lOMoARcPSD|46998391

CHAPTER 4: LAW ON BUSINESS ORGANIZATIONS

A. Overview - Law on Business Organizations

I. Overview of Law on Business (Legal document: Law on Enterprises 2020 and Law on Investment 2020 )
* Right to establish, contribute capital, purchase sahes and contributed capital amounts and manage enterprises
Article 17:
1. Organizations and individuals have the right to establish and manage enterprises
2. Organzition and individuals may not establish and manage enterprises:
#
# Minors; persons whose do not have full of act capacity
# Persons being examined for penal liability, addicted
#
3. Organizations and individuals have the right to contribute capital to, purchase shares or contributed amounts of, joint stock companies
limited liability companies and partnerships (except for Clause 2, Article 17)
* Name of the enterprise
Article 37 - Names of the enterprise
1. Must have names in Vietnamese, include two components (Types of enterprise and proper name)
(The proper name must be written in letters in the Vietnamese alphabet, the letters F, J, Z, W, numerals, and symbols)
Article 38 - Prohibited acts
1. Using names which are identical or confusingly similar to the name of a registered enterprise
2. Using the name of a state agency or relatively organizations in state (unless consented by such agency, unit or organziation)
3. Using words, phrases, and symbols which contravene national historical traditions, culture, ethics, and fine customs
Article 39 - Foreign languages and abbreviated
*Property contributed
Article 34 - Assets contributed as capital
1. Vietnam dong, freely convertible foreign currencies, and use rights, technologies, and other assets
2. Only individual or organizations that are lawful owners or have lawful use right (Clause 1, this Article)
*Sectors of business investment
Article 7 (Law on Enterprises) - Freedom of enterprises and trades
Article 7 (Law on investment 2020) - Condition of business investment (Appendix IV)
EX: real estate (Article 7 - condition, appendix IV, 101)
Article 6 (Law on investment 2020) - Banned of business investment (Appendix I - Narcotic; Appendix II - Chemicals and mineral; Appendix III - Nature)

Downloaded by Nh?t Minh (nguyennhatminhh203@gmail.com)

 lOMoARcPSD|46998391

B. Forms of business organization

a/ Household business - Decree no 01/2021/ND-CP of the Government

Article 79 - *Definition
1. A business household shall be registered for establishment by an individual or members of the household, such person(s) shall be
responsible for the business operation with all of their property.
2. Designed by lawmakers as a small size business because a household business can register business at different locations but must
select a fixed location for the registration of the business household headquarter.
Article 80 - *The right to establish business households and the obligation of business households to register:
1. Individuals or member of households being Vietnamese citizens and having full civil act capacity. EXCEPT:
# Minors, persons whose do not having full of act capacity.
# Persons being examined for penal liability, being held in custody, serving a prison, an administrative handling with a
compulsory detoxification establishment, education institution or banned by the Court and other cases.
2. Individuals or member of households shall be allowed to register for only one business household nationwide and have the right to
contribute capital, but shares or capital contribution portions of enterprises in his/her own capacity.
3. People (or individuals) who register shall not be concurrently the owner of a private enterprise, or the general partner of a partnership.
( Household businesses are not the legal entity because Article 79.1, businesses are responsible for all of their property => not set up other types of companies )

b/ Private enterprise - Law on enterprises 2020

Article 188 - *Definition
1. A private enterprise is an enterprise owned by an individual who is liable for all activities of the enterprise with all is/her assets.
2. Private enterprises may not issue securities of any type.
3. Each individual may establish only one private enterprise. Besides, the private enterprise owner must not concurrently be a business
household owner, a general partner in a partnership.
4. Private enterprises may not contribute capital for the establishment of, or purchase shares, capital contributions in, a partnership,
limited liability company, or joint stock company.
Article 190 - *The structure of a private enterprise
1. The private enterprise owner has total discretion in making all business decisions of the private enterprise.
2. The private enterprise owner may directly manage and administer the business operations or employ another person to be the director
or director general to do so. General, the private enterprise owner shall remain responsible for all business operations of the enterprise.
3. At-law representative: The owner of a private enterprise .
Article 191 - Lease of private enterprises
Article 192 - Sale of private enterprises
(Private enterprises are not the legal entity because Article 188.1, businesses are responsible for all of their property => not set up other types of companies )

Downloaded by Nh?t Minh (nguyennhatminhh203@gmail.com)

 lOMoARcPSD|46998391

c/ Limited liability company - Law on Enterprise 2020

* LLCs with 2 or more members - Vietnamese or foreigner
Article 46 - *Definition
1. A limited liability company has between 02 and 50 members being organizations or individuals. Members must be liable for the debts.
and other property obligations of the enterprise (amount of capital contributed) - except Article 47, Clause 4.
2. A LLC has the legal person status (from the date it is granted the enterprise registration certificate) - is a separate legal entity.
3. A LLC may not issue its shares (except the issuing is for transfer to a joint stock company).
4. A LLC may issue bonds.
Article 54 - *Structure of limited with 2 or more members
1. Must have a Member's Council, a chairperson of the Members' Council, and a director or director general
Article 55 - Definition of the Members' Council and rights/obligations
1a. The highest decision-making body.
2a.Composed of all members being individuals and authorized representatives of organization members of the company
1b. Decide on decision all of company
Article 56 - Definition of chairperson of the Members' Council and rights/obligations
1a. Chairperson shall be elected by the Members' Council and may concurrently work as director and director general
1b. To prepare programs and plans of the Members' Council
Article 63 - Definition of director or director ganeral and rights/obligations
1a. The person who manages day-to-day business operations of the company
1b. To organize the implementation of the resolutions, decision of the Members' Council
( Hire the director or director general - Article 82.1)
2. Being state enterprises and must form a Supervisory Board
Article 88 - Definition of state enterprises
1a. Enterprises with 100% State-owned charter capital
2a. Over 50% of charter capital or total number of voting shares.
Article 65 - Definition of Supervisory Board and supervisors
3. At least one at-law representative : Chairperson and director or director general (If it is not provided in the company charter -> Chairperson
* LLCs with only one member
Article 74 - *Definition of single-member limited liability companies
1. Owned by one organization or individual. The company owner must be liable for all debts and other property obligations of the company
within the amount of the charter capital of the company.
2. Has the legal person status (from the date its is granted the enterprise registration certificate)
3. May not issue its shares (except the issuing is for transfer to a joint stock company)
4. May issue bonds

Downloaded by Nh?t Minh (nguyennhatminhh203@gmail.com)

 lOMoARcPSD|46998391

Article 79 - *Structure of single-member limited liability companies

1. Two models: Company president, director or director general; or
2. The company owner is state enterprise and must establish a Supervisory Board
Article 88 - Definition of state enterprises
1a. Enterprises with 100% State-owned charter capital
2a. Over 50% of charter capital or total number of voting shares.
Article 65 - Definition of Supervisory Board and supervisors
3.
(If it is not provided in the company charter, the chairperson of the Members' Council or the company president shall act)

d/ Shareholding company (or joint stock company) - Law on Enterprises 2020

Article 111 - *Definition of shareholding company
1a . The charter capital is divided into equal portions called shares;
1b . Shareholders may be organizations or individuals; the minimum number of shareholders is 3 and there is no restriction on the maximum
1c . Shareholders only be liable for debts and other property obligations of the enterprise only within the amounts of capital contributed
1d . Shareholders may freely assign their shares to other persons (except for Clause 3, Article 120, and Clause 1, Article 127
2. A joint stock company has legal entity status (from the date of grant of the enterprise registration certificate)
3. A shareholding company has the rights to issue equities, bonds and other types of securities -> raise capital
Article 114 - Types of shares
1. Must have ordinary shares. Owners of ordinary shares are ordinary shareholders.
2. May have preference shares (Dividend preference shares; Redeemable preference shares; Voting preference shares; and others)
Owners of preference shares are called preference shareholders
Article 117 - Dividend preference shares
Article 118 - Redeemable preference shares
Article 116 - Voting preference shares
Article 137 - *Structure of a joint stock company (Two models)
1a . General Meeting of Shareholders, Board of Directors (or Board of Management), Supervisory Board, and director or director general
(Over 11 shareholders and own over 50% of the total number of shares of the company -> A Supervisory Board is compulsory)
1b . General Meeting of Shareholders, Board of Directors (or Board of Management) and director or director general
(At least 20% of members of Board of Directors must be independent members and an Independent Audit Committee in Board of Directors)

2. If only one at-law representative in the company, the Chairperson of the Board of Directors or director or director general shall act
(If it is not mentioned in the company charter, the chairperson of the Board of Directors
(If more than one at-law representative in the company, the chairperson of the Board of Directors and director or director general shall act)

Downloaded by Nh?t Minh (nguyennhatminhh203@gmail.com)

 lOMoARcPSD|46998391

Article 138 - Rights and obligations of the General Meeting of shareholders

1. The highest decision-making body of a joint stock company and all shareholders have the right to vote.
2. Decide on all decisions
Article 153 - Definition of the Board of Directors ( Board of Management) and rights/obligations
1. Full competence to make decisions in the name of the company and exercise the rights and performs obligations
2. Decide on medium-term development strategies (plans, annual plans, recommend the types of shares offered, ...)
Article 162 - Definition of Director, director general and rights/obligations
1. Board of Directors appoints one of its members or hires another person and manages day-to-day business operations.
(Must not exceed 05 years; the director or director general may be re-appointed for an unlimited number of terms)
2. Decide on issues relating to day-to-day business operations

Article 177 - *Definition of parnership

1a . Must be at least 2 members: general partners (jointly conduct business under one common name) and limited partners
1b . General partners must be individuals who are liable for the obligations of the partnership with all of their assets (having expertise)
1c . Limited partners must be organizations, individuals and only be liable for the debts of the partnership within the limit of the capital
amount they have committed to contribute to the partnership
2. A partnership has the legal entity status (from the date it is granted an enterprise registration certificate) - is not a separate legal entity
(But, the general partners do not responsible in terms of assets because liable for all of their assets)
3. Partnerships may not issue securities of any type.
**The structues of partnerships similar with the structures of limited liability company
Article 184 - *Management of business of a partnership
1. At-law representative: General partners . They shall organize management of day-to-day business
2. General partners shall assign among them the tasks of management and control of the partnership.

!) Household enterprises, private enterprises, and partnerships

> Not be concurrently the owner of the private enterprise, or the general partner of a partnership, or the household business.
> Household businesses and private enterprises are not the legal entity status (Article 79.1, article 188.1 respectively)
(# the partnerships have the legal entity - Article 177.2)

Downloaded by Nh?t Minh (nguyennhatminhh203@gmail.com)

 lOMoARcPSD|46998391

C. Establish and dissolution of business organization

* Establish of business organizations - Decree no 01/2021/ND-CP of the Government
Article 14 (divided into the provincial level and the district level)
1a. The provincial level: Business registration sections under provincial-level Planning and Investment Departments (as business registration)
(4 types of enterprises: LLCs; Partnerships; Private enterprises; Shareholding companies)
2a. The disrict level: Finance and planning sections under district-level People's Committes (as district-level business registration agencies)
(Article 82 - Business household --> district-level )
2. Business registration agencies have their own bank accounts and seals
* Dissolution of business organizations - Law on Enterprises 2020

Similarity:
Difference:

Downloaded by Nh?t Minh (nguyennhatminhh203@gmail.com)