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2020 Update: Key amendments of Vietnam Laws on Enterprise and Investment

Content Team2 minute read27 Oct 2020

On 17 June 2019, Vietnam National Assembly passed the updated version of Law on Enterprise (LOE) and Law on Investment (LOI) in Vietnam. Both revised laws will come into force from 1 January 2021.

Key changes are made to free enterprises from administrative procedures, eliminate recurrences of investment-related regulations, as well as open new doors of opportunities for investors into Vietnam markets with new investment incentives. Please see below for further details on amendments!

vietnam-law-update

Key updates on Law on Enterprise 2020

1. Entities/individuals NOT allowed to operate and manage enterprises in Vietnam

Law on Enterprise 2014: 6 groups of entities/individuals as stipulated in Article 18 (2)

Law on Enterprise 2020 (effective from early 2021): One more restricted group is added, increasing the number to 7 groups in total (Article 17). Accordingly, commercial entities who are prohibited to carry on certain business activities as regulated by Vietnam Criminal Code, will also not allowed to operate and manage enterprises in Vietnam.

2. Corporate Seals

Law on Enterprise 2014: Enterprises are required to notify the seal specimen to the business registration agency (BRA) and publish it on the government’s portal before using it. (Article 44)

Law on Enterprise 2020: Enterprises can decide the right of utilizing a seal or not. In addition, they do not need to notify the seal specimen to BRA before using it. (Article 43)

3. Name of business locations

Law on Enterprise 2014: Registered name of branches, representative offices or business locations must be written in Vietnamese letters, the letters F, J, Z, W, numerals and symbols. (Article 41)

Law on Enterprise 2020: In addition to the current requirements on letters, the name of the business location must also include [Enterprise’s Name] and the phrase [“Địa điểm kinh doanh”]. (Article 40)

4. Minority shareholders

Law on Enterprise 2014: Article 114 mandates a shareholder or a group of shareholders to have at least 10% of the total ordinary shares for at least 6 months to exercise the rights of shareholders.

Law on Enterprise 2020: To better protect the rights of the minority shareholders, Article 115 of the revised LOE reduces the mentioned percentage to 5% and removes the requirement of six-month shareholding.

4 highlights of Law on Investments 2020

1. Prohibited business lines

Law on Investment 2014: Debt collection services are listed as a conditional business line

Law on Investment 2020 (effective from early 2021): Debt collection services are removed from the list of conditional business lines, but added to the list of restricted business lines. (Article 6)

2. Conditional business lines

Law on Investment 2014: There are 243 conditional business lines in total (Law No. 03/2016/QH14)

Law on Investment 2020:There will be 227 conditional business lines in total

3. Beneficiaries of investment incentives

Law on Investment 2014: There are 5 groups of beneficiaries of investment incentives

Law on Investment 2020: Two groups are added, increasing the number to 7 groups of beneficiaries in total (Article 15). New investment projects that can be entitled to incentives include:

  • Investments projects for creative startups, innovation-related centers and R&D centers;
  • Investment projects in relation to trading in the product distribution, supporting technical facilities for SMEs, et cetera

4. Special investment incentives

These incentives are not available in Law on Investment 2014. However, article 20 of Law on Investment 2020 regulates special incentives for certain projects with the investment capital reaching more than 3 trillion VND and 30 trillion VND (subject to specific conditions).

Further details on updates of Vietnam Law on Investment and Enterprise 2020 can be found in the following sources (in Vietnamese versions):

Law on Enterprise No 59/2020/QH14

Law on Investment No. 61/2020/QH14

Should you have any question regarding Vietnam business and investment, please do not hesitate to drop us a message or email us via service@bbcincorp.com

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