How is state-owned enterprise understood under Law on Enterprises 2020 in Viet Nam?

State-owned enterprises are an important business entity in each country’s economy. The name of state-owned enterprises shows a connection to the state. However, this relation is understood in any aspect, to what extent, each country, at each period has its own regulations. In Viet Nam, the Enterprise Law 2014 stipulates that a state-owned enterprise must be an enterprise with 100% charter capital held by the state. However, currently the Enterprise Law 2020 has significantly changed in the understanding of SOEs. Let’s join Lawyer X to learn about this issue through this drunk article!

Legal grounds

Law on Enterprises 2020

What is state-owned enterprise?

According to Clause 11, Article 4, Article 88 of Law on Enterprises 2020, it can be explained that state-owned enterprises include enterprises where the State holds more than 50% of the charter capital or voting shares. Specifically, State-owned enterprises shall be limited liability companies or joint-stock companies, including:

– Wholly state-owned enterprises (100% of charter capital of which is held by the State), including:

+ One-member limited liability company with 100% of charter capital held by the State is the parent company of a state business group, the parent company of a State corporation, the parent company in the parent company – the subsidiaries;

+ One-member limited liability company is an independent company with 100% charter capital held by the State.

– Partially state-owned enterprises (over 50% of charter capital or voting shares is held by the State, except for the case of holding 100% of the stated charter capital).

+ Multiple-member Limited liability companies, joint-stock companies with more than 50% of charter capital held by the State, the total number of voting shares is the parent company of an business group or parent company of state corporations, parent company in the group of parent companies – subsidiary companies;

+ Multiple-member Limited liability companies, joint-stock companies are independent companies with over 50% of charter capital held by the State, total number of voting shares.

It should be noted that there are some points stipulated in Article 7 of Decree 47/2021 / ND-CP:

– The parent company mentioned above is not a subsidiary in a business group, corporation and group of parent company – subsidiary company.

– The ownership ratio of charter capital or the total number of voting shares held by the State in the enterprise is the total ownership rate of charter capital, voting shares of the representative agencies of owners hold at that enterprise.

– The above independent company is a joint-stock company or a limited liability company whose charter capital is owned by the State or the total number of shares with voting rights and is not part of the parent company group – subsidiary company.

State-owned enterprise management organization

It can be seen that state-owned enterprises are currently understood in terms of state capital ownership in enterprises. When considering the type of enterprise, the state enterprise can be an limited liability company or joint-stock company. Therefore, the organization and management of state-owned enterprises are executed according to the respective type of enterprise. In which, in the form of one-member limited liability company whose 100% charter capital is held by the State, there are some specific provisions on the management organization as follows:

* Management structure: The representative agency decides one of the two following organizational models:

– A company with a President, Director/General Director and Board of Controllers;

– A company with a Board of Members, Director/General Director and Board of Controllers.

* The Board of Members

– The Board of Members shall perform the company’s rights and obligations in the company’s name as prescribed by Law on Enterprises and relevant laws.

– The Board of Members shall consist of up to 07 members including a President. Members of the Board of Members shall be designated, dismissed, rewarded and disciplined by the state ownership representative body.

– The term of office of the President and other members of the Board of Members shall not exceed 05 years. A member of Board of Members may be designated again for not more than 02 terms in the same company unless he/she has worked for the company for more than 15 consecutive years before the first designation.

* The company’s President

– The company’s President shall be designated by the state ownership representative body as prescribed by law and has up to 02 terms of office of up to 05 years each, unless he/she has worked for the company for more than 15 consecutive years before the first designation. The requirements, dismissal of the company’s President shall comply with Article 93 and Article 94 of Law on Enterprises 2020.

– The company’s President shall perform the rights and obligations of the state ownership representative at the company in accordance with the Law on Management and use of State Investment in Enterprises; other rights, obligations and responsibilities prescribed in Article 92 and Article 97 of Law on Enterprises 2020.

– The Presidents’ salaries and allowances shall be recorded as the company’s administrative expenses.

– The company’s President shall employ the company’s administration and assistance apparatus to perform his/her rights and obligations. Where necessary, the company’s President may discuss with domestic and foreign counsels before making important decisions under his/her jurisdiction. The counseling costs shall be specified in the company’s financial management regulations.

– The decisions within the President’s jurisdiction mentioned in Clause 2 of Article 99 of Law on Enterprise 2020 shall be made in writing and bear the President’s signature, even if the President concurrently holds the position of Director/General Director.

– A President’s decision takes effect from the day on which it is signed or on the effective date written therein, unless it is subject to approval by the state ownership representative body.

– In case the President is not present in Vietnam for more than 30 days, he/she shall authorize another person in writing to perform some of his/her rights and obligations. A written notification of the authorization shall be sent to the state ownership representative body. Other cases of authorization shall comply with the company’s rules and regulations.

*The Director/General Director and Deputy Directors/General Directors

– The Director/General Director shall be designated or hired by the Board of Members or the company’s President under a personnel plan approved by the state ownership representative body.

– The Director/General Director shall manage the company’s everyday business and has the following rights and obligations:

+ Organize the implementation of the company’s busines plans and investment plans and evaluation thereof;

+ Organize the implementation of resolutions and decisions of the Board of Members, company’s President and state ownership representative body and evaluation thereof;

+ Decide everyday matters of the company;

+ Issue the company’s rules and regulations after they are approved by the Board of Members or company’s President;

+ Designate, hire, dismiss, terminate employment contracts with the company’s executives, except those within jurisdiction of the Board of Members or the company’s President;

+ Enter into contracts and carry out transactions in the company’s name, except those within jurisdiction of the President of the Board of Members or the company’s President;

+ Prepare and submit quarterly and annual reports on achievement of business targets and financial statements to the Board of Members or the company’s President;

+ Propose the distribution and use of post-tax profits and other financial obligations of the company;

+ Recruit employees;

+ Propose the plan for the company’s reorganization;

+ Other rights and obligations prescribed by law and the company’s charter.

– The company may have one or several Deputy Directors/General Directors. The designation and quantity of Deputy Directors/General Directors shall be specified in the company’s charter. Rights and obligations of Deputy Directors/General Directors shall be specified in the company’s charter and their employment contracts

* Controllers and the Board of Controllers

– The state ownership representative body shall decide the establishment of a Board of Controllers, which has 01 – 05 Controllers including a Chief Controller. The term of office of a Controller shall not exceed 05 years. A Controller must not be designated more than 02 consecutive terms. In case the Board of Controllers has only 01 Controller, he/she shall be the Chief Controller and has to satisfy corresponding requirements.

– An individual may concurrently hold the position of Chief Controller or Controller of up to 04 state-owned enterprises.

– A Controller or Chief Controller shall satisfy the following requirements:

+ He/she has a bachelor’s degree or higher in economics, finance, accounting, audit, law, business administration or a major that is relevant to the enterprise’s business operation and at least 03 years’ experience (05 years for Chief Controller);

+ He/she is not executive of the company or any other enterprise; not a Controller of enterprises other than state-owned enterprises; not a company’s employee.

+ He/she is not a relative of the head or deputies of the state ownership representative body; any of the members of the Board of members, the Director/General Director, any of the Deputy Directors/General Directors, the chief accountant or any other Controllers of the company;

+ He/she satisfies other requirements specified in the company’s charter.

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