Vietnam Enterprise Law 2014: What Buyers Should Know

Vietnam enterprise law 2014 has been in force since July 1, 2015, and it changes what a company certificate shows. Buyers who deal with Vietnamese companies should know four things: the certificate is shorter, a company may act in any lawful line of business, more than one person can speak for a firm, and at least one must live in Vietnam. This note explains each one in plain words.

What the law is and when it started

The National Assembly passed the Law on Enterprises, number 68/2014/QH13, on November 26, 2014. It took full effect on July 1, 2015. It replaces the 2005 Law on Enterprises, number 60/2005/QH11.

Three other laws came in on the same day. The National Assembly adopted four major laws in November 2014, and law firm DFDL described them as a radical change to the rules for doing business and investing in Vietnam. A new Law on Investment is one of them.

For a buyer, the main point is simple. Paperwork that looked one way in June may look different in July. A company is not hiding something just because its papers are new. It may only be following the new rules.

Sources: Law on Enterprises No. 68/2014/QH13, Article 212; DFDL Legal Brief, December 2014, Vietnam.

The certificate no longer lists business lines

Under the old rules, a company could only run the business lines written on its registration certificate. That is no longer the case. Article 7 of the new law gives enterprises the right to do business freely in any line the law does not prohibit. If a line is conditional, the company must meet the conditions before it starts.

Article 29 now lists what the certificate must contain. It shows the company name and code number. It also shows where the head office is, who the legal representative is, and the charter capital. Business lines are not on that list. The lines a company registers are published on the national enterprise registration portal instead.

What this means for you: a certificate that does not list products or services is normal after July 1, 2015. Do not read a short certificate as a warning sign. If the line of business matters to your deal, ask the company to show its registered lines on the portal, and check whether the work needs a special license.

Sources: Law on Enterprises No. 68/2014/QH13, Articles 7, 29 and 33; DFDL Legal Brief, December 2014, Vietnam.

More than one legal representative

The legal representative is the person who acts for the company in contracts and in court. Article 13 lets a limited liability company or a shareholding company have one or more of them. The charter must say how many there are and what each one may do.

The law also sets a residence rule. A company must always have at least one legal representative living in Vietnam. If it has only one, that person must live in Vietnam and must give written authority to someone else when leaving the country. The representative stays responsible for what the stand-in does.

What this means for you: before you sign, ask who the legal representatives are. Match the name on the contract to the name on the certificate. If a contract is signed by someone else, ask to see the written authority.

Sources: Law on Enterprises No. 68/2014/QH13, Articles 13 and 29; DFDL Legal Brief, December 2014, Vietnam.

Faster registration, with new duties after it

Article 27 tells the business registration office to issue a certificate within three working days of receiving a complete file. If it refuses, it must say why in writing. A new company can therefore appear quickly, so a fresh certificate says little about how long a firm has really operated.

Several duties follow registration. After the certificate is issued, the company must announce its details on the national enterprise registration portal (Article 33). Any change to the certificate must be registered with the registration office within ten days of the change (Article 31). Where a limited liability company has two or more members, they must pay in the promised capital in full within ninety days of the certificate date (Article 48).

What this means for you: check the date on the certificate and compare it with the date of any change. A company that keeps its record current is easier to trust than one that does not. For a limited liability company registered after July 1, 2015, you can also ask when the members paid in their capital.

Sources: Law on Enterprises No. 68/2014/QH13, Articles 27, 31, 33 and 48.

The company seal

Some people expected the seal to disappear. It did not. DFDL noted that lawmakers debated abolishing it, but companies still need an official seal. Article 44 lets a company decide the form, number and content of its seal. The seal must show the company name and the enterprise code number. Before use, the company must notify the registration office of the sample seal so that it can be published on the portal.

What this means for you: a seal on a contract is still part of normal practice. Check that the name and code number on the seal match the certificate. A seal that shows a different name or number is a reason to ask questions before you pay anything.

Sources: Law on Enterprises No. 68/2014/QH13, Article 44; DFDL Legal Brief, December 2014, Vietnam.

A short checklist for buyers

• Ask for the enterprise registration certificate and note the issue date.
• Match the company name and code number on the certificate, the contract and the seal.
• Confirm who the legal representatives are and that one lives in Vietnam.
• Ask for any recent change to the certificate and the date it was made.
• If the work needs a special license, ask to see that license as well. The certificate alone does not prove it.

The law is new, and the government is still expected to issue detailed rules on how it works in practice. Ask a qualified Vietnamese lawyer about any large deal.

These steps cost little. They help a buyer tell a company that keeps good records from one that does not.

Sources

• Law on Enterprises No. 68/2014/QH13, adopted by the National Assembly on November 26, 2014.
• DFDL, "DFDL Legal Brief, December 2014, Vietnam", published December 11, 2014.