In an effort to further improve the business environment, and create an equal playing ground for the community of the enterprises doing business in Vietnam, the Government of Vietnam has recently decided to amend its applicable law on enterprise, which came into force in 2005 (the Law on Enterprise 2005)
Currently, the 4th draft of the law on enterprise (the Draft Law on Enterprise) was issued, with focus on resolving the key following sets of issues:
Corporate establishment: In comparison with other countries in the region and in the world, the procedure for the corporate establishment in Vietnam, despite being considerably improved over the time, has been considered complicated, time- and cost-consuming. In addition, there remains great difference in the corporate establishment, share / equity transfer, establishment of representative office, etc… between the local enterprise and foreign-invested enterprise, causing huge difficulty for the foreign-invested enterprises.
Accordingly, the Draft Law on Enterprise is aimed at creating favorable conditions for the corporate establishment by removing requirements for the business conditions at the stage of applying for the enterprise registration certificate in order to shorten the time to obtain the enterprise registration certificates, and providing a uniform legal procedure in the corporate establishment, share / equity transfer… for both local enterprises and foreign invested enterprises.
Capital contribution timeline: Under the Draft Law on Enterprise, members of a limited liability company shall contribute in full their own capital within 90 days since the date of granting the enterprise registration certificate, instead of 3 years as stipulated under the Law on Enterprise 2005. With such provision, there is no longer difference in term of the capital contribution timeline between the limited liability company and the joint stock company.
Corporate governance model and decision-making structure: The Draft Law on Enterprise also provides an additional corporate governance system (one-tier corporate governance system) for the joint stock company besides the existing system (two-tier corporate governance system), with a view to making the corporate governance system in Vietnam adapted to good practices in the world.
With regard to the decision-making structure of the joint stock company, the Draft Law on Enterprise stipulates that the resolution of the General Meeting of Shareholders shall be passed by a number of shareholders representing at least 51 percent (instead of 65 percent under the Law on Enterprise 2005) for common matters and 65 percent (instead of 75 percent under the Law on Enterprise 2005) for key matters.
A new chapter on state-owned enterprises: Under the Draft Law on Enterprise, a new chapter on state-owned enterprises (the SOEs) is included. With 31 articles, the chapter on SOEs is drafted with the aim of (i) identifying role and mission of SOEs in Vietnam’s economy; (ii) identifying principle of protecting and rising state-owned capital in SOEs; (iii) providing in details organisation and implementation of the state-owned capital ownership rights; (iv) stipulating governance principles for SOEs; and (v) regulating information dissemination for the SOEs.
Restructure, dissolution and termination of the enterprises: Under the Law on Enterprises 2005, merger is only permitted for enterprises of the same legal form. This fact has been proved not to be suitable with the practices in Vietnam and caused obstacles for the enterprises wishing to expand their business by way of merger and acquisition.
The Draft Law on Enterprise provides that all enterprises of the same nature (instead of the same legal form) are entitled to merger and acquisition, and supplements a number of articles to instruct in detail procedures for merger and acquisition, corporate registration after merger and acquisition and on the procedure for dissolution of the enterprises.
The Draft Law on Enterprise is currently under the public comments and expected to be put into the agenda of the 8th session of the 13th National Assembly of Vietnam for further discussion and voting in late 2014.