Vietnam’s Ministry of Planning and Investment is reviewing and evaluating the four-year implementation of the 2020 Enterprise Law to propose amendments and supplements. While the law has had positive impacts and contributed to an improved business environment, reflections from ministries, localities, and enterprises indicate that many of its provisions remain challenging and problematic in practice.
The main reasons for these issues are unclear and vague regulations, leading to differing interpretations in application. Additionally, some provisions are impractical and inconsistent with specialized laws.
According to the Ministry, the challenges revolve around three main issues. Firstly, there is a lack of consistency between the Enterprise Law and specialized laws, such as in the case of private placement of bonds by non-public companies. Secondly, the provisions on supervision, inspection, and state management of enterprises after registration are not stringent enough.
The Enterprise Law also lacks specificity in measures to prevent and handle fictitious and virtual capital contributions, clandestine investments, and the use of fake legal documents and invoices in establishing enterprises. Contributing capital with land use rights and non-cash assets remains challenging.
The Enterprise Law lacks specific measures to tackle fictitious and virtual capital contributions. |
Current laws do not restrict the number of enterprises an individual can establish or represent simultaneously. This loophole has been exploited by unscrupulous individuals for fraudulent activities and personal gain.
The Ministry also pointed out that some provisions on enterprise establishment lack clarity, such as those concerning prohibited subjects for business formation and participation, the requirement of personal codes and electronic identification accounts for business registration, and the responsibility to notify changes in registration information. Provisions on enterprise management and governance are also identified as problematic.
In terms of the law-making orientation, the Ministry will base its work on the synthesis and review of proposals from ministries, sectors, localities, associations, and enterprises.
One proposed amendment is to introduce the concept of beneficial owner based on relevant provisions in the Law on Anti-Money Laundering. As business registration is the “birth certificate” and the first step for an enterprise to enter the market, collecting and managing information about the beneficial owner at this stage is crucial.
The Ministry also suggested restricting or prohibiting the issuance of bearer shares and implementing the position of nominal director in accordance with international practices.
Viet Linh
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