WHAT CHANGES THE ENTERPRISE LAW 2020?

On June 17, 2020, the National Assembly passed the Enterprise Law 59/2020/QH14. The provisions in the Enterprise Law 2020 are considered to have many new points, creating favorable conditions for enterprises in the market entry stage in particular and in the process of investment and business in general.

Enterprise Law 59/2020/QH14. Download here! 

1. Remove the regulation on notification of enterprise seal samples before use:

According to Article 43 of the Enterprise Law 2020, regulations on the seal of enterprises are as follows:
– A seal includes a seal made at a seal engraving establishment or a seal in the form of a digital signature by the law on electronic transactions.
– The enterprise shall decide on the type, quantity, form, and content of the seal of the enterprise, its branches, representative offices, and other units.
– The management and keeping of the seal shall comply with the provisions of the company's charter or the regulations promulgated by the enterprise, branch, representative office, or another unit of the enterprise with the seal. Enterprises use seals in transactions as prescribed by law

Thus, compared with the regulations on seals in the Enterprise Law 2014, the Enterprise Law 2020 has removed rules " Before using, the enterprise is obliged to notify the seal sample to the business registration agency for public posting on the National Portal on Business Registration."

2. Add subjects who are not allowed to establish businesses

According to Clause 2, Article 17 of the Enterprise Law 2020, more subjects are added are not allowed to establish or manage enterprises:
– People with difficulties in cognition and behavior control;
- Public security workers in agencies and units of the Vietnam People's Public Security (except for those appointed as authorized representatives to manage the State's capital contribution in enterprises);
– Organizations being commercial legal entities are prohibited from doing business or operating in certain fields according to the provisions of the Penal Code.

3. Shorten the notice period before suspending business from 2021

According to Article 206 of the Enterprise Law 2020, the notice period for business suspension has been shortened. Specifically: Enterprises must notify in writing the Business Registration Authority at least 03 working days before the date of business suspension or resume business before the announced deadline. 

Thus, the notice period before the business suspension is shortened from 15 days at the latest (Article 200 of the Enterprise Law 2014) to 03 working days.

4. Supplementing the application for registration of a limited company, a joint-stock company

Compared to the Enterprise Law 2014, the Enterprise Law 2020 requires registration documents for a limited company (Article 21), a joint-stock company (Article 22). must have a copy of legal documents of the legal representative, similar to a member of a limited company and a founding shareholder of a joint-stock company.

5. Supplementing regulations on depository certificates without voting rights

Compared with the Enterprise Law 2014, the Enterprise Law 2020 adds provisions on depository certificates without voting rights as follows:

– Common shares used as the underlying asset to issue depository certificates without voting rights are called underlying ordinary shares. Depository certificates without voting rights have economic benefits and obligations corresponding to the underlying ordinary shares, excluding voting rights.
– The Government regulates depository certificates without voting rights.

6. Regulations on the exclusion of dissolution due to revocation of business registration certificate

According to Point d, Clause 1, Article 207 of the Enterprise Law 2020, which stipulates: "The enterprise shall be dissolved in case the enterprise registration certificate is revoked unless otherwise provided for by the Law on Tax Administration."

This regulation ensures synchronization with the provisions of the Law on Tax Administration.

7. Changing the concept of state-owned enterprises

According to Clause 11 Article 4 of the Enterprise Law 2020, the concept of state-owned enterprises includes enterprises in which the State holds more than 50% of charter capital, the total number of shares with voting rights as prescribed in Article 88 of this law.
(According to the Enterprise Law 2014, state-owned enterprises are enterprises in which 100% of charter capital is held by the State.)

8. State-owned enterprises must establish a Control Board

According to Clause 1, Article 103 of the Enterprise Law 2020, depending on the size of the company, the agency representing the owner shall decide to establish a Supervisory Board with between 01 and 05 Supervisors, including the Head of the Board. Control. (Currently, according to the Enterprise Law 2014: appoint 01 Controller or establish a Supervisory Board consisting of 03 to 05 Supervisors).

The term of Supervisors shall not exceed 05 years and maybe re-appointed but not exceeding 02 consecutive terms at that company. In case the Supervisory Board has only 01 Supervisor, that Supervisor is concurrently the Head of the Control Board and must meet the criteria of the Head of the Control Board.

9. Amendment of regulations on the handling of contributed capital in some special cases

Specifically, compared with current regulations, the handling of contributed capital in some special cases is amended and supplemented as follows:
– In case a member has limited or lost civil act capacity, has difficulties in awareness and behavior control, the rights and obligations of that member in the company shall be performed through a representative. (Currently, done through a guardian).
– In case a member donates part or all of his/her capital contribution in the company to another person, the recipient becomes a member of the company by the following provisions:
+ If the recipient is a legal heir under the Civil Code, this person is automatically a member of the company; (Currently, being a wife, husband, father, mother, child, relative to the third line of inheritance...)
+ If the recipient does not fall into the categories specified at Point a, Clause 6, Article 53, he/she will only become a member of the company when approved by the Members' Council.
– Supplement: In case a company member is an individual who is detained, is serving a prison sentence, is serving administrative handling measures at a compulsory detoxification establishment or a compulsory education institution, the member shall authorize another person to exercise some or all of his or her rights and obligations at the company.
– Supplement: In case a company member being an individual is banned by the Court from practicing certain jobs or doing certain jobs, or a member of the company being a commercial legal entity is banned by the Court from doing business or operating in several fields. If certain members fall within the scope of the company's business lines, such members may not practice or do prohibited jobs at that company or the company suspends or terminates related business lines under the decision. The decision of the Court.

10. Amendment of regulations on rights of common shareholders

Currently, the Enterprise Law 2014 stipulates: Shareholders or groups of shareholders owning 10% or more of the total number of ordinary shares for a consecutive period of at least 06 months or a smaller percentage as stipulated in the Charter. Company to have the rights specified in Clause 2, Article 114 of this Law.

However, according to Clause 2, Article 115 of the Enterprise Law 2020, a shareholder or group of shareholders owning 05% of the total number of ordinary shares or more or a smaller percentage as prescribed in the company's charter. Rights of common shareholders.

11. Private enterprises can be converted into limited liability companies, joint-stock companies, and partnerships

According to Article 205 of the Enterprise Law 2020, a private enterprise can be converted into a limited liability company, joint-stock company, or partnership under the decision of the owner of the private business if it fully meets the following conditions:
– The converted enterprise must fully satisfy the conditions specified in Clause 1, Article 27 of this Law;
– The owner of a private business undertakes in writing to be personally responsible with all his assets for all unpaid debts and commits to paying the full amount of the debt when it is due;
– The owner of the private enterprise has a written agreement with the parties of the contract that has not been liquidated on the receipt and continued performance of such contracts by the converted company;
– The owner of the private enterprise shall commit in writing or have a written agreement with other capital contributors on the receipt and use of existing labor of the private enterprise.

The Enterprise Law 2014 only regulates the case of converting a private enterprise into a limited company.

12. Remove the regulation “Reporting changes in the information of business managers”

The Enterprise Law 2014 stipulates that enterprises must report to the business registration agency where the enterprise is headquartered within 5 days from the date of change in information about their full name, name and contact address, nationality, number of citizen identification card, people's identity card, passport or other lawful personal identification of the following persons:
– Member of the Board of Directors for joint-stock companies;
– Member of the Supervisory Board or Supervisor;
– Director or General Director.

However, the Enterprise Law 2020 has abolished this provision.

13. Additional obligations of shareholders

Accordingly, in addition to inheriting the provisions on obligations of common shareholders in Article 115 of the Enterprise Law 2014, the Enterprise Law 2020 adds the following content:
“ Confidentiality of information provided by the company by the provisions of the company's charter and the law; Only use the information provided to exercise and protect their legitimate rights and interests; It is strictly forbidden to distribute, copy or send information provided by the company to other organizations and individuals.”

14. Additional responsibilities of a joint-stock company manager

Compared with the current regulations, the Enterprise Law 2020, adds the responsibilities of a joint-stock company manager as follows:
Members of the Board of Directors, Director or General Director, and other managers who violate the provisions of Clause 1, Article 165 of the Enterprise Law 2020 shall be personally or jointly responsible for compensation for lost benefits, return of benefits. Has received and compensated all damages to the company and the third party.

15. More cases of general partner termination

According to Clause 1, Article 185 of the Enterprise Law 2020, a general partner will be terminated in the following cases:
– Voluntarily withdrawing capital from the company;
– Dead, missing, restricted, or incapacitated for civil acts, having difficulties in cognition and behavior control;
– Excluded from the company;
– Serving a prison term or being banned by a court from practicing certain professions or doing certain jobs as prescribed by law;
– Other cases prescribed by the company's charter.
Compared to the 2014 Enterprise Law, there are more cases of “having difficulties in perception and behavior control” and “executing prison sentences or being banned by the Court from practicing certain professions or doing certain jobs as prescribed by law”.

16. Supplementing the provision “exercising the rights of private business owners in some special cases”

Compared with the current regulations, the Enterprise Law 2020, supplemented with the provisions 'exercising the rights of private business owners in some special cases as follows:
– In case the owner of a private enterprise is held in temporary detention, is serving a prison sentence, is serving administrative handling measures at a compulsory detoxification establishment or compulsory education institution, he/she shall authorize another person to do so. Its rights and obligations.
– In case the owner of a private enterprise dies, the heir or one of the heirs according to the will or by law shall be the owner of the private business according to the agreement between the heirs. In case the heirs cannot reach an agreement, they shall register to convert into a company or dissolve such a private enterprise.
– In case the owner of a private enterprise dies without an heir, the heir refuses to receive the inheritance or is deprived of the right to inherit, the property of the owner of the private enterprise shall be handled by the law on people.
– In case the owner of a private enterprise has limited or lost civil act capacity, has difficulties in perception and behavior control, the rights and obligations of the private business owner are performed through his/her representative.
– In case the owner of a private enterprise is banned by the Court from practicing certain professions or doing certain jobs within the scope of the business lines of the enterprise, the owner of the private enterprise shall suspend or terminate the related business lines. According to a court decision or transferring a private enterprise to another individual or organization.



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