RESTRICTIONS ON BRANCHES OF FOREIGN MERCHANTS IN VIETNAM

The trend of international integration is growing increasingly robust across nearly all nations. In this context, foreign enterprises are expanding their operational scope and business scale to other countries, driving the demand for branch establishment. In recent years, Vietnam has become an attractive destination for foreign investors through the establishment of representative offices or branches of foreign merchants in Vietnam to explore the market and conduct certain commercial activities.

Foreign merchants seeking to establish branches in Vietnam must comply with the legal provisions on commerce. These regulations require foreign merchants to fulfill specific procedures and conditions to obtain approval from the licensing authority.

Legal restrictions on the establishment of branches of foreign merchants in Vietnam

Pursuant to Decree No. 07/2016/ND-CP dated January 25, 2016, foreign merchants are prohibited from establishing branches in Vietnam unless they meet the following conditions:

– The foreign merchant must be established and operate under the laws of a country or territory that is a member of the international treaties to which Vietnam is a party;

– The foreign merchant must have been in operation for at least 5 years from the date of its establishment or registration;

– The business registration certificate or equivalent documents must remain valid for at least 1 year from the date of the application for branch establishment;

– The branch’s scope of activities must align with Vietnam’s commitments to market access under the international treaties to which Vietnam is a party; and

– The branch’s field of operation must be consistent with the business lines of the foreign merchant.

Additionally, the licensing authority has the right to refuse to issue a branch establishment license (“License”) to foreign merchants in the following cases:

-The foreign merchant applies to establish a new branch within two (02) years from the date its previous License was revoked;

– The foreign merchant is restricted from establishing a branch for reasons related to national defense, national security, public order and safety, social ethics, or public health;

– The foreign merchant’s application dossier submitted to the licensing authority fails to comply with Vietnam’s legal requirements. Non-compliance may arise from issues such as improper notarization or consular legalization of documents originating from abroad; or

– The foreign merchant fails to submit additional documents or provide further explanations as requested by the competent authority during the application review process.

Legal restrictions for the Head of branch of a foreign merchant in Vietnam

Decree No. 07/2016/ND-CP also stipulates that the head of a branch is prohibited from concurrently holding the following positions:

– The head of a representative office of another foreign merchant;

– The head of a representative office of the same foreign merchant; or

– The legal representative of an economic organization established under the laws of Vietnam.

Legal restrictions on the procedures for establishing branches of foreign merchants in Vietnam

It is important to note that each foreign merchant is permitted to establish only one branch within a province or centrally governed city in Vietnam.

>>IMPORTANT NOTES ON CAPITAL CONTRIBUTION, CONTRIBUTED CAPITAL OR SHARE PURCHASE https://linconlaw.vn/important-notes-on-capital-contribution-contributed-capital-or-share-purchase/

>> PROCEDURE FOR FOREIGN LOAN APPLICATION https://linconlaw.vn/procedure-for-foreign-loan-application/