New highlights of the law on enterprise 2020 – Part 1

PART 1: CHANGES IN GENERAL PROVISIONS

Law on Enterprise 2020, which officially takes effect from January 1, 2021, has been promptly amended and supplemented with new terms and regulations to make it more suitable for the current and actual practice, stimultaneously, remove  shortcomings and inadequacies in the previous law, creating a favorable and flexible investment and business environment in accordance with the global trend.

In order to support businesses to update information in a timely and accurate manner in accordance with new regulations of the law, PL and Partners will provide information about changes in Law on Enterprise 2020.

PL and Partners would like to provides readers with new points in the general provisions of the Law on Enterprise 2020 through the following article.

1. SUPPLEMENTATIONS AND AMENDMENTS OF SOME DEFINITIONS

1.1. Supplementing the definition of “relatives”

Clause 4, Article 22 of the Law on Enterprise 2020 adds the definition of “relatives“.

Accordingly, a person such as wife, husband, parents, brothers, and sisters… will be collectively called as relatives.

This is a completely new definition compared to the Law on Enterprise 2014. This change helps to streamline words, sentences in legal points.

For example:

Previously, the Law on Enterprise 2014 did not stipulate a definition of relatives. Therefore, for regulations which are regarding relatives must be listed in a wordy way:

“the spouse, biological father, adoptive father, biological mother, adoptive mother, biological children, adopted children, biological brother, biological sister, biological younger brother;…”

Currently, the Law on Enterprise 2020 allows us to briefly write “relatives“.

1.2. Supplementing the definition of “related person”

The Law on Enterprise 2020 adds the Controller and all Legal Representatives to the list of related person.

1.3. Redefining the concept of state-owned enterprises

Law on Enterprise 2014 Law on Enterprise 2020
Clause 8, Article 4 stipulated that State-owned enterprises are enterprises in which the State holds 100% of charter capital. Adding more: An enterprise more than 50% charter capital or voting shares of which is held by the State.

In fact, the definition of State-owned enterprises has been expanded more than before and can be managed in the form of a limited liability company or a joint stock company.

2. ADJUSTMENT ON THE RIGHTS AND OBLIGATIONS OF SOCIAL ENTERPRISES

Law on Enterprise 2014 Law on Enterprise 2020

The rate of profit that must be retained annually for re-investment of social enterprises was 51% of total profit.

=> Without specifying whether it is prior or subsequent to tax.

The rate of profit that must be retained annually for re-investment of social enterprises 51% of the annual post-tax profit.

 

3. REMOVAL REGULATIONS ON REPORTING OF INFORMATION CHANGES OF EXECUTIVE OF AN ENTERPRISE

Law on Enterprise 2014 Law on Enterprise 2020
An enterprise must report to the Business Registration Authority on information of its executive. This provision is abolished.

4. AMENDMENTS ON LEGAL REPRESENTATIVE

The Law on Enterprise 2020 has made some adjustments to cases in which of appointing a legal representative.

First, changing the phrase “being sentenced to prison” to “serving an imprisonment sentence“.

The reason is that a person sentenced to prison can be suspended sentence and they do not have to serve an imprisonment sentence.

In addition, the Law on Enterprise 2020 also supplements a number of cases:

  • Facing criminal prosecution;
  • Serving an administrative penalty in a correctional institution or rehabilitation center;
  • Having difficulty in controlling his/her own behaviors;
  • Being banned by the Court from holding certain positions, practicing certain professions or doing certain jobs.

PL and Partners Law Firm has introduced to you some new points in the General provisions of the Law on Enterprise 2020.

We do hope that the above information will help you have a better understanding of this law.

See more: New highlights of the law on enterprise 2020 – Part 2

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