NEW POINTS OF LAW ON ENTERPRISE
On June 17, 2020, the XIV National Assembly at its ninth session passed the Enterprise Law 2020 No. 59/2020/QH14 and took effect from January 1, 2021, replacing the Law on Enterprises 2014 No. 68/2014/QH13. This is an important event that marks vital innovations related to enterprises, demonstrating the will and aspirations of most businesses, including many new amendments in the process of integrating the public revolution industry 4.0.
Here are some notable changes of the Enterprise Law 2020.
1. Business procedures and change of corporate information
1.1 Enterprise’s seals
Accordingly, Article 43 of the Enterprise Law 2020 has changed the regulations on enterprise seals as follows:
- Remove the procedure for notifying the seal sample to the business registration office;
- Make a normal seal or an electronic seal in accordance with the law on electronic transactions;
- The enterprise decides on the seal type, quantity, form and content of its seal and the seals of its branches, representative offices and other units.
1.2 Enterprise registration
The Law on Enterprises 2014 did not recognize the methods to apply for enterprise registration; however, Article 26 of the Law on Enterprise 2020 has recorded several methods of submitting business registration documents, which demonstrates the reform of procedures. New procedure of business registration is as follows:
- Business registration completely through electronic information network and the ID of the person authorized to file the establishment of the business is a notarized copy of the ID card, no longer is the scanned original ID card as before.
- New forms of notification and meeting minutes as provided for by law;
- Enterprise registration via postal service;
- Register business directly at the business registration authority.
1.3 Contribution of charter capital
The Law on Enterprise 2014 had required founding members or shareholders of a limited liability company ("LLC") and a joint-stock company ("JSC") to contribute to the charter capital for the first time within 90 days of incorporation of the company without exception. However, the Law on Enterprise 2020 now allows a 90-day period to be extended corresponding to the time of transportation, import, and convenient administrative procedures to transfer ownership of property. During this period, founding members/ shareholders who first contribute capital with assets still have the rights of members/ shareholders associated with the contributed capital.
1.4 Abandon the rule "Report on changes of information about enterprise’s manager"
The Law on Enterprises 2014 stipulated that an enterprise had to notify the business registration authority of the locality where its head office is located of the changes to the name, address, nationality, ID number, passport number or other ID papers of the following people within 05 days from the date on which such changes were made:
2. Procedures for business suspension and enterprise dissolution
2.1. Shorten the notice period before business suspension from 2021
Compared with the provisions of the Enterprise Law 2020 in Article 206, it has shortened the pre-suspension notification time from 15 days to 03 working days. Specifically, an enterprise has to notify in writing the business registration authority at least 03 working days before the date of suspension or resumption.
2.2. Regulations on the exclusion of dissolution due to the revocation of business registration certificate
Article 207.1(d) of the 2020 Law on Enterprises stipulates: “The Certificate of Enterprise Registration is revoked, unless otherwise prescribed by the Law on Tax administration.”
This regulation ensures consistency with the provisions of Article 125.1(g) and Article 125.2 of the Law on Tax Administration 2019.
3. The name of a business location must include the enterprise’s name
Article 41 of the Law on Enterprises 2014 only stipulates that the name of the business location must be written in the letters of the Vietnamese alphabet, the letters F, J, Z, W, numbers and symbols.
From 2021, in addition to the above provisions on writing, there is an additional requirement in Article 40.2 of the 2020 Law on Enterprises, the name of a business location must include the name of the enterprise together with the phrase "Địa điểm kinh doanh” (Place of business) (only applicable to branches, representative offices before 2021).
4. Supplement those who are not allowed to establish enterprises
The Law on Enterprises 2020 adds the groups of subjects that are not allowed to establish and manage enterprises at Article 17.2(c)(đ)(e)(g) of the Law on Enterprises 2020. Specifically, the following subjects:
5. State-owned Enterprises
5.1 Changing the concept of State-owned Enterprise
According to Article 4.8 of the Enterprise Law 2014: A state-owned enterprise (SOE) is an enterprise with 100% charter capital held by the State; however, Article 4.11 of the Law on Enterprise 2020 has amended the concept of SOE as follows: a state-owned enterprise is an enterprise where the State holds more than 50% charter capital or voting shares. SOEs are organized and managed in the form of limited liability companies or joint-stock companies as prescribed in Article 88 of the Law on Enterprises 2020, including:
The cases specified in Article 88 of the Law on Enterprises 2020 include:
The new point above will help SOEs to attract investment capital, implement diversified flexible capital mobilization channels, access resources from the private sector to realize their goals and development.
5.2. State-owned enterprises must set up a Board of Controllers
According to Article 103.1 of the Enterprise Law 2020: The state ownership representative body shall decide the establishment of a Board of Controllers, which has 01 – 05 Controllers including a Chief Controller.
(According to the Law on Enterprises 2014: appointing 01 Supervisor or establishing the Supervisory Board of 03 to 05 Supervisors).
The term of office of a Controller shall not be more than 05 years and may be re-appointed but not exceeding 02 consecutive terms at that company. In case the Board of Controllers has only 01 controllers, he/she shall be the Chief Controller and shall satisfy corresponding conditions.
6. A private enterprise can be transformed into a limited liability company, a joint-stock company or a partnership.
Under the provisions of the Law on Enterprise 2020 in Article 205, a private enterprise may expand its transformation into a limited liability company, a joint-stock company or a partnership under the decision of its owner if the following conditions are satisfied:
As for the Law on Enterprises 2014, Article 199 only regulates the case of converting private enterprises into limited liability companies.
7. Abolishing the regulation on the term of ownership of ordinary shares
The Law on Enterprises 2020 has removed the provision that a shareholder or group of shareholders must own common shares for at least six consecutive months (as prescribed in Article 114.2 of the 2014 Law on Enterprises) to ensure that the exercise of the rights of shareholders does not affect the normal operation of production and business activities of the enterprise.
Accordingly, a shareholder or a group of shareholders holding at least 05% (instead of 10%) of ordinary shares or a smaller percentage specified in the company's charter has the following rights:
8. Additional provisions on non-voting depository receipts
Compared to the 2014 Enterprise Law, the Enterprise Law 2020 adds provisions on non-voting depository certificates (Article 114.6) as follows:
Ordinary shares used as underlying assets to issue non-voting depository receipts are called underlying ordinary shares. Non-voting depository receipts have economic benefits and obligations corresponding to the underlying ordinary shares, except for voting rights.
Above is our analysis of the outstanding new points of Enterprise Law 2020. If you have any questions, please contact Dai Ha Thanh Law Firm, we will do the following: the best for your business.
