Setting up legal entity
Legal entities in Indonesia and Vietnam
Legal entity setup varies greatly from country to country. Company registration in Indonesia differs from company registration in Vietnam and there are some local regulations that affect foreign investors in Bali.
In the tables below we compare different legal entity types available to foreign investors in Indonesia and Vietnam
Legal entity types in Indonesia
|Type||Limited Liability Company with Foreign Direct Investment||Local limited liability company||Representative office||Representative office for trading|
|Allowed activities||Can conduct all business activities within the business field it got approval for||Can conduct all business activities within the business field it got approval for||Market researchLocal representation||Local representation|
|Best option for||Foreign companies and investors looking for full or partial ownership in a company operating in Indonesia||Local investors who are not involving any foreign shareholders||
||Foreign trading companies that don’t need to earn revenue to their Indonesian entity|
|Foreign ownership restriction||Foreign ownership can be anything from 0% to 100% depending on the business classification. Classifications that are not in Negative Investment List can be owned 100%.||
||No restrictions||No restrictions|
|Minimum capital||Investment plan: Minimum $1.2 million USD.Paid-up capital: at least 25% of investment plan.For some industries required capital is higher.||Micro: Less than Rp.50 million
Small:Rp. 50 – 500 millionMedium: Rp. 500 – 10 billionLarge: above 10 billion
|No capital requirement||No capital requirement|
|Key benefits||Can operate fully as an independent limited liability company within the business classification||Smaller capital requirement and faster process as long as no foreign shareholders are involved.||
||License can always be extended every 3 years|
||No foreign shareholders||
||Not allowed to earn any revenue|
|Issuing work permits and visas for foreigners||
|Additional required licenses||
|Time to register||
|Set up with Emerhub|
Legal entity types in Vietnam
|limited liability company (llc) or joint-stock company (jsc)?|
|Establishment timeframe||Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment||Approximately 1 to 3 months from submission of documents to the Department of Planning and Investment|
|Suitable for||Small to medium sized business||Medium to large sized businesses|
|Number of founders||1 to 50 founders||At least 3 founders|
|Liability||Founders’ liability is limited to the capital contributed to the Company||Founders’ liability is limited to the capital contributed to the Company|
|Issuance of shares and public listing||A Vietnamese LLC cannot issue shares and be pubicly listed on the local stock exchange||A Vietnamese JSC can issue ordinary and preference shares, the shares can be listed on the public stock exchange|
*Only required if the LLC has more than 1 founder
**Only required if the LLC has more than 11 founders
***Not required if the company has less than 11 shareholders and no shareholder holds more than 50 per cent of the shares, or if at least 20 per cent of the members of the Management Board are independent and these members form an independent auditing committee
|Branch or Representative office?|
|Registration timeframe||Approximately 1 month||Approximately 1 month|
|Suitable for||Investors planning to conduct commercial activities and earn revenue without registering a separate legal entity in Vietnam||Investors planning not to conduct any commercial activities and earn revenue, and who do not want to register a legal entity in Vietnam|
|Restrictions||Parent company must be established for at least 5 years||Parent company must be established for at least 1 year|
|Business activities||Activities are limited to the activities of the parent company||Activities are limited to market research and carrying out supporting roles such as finding trade investment opportunities and partners, advertising and promoting the parent company|
|Corporate structure||At least one legal representative managing the branch’s day to day activities||At least one legal representative managing the representative office’s day to day activities|
|Liability||Parent company’s liability is unlimited||Parent company’s liability is unlimited|
Shelf company is a company without any activities that was specifically created for the purpose of being acquired by an Emerhub client. While the total acquisition process is not shorter than setting up a greenfield company, it provides several benefits:
- Shelf company already has an existing bank account, registered address and has correctly submitted all the necessary reports. This means you will be buying a company with a clean history that you can use to conduct business, participate in tenders, issue invoices etc.
- Shelf company becomes available for doing business immediately after the purchase.
Shelf import companies
Shelf import company is an import company that has already acquired the necessary licenses to begin immediate trading activities. Get in touch with Emerhub to find out whether we have an available shelf import company for your products.
Nominee company’s shareholders are Emerhub’s legal entities (local companies) and the shares are pledges on your behalf. This is beneficial in the following circumstances:
- Industries where the foreign ownership is restricted or forbidden
- If you don’t wish to own company under your name
Nominee company with proper set of legal agreements is the safest way to have somebody else hold shares in your company. You will have total control over the company and can transfer assets to other legal entities as you wish.
It is much safer practice than trusting local individuals to act as nominee shareholders who hold control over your company and could walk away with your assets at any time.
Get in touch with Emerhub consultants to discuss the most suitable form of legal entity for your business.