time without having to operate all the registered lines. The registration of multiple business lines at the same time helps companies to do multi-industry business, without having update its business lines every time there is a need.
The difference between domestic and foreign enterprises when choosing business lines
For Vietnamese companies, choosing industry code will be simpler as enterprises are free to do business in industries that are not prohibited by law, on the basis of ‘Vietnam Standard Industrial Classification’ promulgated together with ‘Decision No. 27/2018/QD-TTg’ dated July 6, 2018 by the Prime Minister. Accordingly, the companies shall select the industry code in the Vietnam standard industrial classification (“VSIC”) according to its activities and register for business operation.
For foreign-invested companies, choosing industry code is more complex. Besides choosing industry code based on VSIC code, the companies must also choose the international industry code (“CPC”) according to Vietnam’s Commitments on Trade in Services to the WTO (“Commitments”) and international treaties to which Vietnam is a member.
In case the company registers an industry code that does not correspond to any CPC industry code, or registers a business line not mentioned in the commitments and international treaties to which Vietnam is a member, such company can still register to operate in this industry but must consult the competent state agencies in accordance with the law of Vietnam to obtain approval from those agencies. Then, the company can register to do the business, and operate in those lines. In such a case, foreign investors must carry out complex procedures, depending on the decisions of competent state agencies. Therefore, investors should consult experts before carrying out these procedures.
Example: Portal activities (VSIC code: 6312), Other currency intermediation activities (Momo e-wallet activities in Vietnam), etc.
Regulations on conditional business lines
According to the current Law on investment, and Law on enterprises of Vietnam, business lines can be divided into three groups:
The first group is business lines which are not conditional. These are the business lines in which companies are free to do business.
The second group is prohibited business lines. These are the business lines that are prohibited in Vietnam.
The third group is conditional business lines. These are the business lines in which the conduct of business activities must satisfy necessary conditions as prescribed by law for reasons of national defense and security, social’s safety, social ethics, and public health. Thus, companies may be required to apply for a corresponding sub-license.
For each specific line, the ‘Law on Investment’, the ‘Law on Enterprises’, and Vietnam’s specialized laws laid down conditions that companies doing business in those lines must meet. These conditions can be divided into the following groups:
Conditions on capital: This group of conditions requires the company to invest in its project a certain amount of capital or deposit a certain amount of money to ensure the operation of the industry in which the company is registered and the responsibilities and obligations arising in the course of business activities.
For example: A company operating in the field of labor outsourcing must make a deposit of 2,000,000,000 VND (two billion dong).
Conditions on facilities: This requires the company to meet the conditions on facilities, equipment, construction area, etc.
Example: A foreign investor building a pre-school educational institution must strictly meet the conditions on construction area, lighting, furniture, equipment, care and education supplies for children, water system, kitchen, playground, trees, and office in accordance with the law.
Conditions on human resources: This group of conditions requires the company to have a full human resource structure. Personnel and/or the head of the company must meet the requirements like experience and qualifications to do business and operate in that field.
Example: All employees working directly, and the head of a company operating in the field of food and beverage, or restaurant business must ensure good health conditions and have been fully trained in hygiene and safety.
Other conditions: A number of other conditions must be met when the companies do business and operate in a conditional business line, based on specific provisions of specialized laws and international treaties to which Vietnam is a party.
Example: A foreign investor operating in the field of advertising must enter a joint venture with a Vietnamese company operating in the field of advertising. Similarly, foreign investors operating in the field of architecture and technical consulting are required to be organizations.
Should multiple business lines be registered?
First, it must be affirmed that the law does not limit the number of registered business lines. Therefore, the company can register unlimited number of business lines. With the registration of many business lines at the same time, the company can operate in multiple lines and meet the requirements during business and operation. However, indiscriminately registering business lines will lead to some disadvantages such as difficulties in identifying business goals, mission, strengths and the main business lines. Thus, the company may fail to win the trust of partners. If the registered business lines of the company are opposite and unrelated, the company may fail to meet the legal conditions while still doing business.
In our experience, due to the above reasons, investors should only register (i) business lines in which the company will operate, (ii) related, complementary business lines in which the company operates, and (iii) the expected business lines in which the company may operate in the future.
Some notes when choosing and registering business lines
- Prohibited business lines include prostitution business, human trafficking, buying and selling tissue, corpse, human body parts, human fetus, firecrackers business, debt collection service, etc.
- Find out in advance the legal conditions on planned business lines. This includes conditions on capital, facilities, human resources, sub-licenses, etc., when registering and operating in conditional business lines.
- The company should choose suitable business lines, and refrain from registering too many business lines without proper plan for operation. The company should register in clusters of related and complementary lines, and auxiliary lines of the main business to ensure continuity and avoid interruptions in the company’s business.
- The company should consult with professional units and lawyers before registering business lines. If investors register conditional business lines, they shall consult before registering in additional lines to ensure compliance with the provisions of law.
Therefore, after preparing the necessary elements, the right business lines must be chosen. Investors then move to the stage of business establishment. You can refer to the procedure for setting up a company and investment project here.
Time of writing: 30 September 2021
The article is based on the current law at the time of recording as above and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases that the reader wants to apply. Therefore, the article is for reference only.
Source: plf.vn
