Highlights of 2020 Law on Enterprises in force from January 1, 2021

On June 17, 2020, in the XIV^th National Assembly’s 9^th meeting, the 2020 Law on Enterprises was passed and is about to take effect on January 1, 2021 as a substitute for the 2012 Law on Enterprises. Below are several significant innovations in the new Law that you should take into consideration.

Firstly, notification of sample corporate stamps:

The existing regulation prescribes that, before use of corporate stamps, enterprises are obligated to inform business registries of sample corporate stamps so that they are publicly posted on the National Corporate Registration Portal.

The newly-adopted Law eliminates this regulation when not requiring enterprises to inform business registries of this.

Secondly, business households:

The regulation on transformation of household businesses into enterprises will be no longer valid. Concurrently, in order to ensure continuity till a new and separate Law on household business comes into existence, the Government may be authorized to provide guidance on registration and operation of household businesses (clause 4 of Article 217 regarding implementation provisions).

Thirdly, rewording and reinterpretation of the term “state/state-owned enterprise”

Under the new Law, in order to be called a state/state-owned enterprise, an enterprise must adhere to the principles of classification of enterprises in which the Government has certain ownership interests at different levels of ownership.  Below are specific regulations laid down in the new Law:

    Article 88. State enterprises

    1. State enterprises that are organized and managed like limited liability companies or joint-stock companies shall be classified into:

    a) Enterprises whose charter capital is wholly owned by the State;

    b) Enterprises of which more than 50% of the charter capital or total voting shares are held by the State, except those referred to in point a of clause 1 of this Article.

    2. Enterprises with their charter capital wholly owned by the State that are referred to point a of clause 1 shall be classified into:   

    a) Single-member limited liability companies with their charter capital wholly owned by the State which are parent companies of state-owned economic corporations, or parent companies of state-owned incorporations or general companies, or parent companies of parent-subsidiary controlled groups;   

    b) Single-member limited liability companies which are independent companies with 100% of their charter capital wholly owned by the state.

    3. As provided in point b of clause 1 of this Article, enterprises of which more than 50% of the charter capital or total voting shares are held by the State shall include:

    a) Multiple-member limited liability companies, or joint stock companies with more than 50% of their charter capital or their total voting shares held by the state which are parent companies of economic corporations, or parent companies of state-owned incorporations or parent companies of parent-subsidiary controlled groups;  

    b) Multiple-member limited liability companies, or joint stock companies which are independent companies with 50% of their charter capital and total voting share owned by the state.

Fourthly, more organizations and individuals that are not entitled to set up and manage enterprises in Vietnam under Article 17 of the 2020 Law on Enterprises, including:

- State agencies and units of the people's armed forces that use state assets to set up enterprises doing business to make profits for their own agencies and units;

- Public officials, civil servants and public employees regulated under the Law on Public Officials and Civil Servants and the Law on Public Employees;

- Officers, non-commissioned officers, professional servicemen, defence workers and officers serving in agencies and units of the Vietnam People's Army; officers, career non-commissioned officers and police workers serving in agencies and units of the People's Police of Vietnam, except for those who are appointed as authorized representatives to manage the State's contributed capital at enterprises or management at state-owned enterprises;

- Officials holding  leadership and management office in State enterprises that are prescribed in accordance with the provisions of Point a, Clause 1, Article 88 of this Law, except for those appointed to be authorized representatives to manage the State's contributed capital share at other enterprises;

- Minors or underage persons; persons who suffer restriction on or loss of their capacity to exercise civil acts; persons who have cognitive and behavioral difficulties; organizations that do not have legal personality;

- Persons who are prosecuted for criminal liability; persons who are detained; persons who are serving imprisonment penalties; persons who are currently serving administrative penalties at compulsory detoxification establishments or compulsory education centers; persons who are banned by courts from holding certain posts or practicing certain occupations or doing certain jobs; persons falling in other cases prescribed in the Bankruptcy Law and the Anti-Corruption Law.

If requested by business registries, the persons who register to establish enterprises must submit their criminal record checks to business registries;

- Entities which is a legal commercial person prohibited from business and operation in certain particular sectors prescribed in the Penal Code.   (this is the new subject of the Law).

Please feel free to add more!

>>> Reading in Vietnamese: Những điểm mới nổi bật tại Luật doanh nghiệp 2020 có hiệu lực từ 01/01/2021