I. Overview of Branches of Foreign-Invested Companies
1. When to Establish a Branch of a Foreign-Invested Company
A branch is a dependent unit of a foreign-invested company, enabling the enterprise to expand its operations in Vietnam without having to implement a separate investment project, as stipulated in Article 64 of Decree No. 31/2021/ND-CP. Establishing a branch is often necessary when a company wishes to broaden its business scope and directly conduct commercial activities such as signing contracts, opening bank accounts, recruiting, and managing personnel. Compared to representative offices, branches are allowed to carry out profit-generating activities, helping the parent company improve operational efficiency in the Vietnamese market.
Foreign-invested enterprises may consider establishing a branch when they aim to develop the market, strengthen their commercial presence, or meet specific business requirements that a representative office cannot fulfill.
2. Conditions for Establishing a Branch of a Foreign-Invested Company
According to Article 8 of Decree No. 07/2016/ND-CP, a foreign trader must have been operating for at least five years in its home country, possess a valid business license, and the intended business activities of the branch must be consistent with Vietnam’s commitments under international treaties. In addition, the branch's business lines must not fall under the list of prohibited business sectors, and the foreign trader must demonstrate financial capacity and relevant experience in the sector in which the branch is to be established.
II. Legal Provisions on Branches of Foreign-Invested Companies
1. Application Dossier for Branch Registration of a Foreign-Invested Company
The application dossier includes: a Notice of Branch Establishment (using the form in Appendix II-7 of Circular No. 01/2021/TT-BKHDT), a valid copy of the company’s decision on branch establishment, a copy of the Enterprise Registration Certificate, legal documents of the head of the branch (notarized copy of ID card/Citizen ID/Passport), the decision on the appointment of the head of the branch, and documents proving the branch’s location (office lease agreement, certificate of land use rights). All documents issued by foreign entities must be translated and notarized in accordance with Article 31 of Decree No. 01/2021/ND-CP.
2. Procedures for Establishing a Branch of a Foreign-Invested Company
The enterprise shall submit the application dossier to the Business Registration Office, which includes: (1) Notice of Branch Establishment using the form in Appendix II-7 of Circular No. 01/2021/TT-BKHDT; (2) Decision of the company on branch establishment; (3) Enterprise Registration Certificate of the parent company; (4) Legal documents of the head of the branch (notarized copy of ID card/Citizen ID/Passport); (5) Decision on the appointment of the head of the branch; (6) Documents proving the branch’s location (office lease agreement, certificate of land use rights). The dossier must be complete, translated, and notarized in accordance with Article 31 of Decree No. 01/2021/ND-CP. If the application is valid, the Branch Operation Registration Certificate will be issued within three (03) working days.
III. Frequently Asked Questions Regarding Branches of Foreign-Invested Companies
1. Is the Director of a Branch of a Foreign-Invested Company Authorized to Sign Documents or Contracts?
According to Article 84 of the Civil Code 2015 and relevant regulations, the director of a branch of a foreign-invested company is authorized to sign documents and contracts within the scope of authorization granted by the parent company. However, such authorization must be clearly specified in the company’s decisions, resolutions, or in a power of attorney. If the branch director signs contracts or documents beyond the scope of authorization, those contracts may not be legally binding on the parent company.
Therefore, the head of the branch, such as the branch director, performs duties under the legal entity’s authorization, limited by the scope and duration of the delegated authority. This means the branch director's powers are restricted to what is assigned by the company.
2. Who is the Legal Representative of a Branch of a Foreign-Invested Company?
Under Article 13 of the Law on Enterprises 2020 regarding the legal representative of a company, for a foreign-invested company, the legal representative is typically the head of the company (Director or General Director) or another individual appointed by the parent company, who is responsible for the operations of the branch in Vietnam.
Specifically:
- The branch director may act as the legal representative of the branch but is not the legal representative of the parent company.
- The legal representative of the parent company is the individual who represents the company in international transactions or matters related to the parent legal entity abroad.
Therefore, the branch of a foreign-invested company will have a head of the branch who represents it within the scope of its operations in Vietnam. However, the parent company will still maintain its own official legal representative for significant or company-wide transactions.
IV. Consulting Services and Procedures Related to Branches of Foreign-Invested Companies
To ensure that the operation of a foreign-invested company’s branch complies with Vietnamese law and to avoid legal risks, it is essential to seek support from legal consulting services.
NPLAW offers professional consulting services, including contract drafting, legal advisory on applicable regulations, and assistance throughout the procedural process. This comprehensive support will help you save time and ensure successful transactions.
