8 the most important change in the Law on Enterprises 2020 in Vietnam: 1- New definition of “state enterprise”. 2 -The regulation regarding common shareholder’s rights is Amended. 3 – Adding more obligations taken on by shareholders
Download: Law on enterprises 2020
The entities prohibited from establishing and managing enterprises are added more in Vietnamese Law on Enterprises 2020.
There are more entities are prohibited from establishing enterprises and managing enterprises In the 2020 Law on Enterprises. In detail:
- Persons that meet cognitive difficulties and behavioral difficulties;
- Police in agencies and units of the People’s Police of Vietnam (except for authorized representatives to manage the State’s contributed capital at enterprises);
- Legal commercial entities that are prohibited from business and operation in certain particular sectors prescribed in the Penal Code.
The regulation “Report on changes of information of company’s managers” is invalid
The current Law on Enterprises set forth that enterprises must report about change in information (full name, name, contact address, nationality, Citizenship ID card/ Identity Card number, Passport or other legal personal identifications) of the company’s managers to the business registration offices within 05 days. Company’s managers consist of:
- Governing Board’s members (in a joint stock company);
- Control Board’s members or a Controller;
- Directors/ General Directors.
In the Law on Enterprises 2020, this regulation is made invalid.
Regulations that notification of corporate stamp specimens before use is abolished
The Law on Enterprises 2014 stipulates that enterprises are obligated to inform business registries of their corporate stamp specimens before use so that they are publicly posted on the National Corporate Registration Portal
However, the new Law stipulate regulations on corporate stamps as bellows:
- Enterprises may decide on the type of their corporate stamp, quantity of their corporate stamps and information shown on stamps of their own
- Corporate may engrave their stamp at stamp carving service businesses or in the form of digital signatures prescribed in the law on electronic transactions.
New definition of “state enterprise” in Law on Enterprises 2020
Under current regulations, enterprise which 100 percent of its charter capital owned by the State is a “state enterprise”. Meanwhile, in the 2020 Law on Enterprises (Article 88), “state enterprise” is an enterprise that has more than 50% of its charter capital held by the State.
The regulation regarding common shareholder’s rights is Amended
As prescribed in the Law on Enterprises 2014, a shareholder or a group of shareholders that wants to must own 10% or more of total common ordinary shares for at least 6 months (consecutively), or own a smaller percentage thereof as stipulated in the company’s charter .
However, as prescribed in the Law on Enterprises 2020, a shareholder or a group of shareholders must own 5% or more of total common ordinary shares for at least 6 months (consecutively), or own a lesser percentage thereof as stipulated in the company’s charter to hold the rights granted to common shareholders prescribed in Clause 2 of Article 115 in this Law.
Sole proprietorships has possibility to transform into limited liability companies, joint stock companies or partnerships
At present, the Law on Enterprises 2014 only stipulates the transformation into limited liability companies from sole proprietorship companies.
Meanwhile, in the new Law on enterprises 2020, (Article 205), a sole proprietorship company, depends on the owner’s decision, it may be converted into a limited liability company, a joint stock company or a partnership. However, this transformation will have to satisfy these following conditions:
- The converted sole proprietorships must fully meet the conditions (prescribed in in the 2020 Enterprise Law- Clause 1 of Article 27);
- The owner of a sole proprietorship company have to take personal responsibility with all of his assets for all unpaid debts and to pay in full the debts due (committing in writing);
- The owner of a converted company has a written agreement with the parties of the undischarged contracts about the converted company’s acceptance and continued execution of those contracts;
- The owner of a sole proprietorship company have to commit (in writing) or has a written agreement about the admission and employment of existing employees of that company with other capital-contributing members.
Adding more obligations taken on by shareholders
In addition to on obligations of common shareholders set forth by Article 115 of Law on enterprises 2014, the Vietnamese Law on enterprises 2020 stipulates the following additional regulation. In detail, shareholders have obligation to secure information that their the company provides in accordance with the company’s charter and law; they only can use the above information to exercise and protect their legitimate rights and interests. Shareholders are also strictly prohibited from distributing, duplicating or sending information the company providing to the other organization or individual
The regulation on cases in which the status of partnership membership is terminated is added
According to the 2014 Law on Enterprises, general partners are deprived of their status in the following cases:
- First, The voluntary withdrawal capital from the company of general partners;
- Second, General partners are dead, missing or have lost their capacity to perform civil acts;
- Third, The company expels general partners;
- Forth, In other cases that the laws specify.
In the newly-update Law on Enterprises (Clause 1 of Article 185 in the 2020 Law on Enterprises), general partners may also be deprived of their status in the case that general partners have cognitive and behavioral difficulties or in case that General partners from are executing prison sentence or they are banned by the Court from practicing certain jobs or doing certain works according to the provisions of law;