Socialist Republic of Vietnam

NATIONAL ASSEMBLY

Hanoi, 21 December 1990 amended 1 July 1994


LAW ON COMPANIES


In order to develop a multi?sector commodity economy; mobilize and use, in an effective way, all national sources of capital, labour and natural resources; create further employment; protect the lawful interests of those who invest capital; accelerate the speed of economic development; increase the efficiency in management of all business operations conducted in Vietnam;

Pursuant to article 83 of the Constitution of the Socialist Republic of Vietnam;

This Law makes provision for limited liability companies and shareholding companies.


CHAPTER I

General Provisions

Article 1

All Vietnamese citizens who are at least eighteen (18) years of age, Vietnamese economic organizations which have the status of legal entities belonging to the various economic sectors, and all social organizations, may contribute capital by way of investment in, or join in the establishment of limited liability companies and shareholding companies, in accordance with the provisions of this Law.

Article 2


A limited liability company and a shareholding company, either of which is hereinafter called a company, is an enterprise to which all the members contribute capital, share the profits and bear the losses both of which are shared in proportion to the capital contributed and the members of which have no liability for its debts beyond the amount of capital which they have contributed to it.

Article 3

For the purposes of this Law, the following terms shall have the respective meanings ascribed to them hereunder:

1. business is the carrying on, for the purpose of generating profits, of one or more of the stages of the investment process, from production to the sale of goods, and provision of services.

2. enterprise is a business unit established for the principal purpose of carrying on business operations.

3. legal capital is the minimum capital level required for the establishment of the company stipulated by law for each business area and occupation.

4. charter capital is the amount of capital contributed by the members and stated in the company's charter.

Article 4

The State recognizes the rights of the company to long?term existence and development, equality with other enterprises before the law, and lawful generation of profits from business.

Within the framework of the law, a company shall be free to carry out its business and make independent decisions in relation to business activities.

Article 5

The right to own means of production, to inherit capital and all assets, and other legal rights and interests of the members of the company shall be protected by the State.

Article 6

Government bodies and units of the people's armed forces are strictly prohibited from using State assets and public funds as capital contributions to a company or from participating in the establishment of a company for the purpose of making private profits for their own bodies and units.


Public servants currently employed in State organizations and officers on active service in the people's armed forces are prohibited from establishing or managing a company.

Article 7

Persons who are certified insane, under criminal prosecution, or who have been convicted and whose sentence has not been erased from the record are prohibited from establishing or managing a company.

Article 8

Members of a company have the rights to:

1. Own the undivided part of the assets of the company which is proportionate to their capital contributed to it.

2. Participate in general meetings of shareholders and discuss and vote on the matters which are within the power of general meetings with a number of votes which is proportionate to their capital contributed to it.

3. Earn profits or bear losses in proportion to their capital contributed to the company.

4. Require, provided they own at least one quarter (1/4) of the charter capital of the company, the convening of a meeting of shareholders for the purpose of considering and resolving the matters which have not been attended to by the board of management or by the directors. The board of management or the directors shall convene the shareholders' meeting within thirty (30) days after receipt of the request.

Article 9

Capital contribution by each member may be in Vietnamese or foreign currency, gold, assets in kind or industrial property rights.

Capital contribution in kind or industrial property rights shall be submitted to a meeting of founding shareholders for consideration, evaluation, and approval and shall be recorded in the charter of the company. Such capital shall be contributed immediately upon the company being officially established.

Article 10

The company's charter means the undertaking in writing of all members of the company in respect of its establishment and activities and which is passed at a meeting of the founding shareholders.

The company's charter shall include the following principal information:

1. The form, objectives, name, head office, and duration of the company.

2. Full names of the company's founding members.

3. The charter capital clearly stating the value of capital contributed in kind or in industrial property rights.

4. Contributed capital of each member in the case of a limited liability company or the price and number of issued shares in the case of a share?holding company.

5. Formalities for conducting decision making at shareholders' general meetings.

6. Management and control structure of the company.

7. Details including limits to the level of all funds to be set up in the company.

8. Rules for accounting and profit?sharing.

9. Provisions relating to merger, change of company formation, dissolution and formalities for liquidation of the company's assets.

Article 11

Companies may not carry on businesses which are prohibited by law. The approval of the Prime Minister of the Government is required for the establishment of companies which propose to conduct business in the following areas and occupations:

1. Manufacture and distribution of explosives, poisons, and toxic chemicals.

2. Mining of certain precious minerals.

3. Production and supply of electricity and water on a large scale.

4. Manufacture of information transmitting facilities, postal and telecommunication services, broadcasting, television and publication.

5. Ocean shipping and air transportation.

6. Specialist export and import business.

7. International tourism.

Article 12

A company shall, subject to the provisions of the law, have the right to:

1. Select the branch, areas of activities and scale of its business.

2. Select the form and method of raising capital.

3. Select its customers, and enter into direct transactions and sign contracts with them.

4. Recruit and hire labour as required by its business.

5. Use foreign currency earned.

6. Make decisions on the use of remaining revenue.

7. Take initiatives in all its registered business activities.

Article 13

A company has obligations to:

1. Carry on business in accordance with the areas and occupations stated in its licence.

2. Give priority to the use of domestic labour, ensure the rights and interests of employees in accordance with the provisions of the labour laws and respect the rights of the trade organizations under the Law on Trade Unions.

3. Guarantee that the quality of goods conforms with that registered.

4. Observe all regulations of the State concerning protection of the environment, historical and cultural relics, and natural places of interest, law and order and social security.

5. Keep the books of account and cost accounting as required by the Ordinance on Accounting and Statistics and be subject to the examination of financial authorities.


6. Pay taxes and meet other obligations in accordance with the stipulations of the law.

7. Use five per cent of its net profits to set up a reserve fund provided that the obligation ceases when the level of the fund is ten per cent of the charter capital of the company.


CHAPTER II

The Establishment, Business Registration, Dissolution,
and Bankruptcy of a Company

Article 14

In order to establish a company, its founding members shall submit an application to the people's committee of the province or city under central authority or an equivalent administrative unit where its head office is to be based.

The following must be clearly stated in the application:

1. Names, ages, and permanent addresses of the founding members.

2. The name and address of the proposed head office of the company.

3. Objectives, branches, and areas of the business of the company.

4. Charter capital and method of contributing capital.

5. Measures to be taken for the protection of the environment.

6. Programme for developing the company.

The application must be accompanied by the initial business plan and draft charter of the company.

Article 15

Any individual who, or organization which, is entitled to participate in the establishment of a company shall satisfy the following requirements before a licence is granted:


1. Objectives, branches and areas of business must be well defined, details of the business office and its specific business plan must be provided;

2. Its charter capital must be sufficient for the scale, branches and areas of the business. The charter capital shall be no less than the legal capital stipulated by the Government;

3. The managers of all business operations shall have the qualifications required by law for their relevant branch and areas of business.

Article 16

Within sixty (60) days from the date on which it receives the application, the people's committee shall grant or refuse to grant a licence to establish the company. In the event that the application is refused it must clearly state the reasons for such refusal.

Where the applicants for the establishment of the company are dissatisfied with the refusal to grant a licence they may appeal directly to the Prime Minister of the Government.

Article 17

Each company shall register at the planning committee of a province or city under central authority. The application file for registration shall include: the licence to establish the company, the company charter and a certificate acknowledging the existence of its business office.

The business registration of a limited liability company shall be completed within one hundred and eighty (180) days from the date on which the licence is granted.

The business registration of a share?holding company shall be completed within one year from the date on which the licence is granted.

Where the time limits contained in paragraphs 2 and 3 of this article expire without the business registration having been completed, the company shall, if it wishes to proceed with establishment, cause its founding members to reapply for the establishment of the company. Where there is a reasonable excuse for the delay the people's committee which originally granted the licence may extend the time limit for registration by a period of not more than ninety (90) days.

Article 18


During the process of registration the name of the company shall be recorded in the business registration book and a certificate of business registration shall be issued. From that point of time, the company has the status of a legal entity and is authorized to proceed with business activities.

The planning committee shall, within seven days from the date on which the registration certificate is issued, send a copy of that certificate and the file of the company to the taxation, financial, and statistics bodies, and to the management bodies of economic and technical branches at their equivalent level.

Article 19

The company shall, within thirty (30) days from the date on which the business licence is granted, cause to be published in five consecutive issues of a local and a central newspaper the following principal items:

1. The full name, type, head office and objectives of the company and branches and areas of its business.

2. The full names and permanent addresses of the founding members.

3. Its charter capital.

4. The date of granting of the licence, the date of issue of the certificate of business registration certificate, and its number.

5. The date of commencement of the company's operations.

Article 20

In the event that the company finds that it is necessary to establish a branch or representative office outside the province or city under the central authority or an equivalent administrative unit where its head office is located, it shall:

1. Apply to the people's committee of the province or city under central authority in which its branch or representative office is to be located for a permit and register its business operations at the planning committee at the same level as provided for in articles 14, 17, and 18 of this Law.

2. Notify in writing within fifteen (15) days after the date on which its branch or representative office is registered for business operation the people's committee which granted the licence to establish the branch or representative office of the opening of its branch or representative office.

Article 21


Where the company wishes to change its objectives, branches, area of business, charter capital or any other items in its business registration file, it shall notify the planning committee which has issued the certificate of business registration and cause the changes to be published in newspapers as provided in article 19 of this Law.

Article 22

A company may be dissolved only in the following circumstances:

1. Its period of duration stated in the company charter has expired.

2. It has achieved its objectives.

3. Its objectives will no longer be achieved or achieved profitably.

4. It has lost three fourths of its charter capital or meets insurmountable difficulties.

5. A reasonably based request is made by a group of members which represents two thirds of the charter capital.

Any resolution of the company in relation to these circumstances shall require the consent of a group of members which represents at least three fourths of the charter capital.

Article 23

An application for dissolution of the company shall be submitted to the people's committee which granted the licence to establish the company and notice of it shall at the same time be published in five consecutive issues of a local and central newspaper. The application and the notice must clearly state the sequence and the procedures for liquidation of assets, the time limit for payment of debts and settlement of all contracts.

The people's committee may approve the application for dissolution only where no claim has been made after fifteen (15) days from the expiry of the time limit for payment of the debts and the settlement of all contracts.

The dissolution may only commence upon the grant of approval of the application for dissolution.

Article 24


A company which is in a state of bankruptcy is a company which encounters difficulties or incurs losses and, after applying all the necessary financial measures, remains unable to meet all its due debts.

The procedure for company bankruptcy shall be carried out in accordance with the provisions of the Law on Business Bankruptcy.


CHAPTER III

A Limited Liability Company

Article 25

A limited liability company is a company in which:

1. Capital is contributed in full by all members when the company is established. All such contributed capital is expressly stated in the company's charter. The company may not issue shares of any kind.

2. Transfers of part of contributed capital among the members may take place without restriction. Transfers of part of contributed capital to persons who are not members shall require unanimous approval from members who represent at least three quarters (3/4) of the charter capital of the company.

Article 26

The name of a limited liability company may be descriptive of its business activities or be constituted by the name(s) of one or more of its members.

The name of the company together with the words limited liability and its charter capital shall be stated on signs, vouchers, advertisements, reports, documents, and other transaction documents of the company.

Article 27

In the event that the number of members of the company does not exceed eleven (11), the establishment and organization of its operations shall take place as follows:


1. Following receipt of both the licence to establish the company and the contributions of each member of all of his or her capital, all the members shall meet to: consider, approve, and evaluate those parts of capital contribution made in kind, or in industrial property rights; adopt the company's charter; allocate among themselves the responsibilities for the management and control of the company; and appoint one of their number as director or to resolve to appoint another person to be director;

2. In the carrying on of the business all members may take part in making decisions on the following matters:

(a) The direction of and objectives for development of the company.

(b) The appointment or dismissal of the company's director.

(c) Amendment of the company's charter.

(d) Approval of annual financial accounting and sharing of profits among members.

(e) The use of reserve fund.

(f) Merger, change of company formation, dissolution or the extension of duration of the company's operation.

The formalities for making decisions on the matters referred to in this clause shall be clearly stipulated in the company's charter.

3. The director is vested with full power to supervise the business activities of a company and is entitled to act on its behalf in all matters.

The director is personally or jointly responsible with other managers to the members for his actions taken on the company's behalf.

The director shall be paid a salary as agreed by the members.

Article 28

Any company that has twelve (12) or more members shall convene a members meeting and elect a board of management and inspectors. The functions, duties and rights of the members general meeting, the board of management and the inspectors are as provided in articles 37, 38, 39, 40, 41, 42 and 43 of this Law.

Article 29

A company may increase its charter capital by calling for more capital to be contributed by the members, by admitting new members, or by drawing on the reserve fund in accordance with a decision of a members meeting.


CHAPTER IV

A Shareholding Company

Article 30

A shareholding company is a company in which:

1. The minimum number of members, called shareholders, which the company shall have for the duration of its operation is seven.

2. The company's charter capital is divided into equal parts called shares. The value of each share is called share value. Each shareholder can buy one or more shares.

3. Issued shares may be named shares or bearer shares. Shares of the founding members, and members of the board of management shall be named shares.

4. Bearer shares may be freely transferred. Except in the cases provided for in article 39 of this Law, named shares may only be transferred upon approval by the board of management.

Article 31

A shareholding company may adopt any name.

The name of the company together with the words a shareholding company, and its charter capital shall be stated on signs, vouchers, advertisements, reports, transaction documents, and other documents of the company.

Article 32

In addition to complying with the procedures for the setting up of the company and the business registration referred to in chapter II of this Law, a shareholding company shall also comply with the following incorporation procedure:

1. All of the founding members shall make application for a total of at least twenty (20) per cent of the number of shares planned to be issued by the company. Where the founding members do not make application to buy one hundred (100) per cent of the shares of the company, they may make a public call for capital from others.


2. In the event that the founding members make a public call for capital from others, they shall, following the grant of a licence to incorporate, submit a draft charter, a list of founding members and permanent addresses and occupations of these members to the planning committee which has issued the certificate of business registration.

3. In the event that there is a public call for capital from others, the company shall ensure that those persons interested in buying shares understand clearly and correctly the objectives and the projected development of the company.

4. An application to buy shares is confirmed by a document bearing the signatures of the buyer and at least one founding member.

The document must clearly state:

(a) The name of the company.

(b) The objectives of the company's operation.

(c) The intended head?office of the company.

(d) The total capital planned to be called for.

(e) The total number of shares planned to be issued.

(f) The place where the contributed capital is deposited.

(g) The date and place where the company charter will be registered.

(h) The full name, age, permanent address, and occupation of the person who applies to buy share(s) and the number of shares he or she applies to buy. The shares may be paid for in cash, kind or industrial property rights, which shall be paid or contributed in full in accordance with a resolution of the board of management.

5. The founding members shall deposit in a blocked account in a domestic bank all amounts paid by the persons who apply to buy shares together with a list of those persons. The amount deposited may only be withdrawn upon the company being issued with a certificate of business registration, or upon the expiry of one year after the date on which the licence for the company's incorporation is granted, without the company having been established.

6. The founding members shall convene a general meeting of shareholders to approve the company's charter and other necessary procedures, when:


(a) The number of issued shares has been sold.

(b) Those who have applied to buy shares have paid in cash at least half the price of the shares they have applied to buy and have committed themselves to pay the balance in cash.

(c) Payment by contribution of assets and rights of industrial property has been made.

Article 33

In the event that the company has not been established within one year from the date of grant of the licence to incorporate the company, then the persons who have applied to buy shares may request a refund of their contributed capital from the founding members who shall give the refund within thirty (30) days from the date of receipt of the request and bear all expenses relating to the preparations for establishing the company.

Article 34

A shareholding company may be permitted by the people's committee of the province, or city under central authority or an equivalent administrative unit where the company's head office is located, to issue shares or stocks.

Article 35

A company may issue new shares only if it satisfies the following conditions:

1. It has collected all the money from any previous issue of shares.

2. It can prove that all its business activities are under good and effective management.

3. It has the assistance of a bank to provide fund management and accountancy services relating to the issue of shares.

4. It has a specific plan and programme to make a public call for capital. The plan and programme must ensure that the public will understand clearly and correctly the business situation, the actual financial situation, and the prospects for development of the company in order that they have a basis on which to make a decision to apply for shares.


The licence for the issue of new shares must expressly state the total amount of capital to be called for, the number of shares to be issued, and the limits of the period during which applications may be made.

Article 36

A company may be granted a licence to issue shares only if it meets the following conditions:

1. It has a specific business plan which requires large capital.

2. It has operated for at least two years and proves that all of its business activities are under good and effective management.

3. The bank where it has opened its accounts certifies the amount of the company's cash deposits. A notary public office confirms that its assets in kind have a value equivalent to its intended borrowings. The intention to borrow may also be sponsored by one or more banks.

4. It has the assistance of a bank to provide fund services and accountancy services relating to the issue of shares.

The licence for the issue of shares shall provide in clear terms the amount which the company may borrow through the issue of shares, the rate of interest and the time period for the repayment.

There shall be clearly written on each share certificate its number, the value of the share, the total capital mobilized by the shares, the rate of interest and the time period for repayment.

Article 37

The shareholders general meeting has the supreme decision making power in relation to the company, as follows:

1. An inaugural shareholders' general meeting shall be convened to deal with the procedures for establishing the company and to discuss and adopt the charter of the company. The inaugural shareholders' meeting shall be attended by members representing at least three quarters (3/4) of the charter capital of the company and voting shall be on a simple majority basis.

2. A special shareholders' general meeting shall be convened to amend the company's charter.


3. An ordinary shareholders' general meeting shall be convened at the end of the financial year or at any other time the board of management or the inspectors regard as being necessary to deal, within the framework of the charter, with matters arising in relation to the company's business operations. Such meeting shall deal with the following principal matters:

(a) Decisions relating to the direction of, and objectives for, the development of the company and its annual business plan.

(b) Discussion and approval of the annual balance sheet.

(c) Election and dismissal of the members of the board of management and the inspectors.

(d) Decisions on the appropriation of the profits for the purposes of setting up funds of the company, and making distributions to shareholders; and on the sharing of responsibility for the business losses of the company.

(e) Consideration of and decisions on the measures to be taken to deal with significant changes to the financial position of the company.

(f) Consideration of wrong doing by the board of management, which has caused damage to the company.

The company's charter shall clearly provide: the formalities for the convening of the shareholders meetings; the charter capital which the shareholders or their authorized persons attending must represent in order for the meeting of shareholders to be validly constituted; and the formalities for decision making at the shareholders meeting.

Article 38

A board of management having three to twelve members is the company's management body.

The board of management shall have full power to act on behalf of a company in making decisions on all matters relating to its objectives and interests, except for those matters solely within authority of the shareholders meeting.

The board of management shall elect a chairman from one of its members. The chairman of the board of the management may also be the director (the general director) of the company, provided that there is no provision to the contrary in the charter.

Article 39

The board of management shall be responsible to the shareholders meeting for damage to the company caused by any shortcomings in the management of the company including breaches of the charter or of the law.

The members of the board of management shall be paid salary and any allowances in accordance with the decision of the shareholders meeting.

The charter of the company may stipulate a minimum number of shares which must be held by each member of the board. These shall be named shares and shall not be transferred by the shareholders until the expiration of two years after they have ceased being the members of the board.

Article 40

Where the chairman of the board is not also the director (the general director) of the company, the board shall appoint one of its members or engage another person to be the director (the general director).

The director (the general director) shall supervise the daily business activities of the company and be responsible to the board of management for the implementation of all duties and powers assigned to him.

Article 41

The company shall have two inspectors one of whom is familiar with accountancy elected by the shareholders meeting. The inspectors have the following powers and duties:

1. To inspect the company's books of account, assets, and annual report as at the end of its financial year and convene a shareholders meeting if necessary.

2. To submit to the shareholders meeting an investigation report on the balance sheet of the company as at the end of its financial year.

3. To report on emergency financial events, and on goods points and shortcomings in the financial management of the board of management.

Article 42

The inspectors shall be paid an allowance decided by the shareholders meeting and are responsible to the shareholders meeting for their wrongdoings committed in carrying out their work and which cause damage to the company.

Article 43

An inspector shall not be: a member of the board of management; the director (the general director) of the company; the spouse of a member of the board of management; or the spouse of the director (the general director) of the company.


CHAPTER V

Dealing with Breaches

Article 44

Any person who: establishes a company without a business licence; carries on business without registration; carries on business outside the area of business or occupation registered by him in the licence; provides false information in relation to his capital contribution when the company is established; provides false information in relation to the number of share buyers; deceives others into selling their shares; issues shares and stocks without permission; or breaches other provisions of this Law shall, depending on the degree of seriousness of the breach, be liable to administrative penalty or subject to criminal prosecution in accordance with the provisions of the law.

Article 45

Any person who takes advantage of his position and authority to issue a licence for the establishment of a company to persons or organizations which may not establish a company; who fails to issue a licence or business registration certificate to persons or organizations which are fully qualified for the establishment of the company or for business registration; who provides false certification concerning capital deposited in a bank or a wrong estimation of the value of assets in kind; or who breaches other provisions of this Law shall, depending on the seriousness of the breach, be subject to administrative penalty or to criminal prosecution in accordance with the provisions of law.


CHAPTER VI

Final Provisions

Article 46

This Law shall be of full force and effect as of 15 April 1991. All previous provisions which are inconsistent with this Law are hereby repealed.


The companies which have been granted licences by authorized bodies for establishment before 15 April 1991 shall, within one hundred and eighty (180) days from that date, complete the procedures for establishment again and reapply for business registration pursuant to this Law.

This Law was adopted by Legislature VIII of the National Assembly of the Socialist Republic of Vietnam at its 8th Session, on 21 December 1990.


President of the National Assembly


LE QUANG DAO


This Law was amended by Legislature IX of the National Assembly of the Socialist Republic of Vietnam at its 5th Session.