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Law No. 59/2020/QH14 - New Enterprise Law

On the 17th of June 2020 the National Assembly passed the new Law on Enterprises No. 59/2020/QH14, which shall come into effect on the 1st of January 2021. This Law contains 10 Chapters and 218 Articles, and supersedes the Enterprise Law 68/2104/QH1 (“Enterprise Law 2014”).

This law provides new guidelines for the operations of companies and similar organisations in Vietnam. However, contrary the Enterprise Law 2014, it does no longer apply or cover “Household” (unincorporated) businesses. Here are the main changes introduced by the New Enterprise Law:

1. Enterprise registration procedures

a. Defines new profiles prohibited to establish enterprises

•    People with limited cognition or problems with the control over their behaviour;

•    Civil servants working for the People’s Public Security of Vietnam; and

•    Commercial entities prohibited from doing business and operating in some specific fields according to the Penal Code.

b. Implements new business registration procedures by postal service and internet registration.

c. Allows enterprises to use both physical seals, along with seals in the form of digital signatures.

More of that, enterprises shall be able to decide the content and form of seals themselves, and concurrently shall not need to register the seal specimen to the business registration agency.

d. Removes the obligatory notification of changes of the company’s manager to the business registration agency.

2. Rights of minority shareholders

It reduces the minimum ownership requirement from 10% to 5%, and removes the holding requirements (as the old Law required shareholders to hold their shares for at least 6 months before their rights could be exercised).

3. Legal representative of the enterprise

If the scope of rights and obligations of each legal representative are not specified in the company's charter, then each legal representative of the company is a lawful representative of the enterprise towards third parties, and is jointly liable for damages caused to the enterprise in accordance with the civil law and other relevant laws.

4. Enterprise conversion

In addition to limited liability companies, from the 1st of January sole proprietorships shall be able to be converted into joint stock companíe.

5. Capital mobilization

a. Types of shares

The Law on Enterprises officially introduces the concept of non-voting depositary receipt, which are eligible to benefits and obligations corresponding to ordinary shares, except voting rights. 

b. Bond issuance

Limited liability company is officially included in the list of enterprises entitled to bond issuance under the provisions of the Law on Enterprises and relevant laws.
The law also supplements the regulations on the private placement of bonds applicable to non-public joint stock companies. 

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