The Law on Enterprises 2020 came into effect on 1 January 2021 (2020 LoE). On 30 September 2020, the Ministry of Planning and Investment released a draft decree guiding the implementation of the 2020 LoE and replacing Decree No. 78/2015/ND-CP as amended by Decree No. 108/2018/ND-CP on enterprise registration (Draft Decree). Please read our update on the 2020 LoE and on the Draft Decree for general information.
The final Decree No. 01/2021/ND-CP came into effect on 4 January 2021 (Decree 1).
Following the general provisions of the 2020 LoE, Decree 1 stipulates the detailed procedures for enterprise registration simplifying administrative procedures.
In general, the content of the Draft Decree is retained in Decree 1 but has been amended and supplemented to make it clearer and more comprehensive. Decree 1 in combination with the 2020 LoE helps to reduce the burden of administrative procedures and unnecessary exposure of enterprise relating information. For example, it is no longer required to make announcements on the use of the company seal, to notify changes in information on enterprise managers and private placement of shares; and the application for certain procedures have also been simplified.
In the following sections, we will set out some notable changes under Decree 1 in comparison with the Draft Decree.
Under the 2020 LoE, the Government is assigned to provide for a coordinating mechanism for enterprise registration. This was already specified in the 2014 Law on Enterprises. However, it was not until October 2020 that detailed guidance to implement such mechanism was issued by the Government in Decree 122/2020/ND-CP (Decree 122) Decree 122 guides the coordinating mechanism in procedures for registration of enterprises, declaration of employment, social insurance participation and registration of use of invoices. For ensuring the consistency of enterprise registration and other relevant procedures, Decree 1 therefore generally refers to the Decree 122 guiding the coordination mechanism and does not further provide guidance on the same.
Aside from the regulations on the application dossier and procedure for enterprise registration by a securities company or fund management company as set out in the Draft Decree, Decree 1 also stipulates the responsibility of the State Securities Commission of Vietnam, under the Ministry of Finance) (SSC) to convert data of securities companies and fund management companies. The SSC needs to provide the enterprise registration authority with the lists of companies satisfying the respective incorporation and operation conditions prescribed by the 2019 Law on Securities (2019 LoS). This so the registration procedures can be carried out in accordance with the law.
The registration procedure of these companies is required to be completed within 2 years from the effective date of the 2019 LoS so before 1 January 2023. The cooperation between the competent authorities is expected to facilitate and accelerate the registration of these companies.
The Draft Decree had already introduced 6 definitions in relation to enterprise legal status. Under Decree 1 an additional status has been added and an enterprise now can have the following legal status:
1. Temporary suspension of the business;
2. No longer doing business at the registered address;
3. Revocation of its ERC due to enforcement of tax administration;
4. Undergoing dissolution procedures, or has been divided, consolidated, or merged;
5. Undergoing bankruptcy procedures;
6. Dissolved, bankrupt or ceased to exist; and
Of note, an enterprise is not allowed to register or notify any changes in its enterprise registration contents if its legal status is “No longer doing business at the registered address”. This is in addition to the other cases which have already been provided in previous regulations and the Draft Decree. Accordingly, the enterprise may continue to register or notify changes in its enterprise registration contents when its legal status has been returned to “Active”. This is to be decided by the relevant tax authority.
Decree 1 further added a provision on refunding the fee for announcement of enterprise registration contents, which is payable at the time of submission of the relevant application dossier for enterprise registration.
Under the previous regulations, an enterprise may register to change the form of the enterprise and concurrently register to change other enterprise registration contents except for change of legal representatives. The Draft Decree did not stipulate this exception but did not explicitly allow such registration either.
Decree 1 now clearly provides that in case an enterprise concurrently registers to change its form of enterprise and legal representatives, the competent signatory shall be the chairperson of members’ council, company president or chairperson of board of management (as the case may be).
Mark Oakley / Managing Partner
Phuong Huynh / Senior Associate
This legal update is not an advice and should not be treated as such.
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