Question: Dear lawyer, some of my friends and I are planning to establish a company. My friends think we should register many different business lines even though some of them have not come into operation or are not yet operated so that later we do not have to carry out the procedure to update the changed business lines. However, in my opinion, only those lines that are operating should be registered. I would like to ask for consult whether to register multiple business lines for the company or not. Why?
PL&Partners would like to thank you for trusting and sending questions to us. For your question, we would like to reply as follows:
Choosing business lines to register for domestic and foreign enterprises has some basic differences. Since you did not specify whether your business has foreign capital or not, we are going to cite in both cases.
1. Differences between business lines of domestic enterprises and foreign-invested enterprises
- For Vietnamese enterprises: opting for line codes shall comply with the principle that enterprises freely engage in any business lines that are not banned by the law based on Vietnam’s economic system promulgated together with Decision No. 27/2018/QD-TTg dated July 6, 2018 of the Prime Minister. Enterprises choose line codes in the system of Vietnamese economic sectors corresponding to their business activities for enterprise registration and operation registration.
- For foreign-invested enterprises: in addition to choosing the line codes in the system of Vietnamese economic sectors, the enterprise shall also choose the international line code (“CPC“) according to the Schedule of Commitments on Trade in Services of Vietnam in the WTO’s Schedule of Commitments and International Treaties to which Vietnam is a signatory. In case the enterprise registers a line code not corresponding to any CPC in the Schedule of Commitments or mentioned in the Schedule of Commitments and International Treaties to which Vietnam is a signatory, the enterprise shall consult competent authorities in Vietnam to obtain their approval. After being approved, the enterprise can register to do business and operate those lines. In fact, the procedure for approval is quite complicated.
2. Is it advisable to register multiple business lines?
Current laws do not limit the number of registered business lines. Therefore, enterprises are entitled to register an unlimited number of business lines. However, the indiscriminate, non-selective and undirected registration of business lines will lead to certain disadvantages as follows:
First, for a newly established enterprise, registering too many business lines will lead to the business operation field being “diluted”, making it difficult to exactly identify business goals.
Second, an enterprise with too many business lines will make it difficult for its partners and clients to determine the mission and strengths of that enterprise, as well as what the main business lines of the company are, which makes the company fail to build the trust of partners toward the company.
Third, it should be noted that not every line that applies for registration will be allowed to do business immediately, but for conditional business lines, your company must meet all the basic conditions on facilities, practice certificates, legal capital, etc. to obtain the corresponding sub-licenses.
- Companies operating in the field of labor sub-leasing shall deposit VND two billion.
- Foreign investors operating in the field of advertising shall form a joint venture with a Vietnamese company also operating in the field of advertising.
Therefore, according to PL&Partners’ experience, enterprises should only register business lines in which they are going to operate, business lines that are relevant and complementary to the field in which they are going to operate and ones that are expected for business career plan for future development.