Regulations of foreign enterprises in Enterprise Law 2020

Foreign investors are eligible to have an investment in Vietnam in the form of economic organizations establishment including enterprise establishment. Currently, Law on Enterprise 2020 has been having many effects on enterprise establishment in Vietnam.

Although Law on Enterprise 2020 has no provisions or regulations that have direct impact on foreign enterprises but having many new points that have a great impact on the management and operation of foreign enterprises in Vietnam.  In particular:

1. Enterprise can establish the enterprise without informing the seal sample

In accordance with Article 44 of the Law on Enterprise 2014, the enterprise must inform the seal sample with the business registration agency when publish in the National enterprise registration portal

However, these regulations have been formally repealed in the Law on Enterprise 2020. Accordingly, the Article 43 of the Law on Enterprise prescribes that:

- The seal of an enterprise may be a seal made at a seal-carving establishment or a seal in the form of a digital signature as specified by the law on e-transactions (new regulations supplemented in the Enterprise Law 202).

- An enterprise may decide on the type, quantity, shape, and content of seals of the enterprise and its branches, representative offices, and other units. (supplemented)

- The management and preservation of seals must comply with the company charter or regulations issued by enterprises or their branches, representative offices or other units having seals. Enterprises shall use seals in transactions in accordance with law. (supplemented)

Foreign investors when receiving the Enterprise Registration Certificate must not send the seal form to the Business Registration Department and self-decide the form and number of seals.

2. Limited Liability Company can issue a bond

Clause 4, Article 46 and Clause 1, Article 74 of the Law on Enterprise 2020 have new regulations that on Limited liability company with two or more members shall be eligible for issuing bond. Enterprise Law 2020 allows limited liability companies to get capital mobilization by issuing bond. This is the new regulation compared with the previous laws.

Therefore, foreign enterprises under the form of limited liability companies can get capital mobilization as follows:

- Increase the contributed capital from members;

- Receive new membership;

- Transform to the joint-stock company;

- Issuing bond.

3. Change conditions to get the General Meeting of Shareholders

The General Meeting of Shareholders shall be conducted if it is attended by shareholders representing more than 50% of the total votes (Article 145 of the Enterprise Law 2020) instead of 51% in previous regulations.

This regulation is very good for large-scale foreign enterprises, especially corporations or parent companies. Because the difference between is 1% of the total vote compared with the old regulations and new regulations is relatively great for the foreign enterprises with many shareholders,

4. Managers with joint and several liability with company's damage

Clause 2, Article 165 of the Enterprise Law prescribes Members of the Board of Directors, the Chief Executive Officer, and other managers of the company who violate the provisions specified in Clause 1 of Article 165 shall be personally or jointly liable for compensating for the lost interests, returning the received interests and compensating for the damage of the company and third parties.

Besides.  Article 12 of the Enterprise Law prescribes:

In case the division of rights and obligations among at-law representatives is not specified in the company charter, every at-law representative may act as a fully competent representative of the company before a third party; all at-law representatives shall bear joint responsibility for damage caused to the company in accordance with the civil law and other relevant laws.

Therefore, managers and at-law representatives must bear joint responsibility for damage caused by the company.

These is the new regulations of the Enterprise Law 2020 and have a direct impaction on the title of enterprise management. Foreign companies in general and foreigners in charge of managers or at-law representatives must update this regulation.

5.  Suspension of business no later than 03 working days

In accordance with Article 200 of the Enterprise Law 2014, the time is no later than 15 days before the date of such suspension of its business.

However, clause 1, Article 206 prescribes:

An enterprise shall notify in writing the business registration agency no later than 3 working days before the expected date of suspension of operation or resumption of its business earlier than the announced date.

The case that foreign enterprise must notify in writing no later than 03 working days.

Therefore, these are some new and important regulations of the Enterprise Law 2020 and have direct impacts on foreign enterprises.