The Law on Enterprises 2020 (Law No. 59/2020/QH14), passed by the National Assembly of Vietnam, forms the bedrock of business activities in the country. It regulates the establishment, organization, restructuring, dissolution, and operational compliance of all corporate entities including LLCs, Joint Stock Companies, partnerships, and sole proprietorships.
Key Highlights of Enterprise Law 2020
Compared to previous legal frameworks, the 2020 iteration introduced significant improvements aimed at simplifying administrative burdens and protecting minority shareholders:
- Seal Autonomy: Companies now have absolute freedom to decide the type, quantity, design, and content of their corporate seals without notifying government agencies.
- Enhanced Shareholder Protection: The threshold for minority shareholders to exercise corporate rights (such as calling a general meeting) was reduced from 10% to 5% of ordinary shares.
- Exclusion of State-Owned Enterprises: Clearer definitions distinguishing private enterprises from state-owned enterprises (SOEs).
- Online Registration: Legal framework backing online enterprise registration, accelerating startup timelines.
Foreign-owned enterprises must submit audited annual financial statements and an investment report to the Department of Planning and Investment (DPI) within 90 days of the fiscal year-end. Failure to comply can result in administrative fines or business license suspension.
Types of Corporate Entities Under the Law
Under Vietnamese law, foreign investors can choose from three main types of companies, each suited for different business scales:
1. Limited Liability Company (LLC)
An LLC is the most popular vehicle for foreign investors setting up small-to-medium enterprises (SMEs). It can be established as a Single-Member LLC (one owner) or a Multi-Member LLC (2 to 50 owners). Owners are only liable for the company's debts up to their committed charter capital.
2. Joint Stock Company (JSC)
A JSC is designed for larger businesses. It requires a minimum of three shareholders, with no maximum limit. JSCs can issue shares and list on public stock exchanges, making them ideal for venture capital and external funding.
Registration Steps & Timeline
Establishing a business under the current framework involves a structured sequential process:
- Step 1: Name Clearance & Address Lease: Choose a legal name that doesn't conflict with existing brands and secure a physical business address (virtual offices are permitted for certain sectors).
- Step 2: Apply for IRC: Foreign-invested businesses must first obtain an Investment Registration Certificate (IRC) from the DPI.
- Step 3: Apply for ERC: After receiving the IRC, companies apply for their Enterprise Registration Certificate (ERC), which serves as the tax and business registration ID.
- Step 4: Post-Registration Compliance: Seal carving, opening capital and transaction bank accounts, purchasing an e-signature token, and publishing the company seal registration.
Frequently Asked Questions
Yes. A company in Vietnam can have one or more legal representatives, and they can be foreign nationals. However, at least one legal representative must reside in Vietnam. If the sole legal representative leaves the country, they must delegate authority in writing to a resident representative.
Shareholders must fully contribute their committed charter capital within 90 days from the date of issuance of the Enterprise Registration Certificate (ERC). Failure to do so requires the company to register a capital reduction.