The important new points of the Enterprise Law 2020

The important new points of the Enterprise Law 2020

Enterprise Law No. 59/2020 / QH14 was adopted at the 9th session of the National Assembly dated 06.17.2020 XIV. Below is a summary of 06 important changes of this Law from January 1, 2021.

1. Adding objects that are prohibited from establishing businesses
7 groups of subjects are prohibited from establishing businesses
The following organizations and individuals are not entitled to establish and manage enterprises in Vietnam:
– State agencies and people’s armed forces units use state assets to set up business enterprises to make profits for their own agencies or units;
– Officials and civil servants;
– Officers, non-commissioned officers, professional servicemen, workers and defense officers in agencies and units of the People’s Army; professional officers and non-commissioned officers in agencies and units of the Vietnam People’s Public Security, except for those who are appointed as authorized representatives to manage the State’s contributed capital in enterprises;
– Officers leading and professional managers in State enterprises, except for those who are appointed as authorized representatives to manage the State’s contributed capital in other enterprises;
– Minors; people with limited civil act capacity or losing civil act capacity; organizations have no legal status;
– Persons who are being examined for penal liability, serving a prison sentence, an administrative handling decision at a compulsory detoxification establishment, a compulsory education institution or banned from business practice or holding a position or do certain business related to the business as decided by the Court; in other cases according to the provisions of law on bankruptcy, prevention of corruption.
The Law on Enterprises 2020 also adds another object that is not allowed to establish and manage enterprises: An organization is a commercial legal entity banned from business, banned from operating in certain fields in accordance with the Criminal Law.
Thus, from January 1, 2021, there will be 07 groups of objects banned from establishing and managing enterprises.

2. The name of the place of business must include the name of the business
Article 41 of the Enterprises Law 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, in Clause 2, Article 40 of the Enterprises Law 2020, there is an additional requirement, the name of the business location must include the name of the enterprise together with the phrase “Place of business” (Currently only applicable to branches, representative offices).

3. No need to announce seal sample before use
Previously, before use seal, an enterprise was obliged to announce the seal sample to the business registration agency for public posting on the National Business Registration Portal (according to Clause 2, Article 44 of the Law on Enterprises. year 2014).
And the new Enterprise Law does not stipulate that enterprises must notify the seal sample to the business registration office.
Accordingly, New Law stipulates that the seal includes the seal made at the seal-making establishments or in the form of digital signature in accordance with the law on electronic transactions and digital signatures.
Enterprises are allowed to decide on the type of seal; decide the number, form and content of the seal of the enterprise, its branches, representative offices and other units.

4. Change in the capital ratio in State enterprises
State-owned enterprises include enterprises where the State holds more than 50% of the charter capital, the total number of shares with voting rights instead of 100% of the current charter capital.
Specifically, Article 88 of the Law on Enterprises No. 59/2020 / QH14 defines State enterprises according to the principle of dividing the types of enterprises with the State ownership according to different levels of ownership:
State enterprises are organized and managed in the form of limited liability companies and joint stock companies, including:
– Enterprises of which 100% charter capital is held by the State;
– Enterprises where the State holds more than 50% of the charter capital or the total number of voting shares or more, except for enterprises where 100% of charter capital is held by the State.
In which, enterprises of which 100% charter capital is held by the State include:
– One-member limited liability company with 100% of charter capital held by the State is the parent company of a state economic group, the parent company of a State corporation, the parent company in the parent company group – Subsidiaries;
– One member limited liability company is an independent company with 100% charter capital held by the State.
And enterprises where the State holds more than 50% of the charter capital or the total number of voting shares include:
– Limited liability companies with two or more members, joint-stock companies where more than 50% of charter capital is held by the State, the total number of voting shares is the parent company of an economic group or corporation or in the parent company group – subsidiary.
– Limited liability companies with two or more members, joint-stock companies are independent companies with over 50% of charter capital held by the State, total number of shares with voting rights.

5. Abolishing the regulation on the term of common stock ownership
The Enterprises Law 2020 has removed the provision that a shareholder or group of shareholders must own common shares for at least six consecutive months in Clause 2, Article 114 of the current Law to ensure 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 owning from 05% (instead of 10%) of the total number of common shares or more or a smaller percentage specified in the company’s charter has the following rights:
– Review and extract the minutes book and resolutions of the Board of Directors, mid-year and annual financial statements according to the form of the Vietnamese accounting system and reports of the Supervisory Board, contracts, assignment translation must be through the Board of Directors and other documents, except for documents related to trade secrets, business secrets of the company;
– Request to convene the General Meeting of Shareholders in some cases;
– Request the Supervisory Board to check each specific issue related to the company’s management and operation when deeming it necessary;
– Other rights according to the provisions of the Enterprise Law 2020 and the company’s charter.

6. Suspension of business only requires 3 days notice
The enterprise must notify the business registration authority in writing at least 03 working days before the date of suspension or resuming business ahead of the notification deadline (Clause 1, Article 206 of the Law on Enterprises 2020). .
According to the current regulations, the enterprise is responsible for notifying in writing the time and duration of suspending or resuming business to the business registration authority at least 15 days before the date of suspending or resuming business. This provision applies in cases where the enterprise continues to do business before the announced deadline (Article 200 of the Law on Enterprises 2014).
Accordingly, the Enterprise Law 2020 has shortened the time limit for notification of business suspension from 15 days to 03 working days before the date of business suspension./.