New points of the 2020 Enterprise Law - Leverage for development

The business market in Vietnam has witnessed strong growth in recent years, along with the increasing demand for business establishment. In order to create a favorable environment, enhance competitiveness and international integration, the Enterprise Law 2020 has officially taken effect from January 1, 2021, replacing the old law with a series of extensive reforms. This article is compiled by GT Law to help businesses and investors grasp the important new points, as well as the practical impact on the business establishment process in the current period.

Eliminate the procedure of notifying the seal sample – More flexibility for businesses

One revolutionary change is that businesses no longer have to notify the business registration authority of their seal samples. Businesses are no longer entangled in the procedures of asking for opinions and waiting for confirmation of seal samples as before.

•  Seals include seals made at seal engraving establishments or seals in the form of digital signatures according to the provisions of law on electronic transactions.
• Enterprises decide on the type, quantity, form and content of seals of the enterprise, branches, representative offices and other units of the enterprise.

Tightening the list of subjects not allowed to establish and manage businesses

The 2020 Enterprise Law continues to expand the list of individuals and organizations prohibited from establishing and managing enterprises to protect market transparency, including:

• People with difficulty in cognition and behavior control.
• Police officers (except for representatives of State capital).
• The organization is a commercial legal entity prohibited from doing business or sentenced by the Court to prohibit operations.

This restriction helps prevent the abuse of legal entities for group interests, and is consistent with the Law on Anti-Corruption, the Civil Code, and the Penal Code.

Contract for business establishment – New legal opening

Before being granted a Business Registration Certificate, the business establishment entity is allowed to sign contracts related to the preparation of operations (rental of headquarters, purchase of assets, services). The contract value is still protected when the business is successfully established, helping the preparation activities take place smoothly, saving waiting time.

Strengthening responsibility for registration and notification of information changes

According to the Enterprise Law 2020, enterprises have the obligation to:

• Register and promptly notify changes related to the Business Registration Certificate and business registration contents of the branch/representative office.
• Closely manage information systems to avoid risks of administrative sanctions or disputes arising from lack of information updates.

This goes along with the trend of digitizing procedures and standardizing national business data.

Clearly define business location names – Enhance brand recognition

When establishing a business location, the enterprise is required to have the phrase “Business Location” attached to the name of the parent enterprise. This regulation aims to:

• Avoid legal ambiguity, clearly distinguish between the main legal entity and its subsidiaries.
• Limit the risk of disputes when violations occur, enhance brand reputation.

Valuation of contributed assets: Strict and transparent

Besides money, foreign currency, gold, other assets when contributing capital must follow a clear valuation process:

• Members/shareholders agree or hire a valuation organization to determine the value of the assets, expressed in Vietnamese Dong;
• The agreed value is responsible before the law for the valuation results.
• Ensure transparency in capital contribution, avoid "false declaration" or virtual capital contribution.

Time limit for capital contribution to a limited liability company with two or more members – Clear and strict

Each member must contribute capital of the correct type of assets and sufficient quantity as committed within 90 days from the date of issuance of the Business Registration Certificate (excluding the time for procedures to transfer ownership and transport assets).

This regulation aims to improve capital transparency – a fundamental factor for business stability.

Temporary suspension of business requires 3 days notice – Proactive and flexible

Now, businesses only need to send a written notice to the Business Registration Office at least 03 working days before temporarily suspending operations or resuming business before the notified deadline. Thanks to that:

• Enterprises proactively respond to market fluctuations or internal needs;
• No more headaches with cumbersome processes, saving costs and processing time.

Practical impact: Convenience, innovation, digital transformation

Extensive reforms of the Enterprise Law 2020 create positive impacts:

• Simplify procedures, reduce time and costs: Increase the attractiveness of the business environment, encourage startups.
• Increase business initiative and flexibility, easily adapt to market changes.
• Encourage digitalization of the registration process: Online registration procedures are becoming increasingly popular, ensuring that electronic records have the same legal value as paper records.
• Requirement of accurate and consistent Charter: Improve governance quality, minimize risk of internal disputes.
• Attracting foreign investment and domestic resources: Creating a foundation for the policy of enriching the whole people, while increasing Vietnam's competitiveness in the international arena.

GT Law advises on document solutions and optimizes procedures

With practical experience in a series of business establishment and dissolution records, GT Law recommends:

• Prepare documents carefully, in accordance with prescribed forms, and fully identify information about founders, capital contributions, and industries.
• Take advantage of electronic records and documents, use digital signatures to shorten file processing time.
• Proactively update changes in members, charter capital, shareholder list, business lines... as soon as they arise.
• For contracts for establishment, sale, and lease of assets: Can be signed before the date of business registration and should carefully check the authority and legal capacity of the parties.
• Solution to shorten processing time: Prepare documents in advance, understand the common reasons for rejection or request for amendment such as: lack of legal documents, incorrect personal information, lack of charter information.
• Always consult a legal expert when problems arise from the Business Registration Office to avoid having your application rejected due to misunderstanding of new regulations.

The Enterprise Law 2020 marks an important step towards a more open, transparent and flexible investment environment. Quickly updating and complying with new regulations is a key step for businesses to maximize their potential and avoid legal risks. GT Law is ready to accompany businesses on every journey - from start-up, operation, restructuring, to dissolution, always ensuring all documents and procedures meet the highest standards and efficiency.