DECREE

DETAILING A NUMBER OF ARTICLES OF THE LAW ON ENTERPRISES

 

THE GOVERNMENT

 

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the November 29, 2005 Law on Enterprises;

At the proposal of the Minister of Planning and Investment,

 

DECREES:

Article 1. Scope of regulation

This Decree guides in detail a number of articles of the Law on Enterprises regarding the establishment, management organization, operation, reorganization and dissolution of enterprises.

Article 2. Subjects of application This Decree applies to:

1. Limited liability companies, joint-stock companies, partnerships and private enterprises, including also limited liability companies and joint-stock companies transformed from wholly state-owned enterprises, enterprises of Party or socio-political organizations, joint-venture enterprises and wholly foreign-owned enterprises (below collectively referred to as enterprises);

2. Joint-venture enterprises and wholly foreign-owned enterprises which do not re-register under the Government's Decree No. 101/ 200n/ND-CP of September 21. 2006. on re-registration, transformation and registration for renewal of investment certificates of foreign-invested enterprises in accordance with the Law on Enterprises and the Investment Law (below referred to as Decree No. 101/2006/ND-CP);

3. Business households:

4. Other organizations and individuals involved in the establishment, management organization, operation, reorganization and dissolution of enterprises.

Article 3. Application of the Law on Enterprises, treaties and relevant laws

1. The establishment, management organization and operation of enterprises comply with the Law on Enterprises, except cases defined in Clauses 2 and 3 of this Article.

2. If a treaty to which the Socialist Republic of Vietnam is a contracting party otherwise provides for dossiers, order, procedures and conditions for enterprise establishment, business registration, ownership structure and business autonomy, the provisions of that treaty prevail.

3. The following laws prevail when there is a disparity between them and the Law on Enterprises regarding dossiers, order procedures and conditions for enterprise establishment and business registration; management organization structure, competence of internal management bodies of enterprises, business autonomy, reorganization and dissolution of enterprises:

a/ The Law on Credit Institutions:

b/ The Petroleum Law;

c/ The Law on Civil Aviation of Vietnam;

d/ The Publication Law:

e/ The Press Law;

f/ The Education Law:

g/ The Securities Law:

h/ The Law on Insurance Business:

i/ The Law on Lawyers:

j/ The Law on Public Notary;

k/ Laws amending and supplementing the laws specified this Clause and oilier specific laws passed by the National Assembly after the effective dale of this Decree.

Article 4. Party organizations and mass organizations in enterprises

1. Party organizations and mass organizations in enterprises shall operate under the Constitution, law and their statutes.

2. Enterprises shall respect and create favorable conditions for propaganda and campaigns for founding Party organizations and mass organizations in enterprises, and admission of their employees to these organizations.

3. Enterprises shall provide favorable physical foundation, time and other necessary conditions for their employees who are members of Party organizations and mass organizations to participate in all regular activities of these organizations according to their statutes and internal regulations.

Article 5. Contribution of intellectual property rights as capital

Intellectual properly rights which may be used for capital contribution include copyright and its related rights, industrial property rights, right to plant varieties and oilier intellectual property rights under the law on intellectual property. Only individuals and organizations that are holders of these rights may use these assets in making capital contribution. The Ministry of Finance shall guide the valuation of intellectual property rights contributed as capital.

Article 6. Charter capital of companies and shares issuable by joint-stock companies

1. Charter capital of a limited liability company with two or more members is the total value of capital portions already contributed or to be contributed within a proscribed time limit by its members according to their commitments and staled in the company charter.

2. Charter capital of a one-member limited liability company is the total value of the capital amount already contributed or to be contributed within a prescribed lime limit by its owner and slated in the company charter.

3. The time limit for a member or the owner of a company to fully contribute a committed capital amount to the charier capital defined in Clauses I and 2 of this Article is 36 months after the grant of an enterprise registration certificate or a certificate of registration of member addition or change.

4. Charier capital of a joint-stock company is the total par value of issued shares. Issued shares are those fully paid for by shareholders to the company. By the time of business registration for enterprise establishment, the charter capital of a joint-stock company is the total par value of shares registered to be purchased by founding shareholders and oilier common shareholders and slated in the company charter. These shares must be fully paid for within 90 days after the grant of an enterprise registration certificate.

5. Shares issuable by a joint-stock company are those decided by the Shareholders" General Meeting to be issued to raise more capital. The number of shares issuable by a joint-stock company by the time of business registration is the total number of shares registered to be purchased by founding shareholders and other common shareholders by the time of business registration and shares to be issued within 3 years alter the grant of an enterprise registration certificate and slated in the company charier.

Article 7. Prohibited business lines 1. Prohibited business lines include:

a/ Trading in weapons, military equipment or techniques, ammunition, special-use facilities for military or public security purposes; military uniforms (including stripes, badges and insignias of the army or public security forces), military equipment for people's armed forces; special-use components, parts, accessories, supplies and equipment, and technologies used exclusively for their manufacture;

b/ Trading in narcotics of all kinds;

c/ Trading in Schedule-1 chemicals (according to the International Convention);

d/ Trading in cultural products which are reactionary, depraved, superstitious or harmful to aesthetic or personality education;

e/ Trading in firecrackers of all kinds;

f/ Trading in toys or games which arc dangerous or harmful to personality education, health of children, or national security, social order and safety;

g/ Trading in wild plants or animals, including live animals and their processed parts, on the lists provided for by treaties to which Vietnam is a contracting party and precious and rare plants and animals on the list of those banned from exploitation and use;

h/ Dealing in prostitution, organizing prostitution, trafficking in women or children;

i/ Providing services of organizing gambling or running gambling dens in any forms;

j/ Providing services of investigation into secrets, infringing upon the State's interests or lawful rights and interests of organizations or citizens;

k/ Providing services of brokering marriages involving foreign elements;

1/ Providing services of brokering adoption involving foreign elements;

m/ Trading in imported scraps which cause environmental pollution;

n/ Trading in products, goods or equipment banned from circulation or use or not yet permitted for circulation or use in Vietnam;

o/ Other business lines banned under specialized laws, ordinances and decrees.

2. In some particular cases, the business lines specified in Clause 1 of this Article may be permitted in accordance with relevant specialized laws, ordinances or decrees.

Article 8. Conditional business lines and business conditions

1. Conditional business lines and business conditions comply with relevant specialized laws, ordinances, decrees or Prime Ministerial decisions (below collectively referred to as specialized laws).

2. Business conditions take the following forms:

a/ Business license;

b/ Business eligibility certificate;

c/ Practice certificate;

d/ Professional liability insurance certificate;

e/ Certification of legal capital;

f/ Other approvals of competent state agencies:

g/ Other requirements which enterprises must satisfy in order to acquire the right to do business in certain business lines without having to obtain certification or approval in any form by a competent slate agency.

3. All regulations on conditional business lines and relevant business conditions in legal documents other than those mentioned in Clause I of this Article arc invalid.

Article 9. Business lines for which practice certificates are required

1. Practice certificates defined in Clause 2. Article 7 of the Law on Enterprises means documents granted by competent Vietnamese state agencies or state-authorized professional associations to individuals who possess adequate professional qualifications and experience in a certain business line.

Practice certificates granted in foreign countries are invalid in Vietnam, unless otherwise provided for by a specialized law or a treaty to which Vietnam is a contracting party.

2. Business lines for which practice certificates are required and relevant conditions for the grant of practice certificates comply with relevant specialized laws.

3. Enterprises engaged in business lines for which practice certificates are required by law shall register their business or additionally register those business lines according to the following provisions:

a/ If the law requires that to deal in a business line, the director of an enterprise or head of a business establishment must have a practice certificate, he/she must acquire such a certificate.

b/ If the law requires that to deal in a business line, the director of an enterprise and other persons must have practice certificates, that director and at least one professional officer of the enterprise as prescribed by the relevant specialized law must acquire such certificates.

c/ If the law does not require that to deal in a business line, the director of an enterprise or head of a business establishment must have a practice certificate, at least one professional officer of that enterprise as prescribed by the relevant specialized law must acquire such a certificate

Article 10. Business lines for which legal capital is required

1. For business lines for which legal capital is required, specific legal capital levels, competent state agencies managing legal capital, agencies and organizations competent to certify legal capital, dossiers, conditions and modes of certifying legal capital comply with relevant specialized laws.

2. The chairman of the Members' Council or the company president and the director (director general) of a limited liability company; the chairman of the Board of Directors and the director (director general) of a joint-stock company: all partners to a partnership, and the owner of a private enterprise are responsible for the truthfulness and accuracy of the capital amount certified as legal capital upon enterprise establishment. An enterprise is obliged to ensure that the actual amount of its charter capital is not lower than its legal capital certified throughout its business operation process.

3. For business registration for establishment of an enterprise conducting a business line for which legal capital is required, the enterprise registration dossier must contain certification of legal capital by a competent agency or organization. Persons directly certifying legal capital shall take joint responsibility for the accuracy and truthfulness of the capital amount at the lime of certification.

4. If an enterprise registers an additional business line for which legal capital is required, such additional business registration is not subject to additional certification of legal capital by a competent agency or organization, provided that the own capital identified in the asset balance sheet of the enterprise made within 3 months after the registration dossier is filed is equal to or higher than the prescribed legal capital level.

Article11. Right to make business registration and conduct business activities

1. An enterprise may take the initiative in making business registration and conducting business activities without having to ask for permission or approval from or consulting any state agency if its business lines:

a/ Are not banned by law;

b/ Are not conditional as prescribed by specialized laws.

2. An enterprise may conduct conditional business lines from the time it fully meets the conditions prescribed for those business lines.

If an enterprise conducts business activities when it has not fully satisfied the prescribed conditions, the chairman of the Members' Council or the president of the company and the director (director general), for limited liability companies; the chairman of the Board of Directors and the director (director general), for joint-stock companies; all partners, for partnerships, and the owner, for private enterprises, shall take joint responsibility before law for such business.

3. Unless otherwise provided for by a treaty to which Vietnam is a contracting party or a specialized law, an enterprise established in Vietnam of which foreign investors hold not more than 49% of charter capital is subject to investment or business conditions applicable to domestic investors.

4. Unless otherwise provided for by a treaty to which Vietnam is a contracting party or a specialized law. an enterprise established in Vietnam of which foreign investors hold more than 49% of charier capital is subject to investment or business conditions applicable to foreign investors.

5. The holding rates specified in Clauses 3 and 4 of this Article is applicable to enterprises throughout the course of their investment or business in relevant sectors.

Article 12. Right to establish enterprises

1. All organizations being legal entities, including also foreign-invested enterprises in Vietnam, regardless of their registered head office addresses, and all individuals, regardless of their places of residence and nationalities, other than those defined in Clause 2. Article 13 of the Law on Enterprises, may establish or participate in the establishment of enterprises in Vietnam in accordance with the Law on Enterprises.

2. An individual may register to establish only one private enterprise or a business household, or to become a partner to one partnership, unless otherwise agreed upon by the other partners. An individual owning a private enterprise or a business household or joining a partnership may establish or participate in the establishment of a one-member limited liability company, a limited liability company with two or more members or a joint-stock company.

3. Investors being foreign organizations or individuals that establish for the first lime an enterprise in Vietnam shall register investment concurrently with establishment of an economic organization under the law on investment. In this case, the enterprise shall he granted an investment-cum-enterprise registration certificate.

4. Foreign-invested enterprises already established in Vietnam which wish to establish new enterprises in Vietnam shall comply with the following provisions:

a/ If a new enterprise is established or jointly established by a foreign-invested enterprise with more than 49% of the charter capital owned by a foreign investor, there must be an investment project for which investment registration shall be made together with the establishment of an economic organization under the investment law. In tin's case, the enterprise shall be granted an investment-cum-enterprise registration certificate.

b/ If anew enterprise is established or jointly established by a foreign-invested enterprise with 49% or less of the charter capital owned by a foreign investor, the establishment of that enterprise must comply with the Law on Enterprises. In this case, investment registration must comply with relevant regulations applicable to domestic investment projects.

Article 13. Right to contribute capital and purchase shares

1. All organizations being legal entities. including also foreign-invested enterprises, regardless of their registered head offices, and all individuals, regardless of their nationalities and places of residence, other than those defined in Clause4. Article 13 of the Law on Enterprises, may contribute unlimited capital amounts to. or buy unlimited shares from, enterprises in accordance with relevant provisions of the Law on Enterprises, except the following cases:

a/ Foreign investors' holding rates in listed companies comply with the securities law:

b/ Foreign investors' holding rates in particular cases comply with the laws specified in Clause 3. Article 3 of this Decree and relevant specialized laws:

c/ Foreign investors' holding rates in wholly state-owned enterprises which are equitized or otherwise transformed comply with the law on equitization and transformation of wholly state-owned enterprises;

d/ Foreign investors' holding rate in service enterprises comply with the Schedule of Specific Commitments in Services (Annexes to the Protocol on Vietnam's WTO accession).

2. Foreign investors may contribute capital to limited liability companies or receive capital contribution portions transferred by members or owners of companies under regulations on capital contribution or transfer: and shall make member change registration under relevant provisions of the Law on Enterprises and relevant laws.

Registration of a change in membership of companies already possessing investment certificates shall be made at competent slate agencies in charge of investment management.

Registration of a member change in other cases shall be made at business registration offices.

3. Foreign investors may purchase newly issued shares and receive transferred shares under regulations on share purchase and transfer and register shareholders or changes in shareholders under relevant provisions of the Law on Enterprises.

In case of receipt of contributed capital shares from founding shareholders as specified in Clause 3, Article 84 or shares transferred by founding shareholders as specified in Clause 5. Article 84 of the Law on Enterprises, they shall also make a registration of change of founding shareholders under the Law on Enterprises at business registration offices or competent state agencies in charge of investment management.

Article 14. Ban on state agencies and people's armed forces units from using state capital and assets to contribute capital to. purchase shares from, or establish, enterprises for profit-seeking purposes

1. State agencies and people's armed forces units are strictly prohibited from using state assets and public funds to establish, contribute capital to or purchase shares from enterprises for their own profit-seeking purposes.

2. Slate assets and public funds defined in this Article include:

a/ Assets procured with state budget capital and capital of state budget origin;

b/ Funds allocated from the state budget:

c/ Land allocated for performing the functions and tasks prescribed by law;

d/ Other assets and incomes generated from the use of the above assets and funds.

e/ Aid funds provided by foreign governments, organizations and individuals.

3. Seeking own profits means that agencies or units use incomes generated in any form from business, capital contribution or share purchase activities for at least one of the following purposes:

a/ Division in any form to a number or all of their cadres and employees;

b/ Supplementing their budgets in contravention of the law on the state budget:

c/ Setting up funds or supplementing their funds for their own interests.

Article 15. Additional guidance on directors (directors general) and Board of Directors members

1. The director (director general) of a joint-stock company or a limited liability company with two or more members must meet the following criteria and conditions:

a/ Having full civil act capacity and being not banned from establishing and managing enterprises under Clause 2. Article 13 of the Law on Enterprises:

b/ Being an individual shareholder who holds at least 5% of common shares (of a joint-stock company) or an individual member holding at least 10% of the charter capital (of a limited liability company) or a person with adequate professional qualifications or actual experience in business administration or in major business lines of the company.

If the company charier provides criteria and conditions different from those prescribed at this Point, such criteria and conditions apply:

c/ With regard to a subsidiary of a company with stale-owned capital or shares representing more than 50% of its charter capital, in addition to the criteria and conditions set at Points a and b of this Clause, the director (director general) of the subsidiary must not be the wife or husband, father or adoptive father, mother or adoptive mother, a child or adoptive child or a blood sibling of the person managing the parent company or the person representing the state capital portion in that subsidiary.

2. The director (director general) of a one-member limited liability company with the sole institutional member must satisfy the following criteria and conditions:

a/ Having full civil act capacity and being not banned from establishing and managing enterprises under Clause 2, Article 13 of the Law on Enterprises;

b/ Having adequate professional qualifications and actual experience in business administration or in major business lines of the company, unless otherwise provided for by the company charter;

c/ If the company owner is a state agency or an enterprise with state-owned capital representing more than 50%. in addition to the criteria and conditions set at Points a and b of this Clause, the director (director general) must not be the wife or husband, father or adoptive father, mother or adoptive mother, a child or adoptive child or a blood sibling of the head or deputy head of the state agency or of the representative of the state capital portion in that company.

3. A member of the Board of Directors of a joint-stock company must satisfy the following criteria and conditions:

a/ Having full civil act capacity, being not banned from establishing and managing enterprises under Clause 2, Article 13 of the Law on Enterprises:

b/ Being an individual shareholder who holds at least 5% of the total of common shares; or an individual member holding less than 5% of total shares, or a person who is not a shareholder but has adequate professional qualifications or experience in business administration or in major business lines of the company.

If the company charter provides criteria and conditions different from those prescribed at this Point, the criteria and conditions set in the company charter apply.

4. Unless otherwise provided for by the company charter, the chairman of the Members' Council, the president, the chairman of the Board of Directors or the director (director general) of a company may concurrently act as the chairman of the Members* Council, the president, the chairman of the Board of Directors or the director (director general) (except director (director general) of a joint-stock company) of another company under Clause 2. Article 116 of the Law on Enterprises.

Article 16. Authorization by at-law representatives of enterprises

1. The at-law representative of an enterprise shall reside in Vietnam. In case of absence from Vietnam for more than 30 days, he/she shall authorize in writing another person to exercise his./her rights and perform his/her duties as the at law representative of the enterprise.

2. In case the duration of authorization has expired but the at-law representative of the enterprise is not back in Vietnam and makes no other authorization, the following provisions shall be complied with:

a/ The authorized person shall continue exercising the rights and performing the duties of the at-law representative of the private enterprise within the scope of authorization until the at-law representative of the private comes back lo work in the enterprise;

b/ The authorized person shall continue exercising the rights and performing the duties of the at-law representative of the limited liability company, joint-stock company or partnership within the scope of authorization until the at-law representative of the company comes back to work in the company or until the Members' Council, the owner, the Board of Directors or Members* Council of the partnership decides to appoint another person to act as the at-law representative of the company.

3. In case an enterprise's at-law representative is absent from Vietnam for more than 30 days without authorizing another person lo exercise his/her rights and perform his/her duties, the Members' Council, the company owner, the Board of Directors or the Members" Council of the partnership appoint another person to act as the at-law representative of the company.

Article 17. Setting up of branches and representative offices of foreign-invested enterprises

A foreign-invested enterprise which has been established under the Investment Law and the Law on Enterprises or registered transformation under law may set up branches or representative offices in addition to its head office. The setting up of a branch is not required to be accompanied by or conducted concurrently with the completion of investment procedures under the investment law. The dossiers, order and procedures for registration of operation of branches and representative offices comply with relevant provisions of the Law on Enterprises and such registration shall be made at competent state agencies in charge of investment management.

Article 18. Making of capital contribution and rights and obligations related to the contribution of capital to limited liability companies with two or more members

1. Members shall make adequate capital contribution within the time limit they have committed to in the list of members. If capital contribution is made in installments, the time limit for each member to make the last installment of capital contribution does not exceed 36 months after the company is granted an enterprise registration certificate or a certificate of registration of member addition or change. For each installment of capital contribution a member will be granted a certificate of capital amount contributed in that installment.

2. Within 15 days following each installment of capital contribution as committed, the at-law representative of the company shall report on the capital contribution progress to the business registration office.

In case the at-law representative fails to notify the capital contribution progress under regulations, the chairman of the Members' Council or the director (director general) or a member holding the largest capital contribution portion in the company may report on the capital contribution progress on the company's behalf.

3. Within the time limit for making adequate capital contribution as committed, members may have votes and be divided profits in proportion to their actually contributed capital amounts, unless otherwise provided for in the company charter.

4. Past the time limit for the last installment of capital contribution as committed, a member that still fails to make the committed capital contribution will automatically be no longer a member of the company and may not transfer the right to contribute capital to another party. The capital amount not yet contributed shall be handled under Clause 5 of this Article.

5. Within 90 days after the time limit for making the last installment of capital contribution as committed, the capital amount not yet adequately contributed shall be handled in the following order of priority:

a/ Other members undertake to contribute partially or wholly such capital amount in proportion to their capital amounts already contributed to the company:

b/ One or several members undertake to contribute wholly such capital amount;

c/ To mobilize other parties to adequately contribute such capital amount.

6. Within 15 days after the expiration of the 90-day time limit specified in Clause 5 of this Article, the at-law representative of the company shall report on the capital contribution progress and register a change in the company's membership. A dossier for member change registration in this case comprises:

a/ An application for member change registration:

b/ A notice of capital contribution progress or a copy, certified by the company, of the certificate of capital contribution by members;

c/ The list of members.

7. Within 5 working days after receiving a complete dossier as specified in this Clause, the business registration office shall effect the registration and grant a member change registration certificate to the company.

In case a member or his/her/its authorized representative refuses to sign the list of members specified at Point c. Clause 6 of this Article, the business registration office shall notify such list to such member, requiring him/her/it to certify in writing his/her/its contributed capital amount within 15 days after receiving the notice. Such a notice must be sent by registered mail to the concerned member. Past that time limit, if receiving no written certification from the concerned member, the business registration office shall register a member change at the request of the company. In case the member refusing to sign the list of members confirms in writing his/her/its disagreement with the contributed capital amount indicated in the list of members, the business registration office shall refuse to grant a member change registration certificate.

8. In case the capital amount actually contributed under Clause 5 of this Article is still lower than the total capital amount to be contributed as committed by members, the business registration office shall register the contributed capital amount as the charter capital of company upon carrying out procedures for registering change of the company's membership under Clause 6 of this Article. Members that fail to make adequate capital contribution as committed shall bear joint liability in proportion to their un contributed capital amounts for debts and other financial obligations of the company arising before the member change registration under Clause 6 of this Article.

9. The business registration office may inspect the capital contribution progress at the request of one or several members holding contributed capital portions representing at least 25% of the company's charter capital. Results of inspection of the capital contribution progress by the business registration office shall be used for determining the number of votes and division of profits under Clause 3 of this Article and compiling member change registration dossiers under Clause 6 of this Article.

Article 19. Right of members to institute lawsuits against the chairman of the Members' Council and director (director general)

1. A member may. at his/her own will or on the company's behalf, institute a lawsuit over the civil liability of the chairman of the Members' Council and director (director general) in the following cases:

a/ The chairman of the Members' Council and director (director general) fail to properly exercise their vested rights and perform their assigned duties: fail to implement or fail to properly and promptly decisions of the Members' Council: exercise their vested rights and perform their assigned duties in contravention of law or the company charter;

b/ The chairman of the Members' Council and director (director general) have used business information, know-how and opportunities of the company for self-seeking purposes or in the interests of other organizations and individuals;

c/ The chairman of the Members' Council and director (director general) have abused their positions, posts and the company's assets for self-seeking purposes or in the interests of other organizations and individuals:

d/ Other cases specified by law and the company charier.

2. The order and procedures for instituting a lawsuit comply with relevant provisions of the civil procedure law.

Article 20. Additional guidance on some rights and obligations of members of limited liability companies

1. In case an individual member of a limited liability company is held in custody or temporary detention, sentenced to imprisonment or deprived of his/her professional practice right by a court for commission of such crime as smuggling, production of counterfeit goods, illegal trading, tax evasion, deception against customers or other crimes specified by law, he/she may authorize another person to join the Members' Council to run the company.

2. In case an individual member acting as the at-law representative of a limited liability company with two members is held in custody or temporary detention, absconding from his/her place of residence, has lost his/her civil act capacity or has it limited or is deprived of his/ her professional practice right by a court for commission of such crime as smuggling, production of counterfeit goods, illegal trading, lax evasion, deception against customers or other crimes specified by law. the other member will automatically become the at-law representative of (he company until the Members' Council issues a new decision on the at-law representative of the company.

3. In case the company does not redeem a capital contribution or fails to pay for the red