Law on Enterprises No. 59/2020/QH14

Instrument, issuing body and effect

Law on Enterprises No. 59/2020/QH14 was passed by the 14th National Assembly of the Socialist Republic of Vietnam at its 9th session on 17 June 2020, on the basis of the Constitution. Under Article 217, the Law takes effect on 1 January 2021, when Law on Enterprises No. 68/2014/QH13 ceases to be effective. Article 217 also replaces the phrase 'state enterprise' with the phrase 'enterprise in which the State holds 100% of charter capital' in specified provisions of the Law on the State Budget No. 83/2015/QH13, the Law on Irrigation No. 08/2017/QH14, the Civil Procedure Code No. 92/2015/QH13, the Law on Management and Use of Weapons, Explosives and Support Tools No. 14/2017/QH14, the Law on Denunciations No. 25/2018/QH14 and the Anti-Corruption Law No. 36/2018/QH14. The Government must regulate the registration and operation of business households and detail the management organisation and operation of State enterprises that directly serve national defence or security, or combine economic activity with national defence or security.

Scope and application

This Law governs the establishment, management organisation, reorganisation, dissolution and related activities of enterprises, namely limited liability companies, joint stock companies, partnerships and sole proprietorships, and also regulates groups of companies. It applies to enterprises and to agencies, organisations and individuals involved in those activities. Where another law contains specific provisions on the establishment, management organisation, reorganisation, dissolution and related activities of enterprises, that other law applies.

The State recognises the long-term existence and development of the enterprise forms provided for in this Law and guarantees equality before the law regardless of form of ownership and economic sector. Enterprises enjoy freedom of business in lines of business not prohibited by law, and must satisfy and maintain business investment conditions where the line of business is conditional. Article 16 prohibits, among other acts, refusing or delaying the grant of an Enterprise registration certificate or requiring papers beyond those set by this Law.

Establishment and registration

Chapter II sets the registration dossier for each type of enterprise: a written request for enterprise registration for a sole proprietorship, plus Company charter, list of members or List of founding shareholders and shareholders being foreign investors, and legal papers for companies. Registration may be made directly, by postal service or electronically with the business registration agency. An Enterprise registration certificate is granted where the line of business is not prohibited, the name complies with Articles 37, 38, 39 and 41, the dossier is valid and fees are paid. Each enterprise receives a single Identification number of an enterprise that is never reissued.

An enterprise must register changes to the content of its Enterprise registration certificate within 10 days of the change, and the business registration agency must respond within 03 working days; certain changes, including lines of business and founding shareholders of a joint stock company (except listed companies), require notification. Registered content must be published on the National Business Registration Portal against a fee. Contributed assets other than Vietnamese currency, freely convertible foreign currency and gold must be valued and expressed in Vietnamese currency.

Limited liability companies and state enterprises

A limited liability company with two or more members has from 02 to 50 members and may not issue shares except when converting into a joint stock company. It may issue bonds under this Law and other relevant laws; any private placement of bonds must comply with Articles 128 and 129. A first meeting of the Members' Council may proceed when attending members hold at least 65% of charter capital, with the specific ratio set by the company charter. Members or groups of members holding at least 10% of charter capital (or a smaller rate set by the Company charter) hold additional rights, including convening meetings. A single-member limited liability company may be owned by one organisation or one individual. An organisation-owned company is managed under either the Company President model or the Members' Council model, in each case with a Chief Executive Officer; an individual-owned company has a Company President and a Chief Executive Officer, and the owner may hold both roles or hire another person as Chief Executive Officer.

Article 88 defines State enterprises as enterprises in which the State holds 100% of charter capital and enterprises in which it holds over 50% of charter capital or total voting shares. Under Article 89, Chapter IV applies to the 100%-owned group; the over-50% group is governed by Section 1 of Chapter III or Chapter V, according to its company form. Enterprises in the 100%-owned group are subject to the Chapter IV governance and periodic and extraordinary disclosure rules, including the 36-hour extraordinary-disclosure deadline.

Joint stock companies, partnerships and sole proprietorships

A joint stock company has charter capital divided into shares, at least 03 shareholders and no maximum, and may issue shares, bonds and other securities. Founding shareholders must pay for subscribed shares within 90 days of the grant of the Enterprise registration certificate unless a shorter period is set. Share types comprise ordinary shares and preference shares, including dividend, redeemable, voting and other preference shares provided for in the company charter and securities law. The company may redeem no more than 30% of ordinary shares sold and part or all of the dividend preference shares sold. The Board of Directors may decide a redemption of no more than 10% of total shares of each class sold within 12 months; other redemptions are decided by the General Meeting of Shareholders. A first General Meeting of Shareholders may proceed when attending shareholders represent over 50% of total votes, with the specific ratio set by the company charter. Resolutions on the matters listed in Article 148(1) require at least 65% of the votes of attending shareholders, subject to the statutory exceptions and the specific ratio set by the company charter. The Board of Directors has from 03 to 11 members. Shareholders or groups of shareholders owning at least 01% of ordinary shares may bring an individual or joint liability action against Board members or the Chief Executive Officer in the circumstances listed in Article 166.

A partnership has at least 02 general partners who are jointly liable with all their assets and may also have limited partners. A sole proprietorship is owned by one individual liable with all of his or her assets, may not issue securities, and each individual may establish only one.

Reorganisation, dissolution and administration

Chapter IX governs division, separation, consolidation, merger and conversion between company forms, suspension of business (notified at least 03 working days in advance), the grounds and procedures for dissolution, revocation of the Enterprise registration certificate, and acts prohibited from the date of the dissolution decision. Bankruptcy follows the law on bankruptcy. The Government performs unified state management of enterprises, with ministries, ministerial-level agencies and provincial People's Committees exercising assigned tasks, and the business registration agency granting certificates and operating the national information system on business registration.