What are prohibited actions relating to enterprise activities in accordance with Vietnamese law?

Enterprises is a familiar entitiy in business relationships. Vietnamese law currently has regulations in probited actions relating to enterprise activities, that partially ensures a fair business environment. Let’s find out these prohibited actions with Lawyer X using the following scenario: “Dear lawyer! I intend to acceding the business market in the form of establishing an enterprise. I want to learn about what actions I must not conduct under Viet Nam law on enterprises? Thanks for answering me!”

Legal grounds

2020 Viet Nam Law on Enterprises

What is an enterprise?

The definition of an enterprise is specified in Clause 10, Article 4 of Law on Enterprise 2020, whereby: “Enterprise means an organization that has a proper name, assets, premises, is established or registered in accordance with law for business purposes.”

As can be seen, the enterprise has the following characteristics:

– Enterprise is an organization. Only an entity that is an organization can be considered an enterprise. Individuals who even though carry out business activities cannot be considered an enterprise.

– Has its own proper name, property, and premises. This feature shows the independence of an enterprise. The proper name helps enterprises to easily participate in transactions as well as distinguish them from other entities. Enterprise property is the physical basis for the enterprise to carry out production and business activities. Premises is a necessary element, is a place to perform some activities of the business.

– The enterprise is established or registered for establishment in accordance with the law. This shows that when an enterprise wants to operate in Vietnam, first of all, it must have the permission, recognition and management of the State without being set up or operating arbitrarily.

– The purpose of enterprise operation is for business purposes. Enterprise is a type of organization besides many other organizations that are regulated by law such as political organizations, social organizations, socio-political organizations, etc. This is an important characteristic to distinguish enterprise with other entities.  Enterprises mainly operate towards the purpose of making a profit, enriching themselves, the owner when investing in.

According to the Enterprise Law 2020, inheriting the previous legal regulations, currently enterprises include the following four types: private enterprises, partnerships, limited liability companies, joint-stock companies. Thus we can answer the question if  enterprise and company are the same? Enterprise has broader connotations than company. Company refers to types of enterprises  that are: Partnerships, Limited Liability Companies, Joint-Stock Companies. All types of companies are considered as enterprises. But not every type of enterprises is considered as a corporation, in particular private enterprise is not considered a company.

Enterprises are often known for the purpose of maximizing profits, but there are businesses whose purpose in doing business is to realize social goals. Currently, the law also stipulates criteria for an enterprise to be considered a social enterprise under Clause 1, Article 10 of the Enterprise Law 2020:

– Is a registered enterprise in accordance with the Law on Enterprises

– Operational objectives are aimed at solving social and environmental problems for public interests;

– Use at least 51% of the annual post-tax profit for re-investment to achieve the registered targets.

Rights and obligations of enterprises

Rights of enterprises

Every enterprise has the right to:

– Freely engage in any business line that is not banned by law.

– Freely run the business and choose a type of business organization; choose business lines, area of operation and type of operation; change the scale of business and business lines.

– Choose the method of mobilizing, distributing and using capital.

– Freely find markets, customers and enter into contracts.

– Export and import.

– Hire employees in accordance with employment laws.

– Apply technological advances to improve business efficiency; have intellectual property rights protected in accordance with intellectual property laws.

– Acquire, use, dispose of their assets.

– Reject unlawful requests for provision of resources from other organizations and individuals.

– File complaints and participate in proceedings as prescribed by law.

– Other rights prescribed by law.

Obligations of enterprises

– Maintain the fulfillment of conditions for conducting restricted business lines and business lines restricted to foreign investors ( “restricted business lines”) prescribed by law throughout the course of business operation.

– Apply for enterprise registration; register changes to enterprise registration information; publish information about the establishment and operation of the enterprise; submit reports and fulfill other obligations prescribed by Law on Enterprises 2020.

– Take responsibility for the accuracy of information in the enterprise registration application and reports; promptly rectify incorrect information if found.

– Organize accounting works; pay taxes and fulfill other financial obligations prescribed by law.

– Protect lawful rights and interests of employees as prescribed by law; do not discriminate against or insult employees; do not mistreat or force employees to work; do not employ minors against the law; enable employees to improve their vocational skills through training; buy social insurance, unemployment insurance, health insurance and other insurance for employees as prescribed by law.

– Other obligations prescribed by law.

Prohibited actions relating to enterprise’s activities

Actions that are prohibited under Law on Enterprises comprise:

– Issuing or refusing to issue the Certificate of Enterprise registration against regulations of Law on Enterprises; requesting the founder to submit additional documents against regulations of Law on Enterprises; delaying, obstructing, harassing enterprise founders and business operation of enterprises.

– Obstructing the enterprise’s owner, members/partners/shareholders from performing their rights and obligations prescribed in Law on Enterprises and the enterprise’s charter.

– Doing business as an enterprise without applying for enterprise registration; carrying on busines operation after the Certificate of Enterprise Registration has been revoked or while the enterprise is being suspended.

– Providing dishonest or incorrect information in the enterprise registration application or application for changes to enterprise registration information.

– Declaring false charter capital; failure to contribute adequate charter capital as registered; deliberate contribution of assets with false value.

– Engaging in banned business lines or business lines from which foreign investors are banned; engaging in restricted business lines without fulfillment of conditions or failure to maintain fulfillment of conditions during operation in restricted business lines.

– Frauds, money laundering, terrorism financing.

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