On 17 June 2019, Vietnam National Assembly passed the updated version of the 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, and open new opportunities for investors in Vietnam markets with new investment incentives. Please see below for further details on amendments!
Key updates on Law on Enterprise 2020
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 prohibited from carrying on certain business activities as regulated by Vietnam Criminal Code will also not be allowed to operate and manage enterprises in Vietnam.
Corporate Seals
Law on Enterprise 2014: Enterprises are required to notify the sealed specimen of 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 sealed specimen to BRA before using it. (Article 43)
Name of business locations
Law on Enterprise 2014: Registered names 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)
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
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)
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
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 about trading in product distribution, supporting technical facilities for SMEs, et cetera
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 questions regarding Vietnam business and investment, please do not hesitate to drop us a message or email us via service@bbcincorp.com
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
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