New changes in Law on Enterprises

MInH tHao

On 17 June 2020, Vietnam’s National Assembly passed the amended Law on Enterprises which will take effect on 1 January 2021. BIDV Review introduces some key highlights of the new law.

NEw DEFINITION OF STATE-OwNED ENTERPRISES

As defined in clause 11 of Article 4 in the 2020 Law on Enterprises, stateowned enterprises (SEOs) include those in which the State owns more than 50 percent of the charter capital or total voting shares as provided in Article 88 in this Law. Meanwhile, under the regulations in the 2014 Law on Enterprises, a state-owned enterprise is an enterprise with 100 percent of its charter capital held by the State.

AMENDING REGULATION ON THE RIGHT OF COMMON SHAREHOLDER

As prescribed in the 2020 Law on Enterprises, a shareholder or a group of shareholders must own 5 percent or more of total common ordinary shares, or own a lesser percentage thereof as stipulated in the company's charter to hold the rights granted to common shareholders prescribed in Clause 2 of Article 115 in this Law.

The new law removes the regulation on the possessing time of “at least 06 consecutive months” of shareholders or groups of shareholders owning 10 percent and above of the common shares. In reality, there are many cases that the investors have purchased a lot of shares in the business but lost their rights and benefits since they could not meet the regulations on ownership period for at least 06 consecutive months. Therefore, this regulation is to protect the legal interests of shareholders

ADDING MORE OBLIGATIONS TO SHAREHOLDERS

In addition to inheriting the provisions on obligations of common shareholders laid down in Article 115 of the 2014 Law on Enterprises, the 2020 Law on Enterprises sets out the following additional regulation in Article 119:

“Secure information provided by the company in accordance with the company's charter and law; only use the information provided to exercise and protect its legitimate rights and interests; strictly prohibit distribution, duplication or sending of information provided by the company to the other organization or individual.”

REMOVAL OF SEAL SPECIMEN

The amended Law on Enterprises removes the procedure to notify the seal specimens, including the carving seal and digital signatures, to the Business Registration Authority (BRA). Additionally, enterprises are allowed to decide on the type, number, form, and content of the seals for its branch, representative offices (ROs) and other units without notifying the BRA. The requirement on changes to the personal information of a company manager has also been removed.

NON-VOTING DEPOSITORY RECEIPTS

The 2020 Law on Enterprises includes an additional regulation regarding nonvoting depository receipts as follows: Ordinary shares used as underlying assets for issuing non-voting depository certificates are referred to as underlying ordinary shares. Nonvoting depository certificates have economic benefits and obligations corresponding to underlying ordinary shares, except voting rights. The Government will regulate non-voting depository receipts.