ESTABLISING REPRESENTATIVE OFFICES AND BRANCHES OF KOREAN TRADERS IN VIETNAM
Under the Commercial Law, Korean traders can open their representative offices and branches in Vietnam and also establish Korean investment-funded enterprises in Vietnam. Then the Ministry of Planning and Investment is responsible for managing the issuance of licenses to allow Korean traders to invest in Vietnam. The Ministry of Industry and Trade is responsible for the issuance of licenses of establishing representative offices and branches of Korean traders in Vietnam.
Representative offices of Korean traders are not authorized to perform direct profitable business in Vietnam but carry out trade promotion activities within the constraints of the Law only.
Branches of Korean traders in Vietnam are allowed to (i) perform goods’ trading business and other commercial activities in accordance with their establishment licenses under the laws of Vietnam, and (ii) open accounts in Vietnam and transfer their profits abroad.
Decree 72/2006/ND-CP details Commercial Law regarding the establishment, operation, rights and obligations of Vietnam-based representative offices and branches of Korean traders who specialize in goods’ sale and purchase and activities directly related to goods’ sale and purchase. Representative offices and branches of Korean-invested enterprises established in Vietnam shall not be governed by this Decree.
1) Which agencies are responsible for granting establishment permits?
The Trade Ministry shall grant, re-grant, amend, supplement, extend or withdraw permits for establishment of branches and provincial/municipal trade or trade-tourism services shall grant, re-grant, amend, supplement, extend or withdraw representative office establishment permits.
2) What conditions need satisfied for establishment permits?
For a permit to establish in Vietnam, the first and foremost condition is that the law of the businessperson’s country or territory must recognize her or him. For a representative office, a further requirement is the Korean businessperson having been operating for at least one year after the office’s establishment or registration, five years for branches.
Permits for establishment of Vietnam-based representative offices or branches of Korean businesspersons shall each have a valid term of five years, which must, however, not exceed the remaining valid term of such businessperson’s business registrations or papers of equivalent value in case Korean laws specify valid terms of business registrations of Korean traders.
3) What documents need prepared in the dossier of application for establishment permits?
* A dossier of application for a representative office establishment permit must comprise:
An application for the representative office establishment permit, made according to a form set by the Trade Ministry and signed by the Korean businessperson’s competent representative;
Copies of the Korean businessperson’s business registration or papers of equivalent value certified by the competent authority of the locality where the Korean businessperson has been established. In case that an operation duration for the Korean businessperson is specified in such business registration or papers of equivalent value, such operation duration must remain valid for at least one year;
An audited financial statement or other document of equivalent value proving the actual existence and operation of the Korean businessperson in the latest fiscal year; and
A copy of the Korean businessperson’s operation charter, for those belonging to business entities.
* A dossier of application for a branch establishment permit must have:
An application for a branch establishment permit, made according to a form set by the Trade Ministry and signed by the Korean businessperson’s competent representative;
A copy of the branch’s operation charter, clearly stating the scope of authorization for the branch’s head;
Copies of the Korean trader’s business registration or paper of equivalent value certified by the competent authority of the locality where the Korean businessperson has been established or made its business registration. In case whereby an operation duration for the Korean trader is specified in such business registration or papers, such operation duration must remain valid for at least three years; and
An audited financial statement or other equivalent document substantiating the actual existence and operation of the Korean businessperson in the latest fiscal year.
Copies of the Korean businessperson’s business registration, audited financial statement or equivalent documents, and a copy of the branch’s operational charter must be translated into Vietnamese and certified and legalized by Vietnam’s Korean-based diplomatic missions or consular offices.
4) When will representative or branch establishment permits not be granted?
The agencies competent to grant permits for establishment of a representative office or branch shall not grant such permits to Korean businesspersons when:
Such Korean businessperson: (i) fails to have the proper dossier of application or trading in goods and/or services, (ii) is on the list of goods and services banned from business, or (iii) applies for permits within two years after the law has withdrawn their permits.
There appears evidence that the establishment of such Korean businessperson’s representative offices or branches may cause harm to Vietnam’s: defense, security, social order and safety, history and culture, ethics, fine customs and practices, people’s health, sustaining of natural resources, or preserving the environment.
5) How long it takes to obtain an establishment permit?
Within 15 days after receiving complete and valid dossiers, the provincial/municipal Trade Services (for establishment of a representative office) and Trade Ministry (for establishment of a branch) shall grant permits to Korean businesspersons. If the dossier is invalid, the permit-granting agencies shall, within three working days after receiving such dossiers, notify such in writing to Korean businesspersons so that the latter can supplement and complete the dossiers.
Upon the expiration of the time limits, if the competent agencies refuse to grant a representative office or branch establishment permits, they shall have to notify such in writing to the concerned Korean businessperson, clearly stating the reason for the action.
6) How shall representative offices or branches make known their operations in Vietnam?
Within 45 days after being granted a permit, a representative office or branch shall have to publish on three consecutive issues of a printed or online newspaper licensed in Vietnam: the name and address of the head office in Vietnam; name and address of the Korean businessperson and head of the representative office or branch; the serial number, date of issue and valid term of the representative office or branch establishment permit and the permit-granting agency; and operations of the representative office or branch.
At the same time, the Korean businessperson must officially commence operations and notify, in writing, the permit-granting agency that operations have commenced.
7) What shall operations of representative offices cover?
Operations of representative offices shall cover performance of the function of liaison offices; the formulation of cooperation projects of Korean businesspersons in Vietnam; studies of the market in order to promote opportunities to buy or sell goods, provide and use commercial services of traders they represent; and monitoring and control of the performance of contracts signed with Vietnamese partners or related to the Vietnamese market by Korean businesspersons they represent…
8) What shall operations of branches cover?
Operations of branches shall cover activities that are allowed in their establishment permits and compliant with Vietnam’s law and International laws to which Vietnam is a contracting party.
Branches must satisfy conditions where a branch operates in conditional domains. These conditions are expressed in form of business licenses, certificates of satisfaction of business conditions, practice certificates, certificates of professional liability insurance, requirements on legal capital, or other requirements set forth by the Enterprise Law.
9) What accounts shall be opened for operations of representative offices and branches?
Representative offices are allowed to open expenditure accounts in Korean currencies and expenditure accounts in Vietnam dong of Korean-currency origin at banks licensed to operate in Vietnam and use such accounts only for their operations.
Branches are allowed to open settlement accounts in Korean currencies or in Vietnam dong at banks licensed to operate in Vietnam in service of their operations.
In special cases, branches are allowed to open accounts at overseas’ banks after obtaining consent of the State Bank of Vietnam. Branches shall have to report to the State Bank of Vietnam on the use of accounts opened overseas.
The opening, use, and closure of accounts of representative offices or branches shall comply with the regulations of the State Bank of Vietnam.
10) How shall representative offices and branches report their operation?
Annually, before the last working day of January, representative offices and branches shall send written reports on their operations of the preceding year to the agencies having granted representative office or branch establishment permits.
Branches shall have to observe the regime of financial statements and statistical reports.
In case of necessity as specified by Vietnamese law, representative offices and branches shall have to report, supply documents on, or explain matters related to, their operating at the request of competent state management agencies.
11) What are rights and obligations of representative offices and their heads?
Representative offices and their heads shall exercise their rights and perform their obligations in accordance with the Commercial Law and the following guidance:
Representative offices must neither act as representative for other businesspersons nor sub-lease their head offices.
The head of a representative office of a Korean businessperson must not concurrently hold the following posts:
The head of a Vietnam-based branch;
The representative at law of the Korean trader for signing contracts without the latter’s letter of authorization; and
The representative at law of the enterprise establishment under Vietnamese law.
In case Korean businesspersons authorize heads of their representative offices to sign contracts, amend or supplement already signed contracts, they shall have to effect the authorization in writing for each contract signing or each amendment or supplementation of a signed contract.
12) What are rights and obligations of branches and heads of branches?
Branches and heads of branches shall exercise their rights and perform their obligation in accordance with the provisions of the Commercial Law and the following guidance:
Branches must neither perform the function of acting as representative for other businesspersons nor sub-lease their head offices.
Heads of branches of Korean businesspersons must not concurrently hold the following posts:
– Heads of representative offices of the same Korean businesspersons in Vietnam
– Heads of representative offices or branches of other Vietnam-based Korean businesspersons.
13) In which cases shall representative offices or branches terminate their operation?
Representative offices or branches shall terminate their operation in the following cases:
It is so requested by Korean businesspersons and approved by competent agencies;
Korean businesspersons terminate their operation under laws of countries where such businesspersons have been established or accomplished business registrations;
Korean businesspersons do not apply for extension of representative office or branch establishment permits upon the expiration of operation duration stated therein;
The permit-granting agencies refuse to extend the representative office or branch establishment permit upon the expiration of operation duration stated therein; and
The representative office or branch establishment permit are withdrawn by related agencies.
14) What are the obligations of the Korean businessperson towards their representative office or branch?
Korean business persons shall be held responsible before Vietnamese law for all operations of their Vietnam-based representative offices or branches.
Heads of representative offices or branches shall be responsible for their activities and the operations of their representative offices or branches before Vietnamese law in cases whereby they conduct operations beyond the scope of authorization.
Ref: Circular No.11/2006/TT-BTM of the Ministry of Trade guiding the implementation of the Government’s Decree No.72/2006/ND-CP detailing the Commercial Law regarding Vietnam-based representative offices and branches of Korean traders
A Korean business entity or a Korean trader is allowed to set-up a branch in Vietnam to conduct business activities.
Having the right to conduct business activities and make profit are how a branch differs from a representative office in Vietnam. A branch depends on the Korean business entity that set-up the branch while a Korean owned company set-up in Vietnam exists by itself. The Vietnam Department of Industry and Trade will be approving the establishment of a branch in Vietnam while Vietnam Ministry of Planning and Investment will be the State agency that coordinate the setting up a company in Vietnam.