Nowadays, the development of the economy strongly increased businesses’ appearance. Many types of business took place and made profits in the market. However, most people still do not fully understand the nature of each business type on the business operation. So, in this article, LSX legal firm informs: “Types of enterprise under Vietnamese Law on Enterprise”
Legal ground
- Law on Enterprise 2020
Enterprise under Vietnamese law
“Enterprise” means an organization that has a proper name, assets, and premises; established or registered in accordance with the law for business purposes.
A Vietnamese enterprise means an enterprise established or registered for establishment in accordance with Vietnamese law and has its head office in Vietnam.
Classification of business types
Enterprises are classified based on many different criteria, but the characteristics of the types of businesses are linked together, enterprises are classified as follows:
- State-owned enterprise: An enterprise in which the State owns more than 50% of the enterprise’s charter capital.
- Foreign-invested enterprise: An enterprise in which foreign investors own part or all of the enterprise’s charter capital.
- Sole proprietorship: An enterprise established and owned by an individual investing capital.
- Company: An enterprise established and jointly owned by individual, organization, or individuals and organizations (referred to as members) and jointly owned, including joint stock company, limited liability company, partnership, 100% foreign-owned company, and joint venture company.
Types of enterprise under Vietnamese Law on Enterprise
Limited liability company
Limited liability companies include single-member limited liability companies and limited liability companies with two or more members (Clause 7, Article 4 of the Law on Enterprise 2020).
Single-member limited liability company
- Firstly, a single-member limited liability company means an enterprise owned by a single organization or individual ((hereinafter referred to as “owner”). The owner’s liability for the company’s debts and other liabilities shall be equal to the company’s charter capital.
- Secondly, a single-member limited liability company has the status of a juridical person from the date of issuance of the Certificate of Enterprise Registration.
- Thirdly, a single-member limited liability company must not issue shares except for equitization.
- Fourthly, single-member limited liability companies may issue bonds in accordance with this Law and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of the Law on Enterprise 2020.
The organizational structure of a single-member limited liability company owned by an organization
A single-member limited liability company owned by an organization shall apply one of the two models below:
- A company with a President and the Director/General Director;
- A company with a Board of Members and the Director/General Director.
In case the company’s owner is a state-owned enterprise prescribed in Clause 1 Article 88 of the Law on Enterprise, a Board of Controllers shall be established. The establishment of a Board of Controllers in other cases shall be decided by the company.
The company shall have at least one legal representative who holds the title of President of the Board of Members, the company’s President, or Director/General Director. Unless otherwise prescribed by the company’s charter, the President of the company or President of the Board of Members shall be the company’s legal representative.
The organizational structure of a single-member limited liability company owned by an individual
A single-member limited liability company owned by an individual shall have a President and a Director/General Director.
A company’s owner shall be the President who may concurrently hold the position of Director/General Director or hire another person as the Director/General Director.
Rights and obligations of the Director/General Director shall be specified in the company’s charter and the employment contract.
Multi-member Limited Liability Company
- A multiple-member limited liability company means an enterprise that has 02 – 50 members as organizations or individuals. A member’s liability for the enterprise’s debts and other liabilities shall be equal to the amount of capital that member contributed to the enterprise, except for the cases specified in Clause 4 Article 47 of the Law on Enterprise 2020. The member’s stake (contributed capital) may only be transferred in accordance with Articles 51, 52, and 53 of the Law on Enterprise 2020.
- A multiple-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.
- Multiple-member limited liability companies must not issue shares except for equitization.
- Multiple-member limited liability companies may issue bonds in accordance with this Law and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of the Law on Enterprise 2020.
Organizational structure
- Firstly, a multiple-member limited liability company shall have a Board of Members, President of the Board of Members, and Director/General Director.
- Secondly, a state-owned multiple-member limited liability company prescribed in Point b Clause 1 Article 88 of the Law on Enterprise 2020 and each subsidiary company of a state-owned enterprise prescribed in Clause 1 Article 88 of this Law shall have a Board of Controllers. The establishment of the Board of Controllers in other companies shall be decided by themselves.
- Thirdly, a company shall have at least one legal representative who holds the title of President of the Board of Members, Director/General Director. Unless otherwise prescribed by the company’s charter, the President of the Board of Members shall be the company’s legal representative.
Joint-stock company
A joint stock company is an enterprise in which:
- The charter capital divided into units of equal value called shares;
- Shareholders can be organizations and individuals; the minimum number of shareholders is 03 and there is no limit on the maximum number of shareholders;
- A shareholder’s liability for the company’s debts and liabilities equal to the amount of capital contributed to the company by the shareholder;
- Shareholders may transfer their shares to other persons except for the cases specified in Clause 3 Article 120 and Clause 1 Article 127 of the Law on Enterprise 2020.
A joint stock company has the status of a juridical person from the date of issuance of the Certificate of Enterprise Registration.
Joint stock companies may issue shares, bonds, and other kinds of securities.
Organizational structure
Unless otherwise prescribed by securities laws, a joint stock company may choose one of the following models:
- A joint stock company with the GMS, Board of Directors, Board of Controllers, and Director/General Director. If the joint stock company has fewer than 11 shareholders and the shareholders that are organizations hold less than 50% of the company’s total shares, the company does not have to establish a Board of Controllers;
- A joint stock company with the GMS, Board of Directors, and Director/General Director. In this case, at least 20% of the members of the Board of Directors shall be independent members and there has to be an audit committee affiliated to the Board of Directors. The company’s charter or the audit committee’s operating regulations promulgated by the Board of Directors shall specify the organizational structure, functions, and duties of the audit committee.
Partnership
A partnership is an enterprise in which:
- Have at least 02 partners that as joint owners of the company and do business under the same name ((hereinafter referred to as “general partner”). A partnership may have limited partners in addition to general partners;
- A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets;
- A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.
A partnership has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.
Partnerships must not issue any kind of securities.
Sole proprietorship
- A sole proprietorship means an enterprise owned by a single individual whose liability for its entire operation equal to his/her total assets.
- A sole proprietorship must not issue any kind of securities.
- An individual may only establish one sole proprietorship. The owner of a sole proprietorship must not concurrently own a household business or hold the position of the general partner of a partnership.
- A sole proprietorship must not contribute capital upon establishment or purchase of shares or stakes of partnerships, limited liability companies, or joint stock companies.
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Contact LSX
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Related questions
Firstly, company’s name
Secondly, address of head office
Thirdly, company’s business lines
Lastly, charter capital
To establish an import-export company, enterprises need to prepare the following documents:
An application for enterprise registration, made according to the form corresponding to each type of enterprise in Decree 122/2020/ND-CP.
Company charter.
Partnerships and limited liability companies with two or more members must submit the list of members. On the other hand, joint-stock companies must submit a list of founding shareholders.
Copy of legal documents (ID card, passport) of the legal representative of the enterprise and members as well as shareholders of the enterprise.
Submit initial tax return.
Open bank account and purchase digital signature.
Submit license fee declaration.
Select invoice.
Select the accounting mode and method of depreciation of fixed assets.
Social insurance and union fund.
Conclusion: So the above is Types of enterprise under Vietnamese Law on Enterprise. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
