New highlights of the law on enterprise 2020 – Part 3

PART 3: AMENDMENTS REGARDING LIMITED LIABILITY COMPANY AND JOINT STOCK COMPANY

The Law on Enterprise 2020 officially takes effect from January 1, 2021, along with changes and adjustments to provisions that still had many shortcomings in the previous law, thereby creating a flexible business environment, which is more suitable for the developing economy as today.

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

Continuing the contents sent to our readers before in part 1 and part 2 related to changes in General Provisions and the establishment, suspension, and dissolution of enterprises, in this part, PL and Partners are going to continue figuring out changes related to limited liability companies and joint stock companies.

First, for LIMITED LIABILITY COMPANY, there are two prominent amendments as follows:

1. LIMITED LIABILITY COMPANIES ARE ALLOWED TO ISSUE BONDS

Clause 04 Article 74 of the Law on Enterprise 2020 supplements provision that allows single-member limited liability companies to mobilize capital by issuing bonds.

Similarly, Clause 04 Article 46 also allows multi-member limited liability companies to issue bonds.

This amendment makes it easier for enterprises to mobilize capital.

2. INSPECTION COMMITTEE IS NOT REQUIRE

Law on Enterprise 2014

Law on Enterprise 2020

Article 55 stipulated that a multi-member limited liability company having more than 11 members must establish an Inspection Committee.

 

Only two cases in which it is necessary to establish an Inspection Committee:

– Multi-member limited liability company cum state-owned enterprise.

– Subsidiaries of a state-owned enterprise.

Other cases are decided by the company itself.

For joint stock companies, there are many new points related to shareholders, shares, general meeting of shareholders (GMS), etc, specifically:

1. AMENDMENTS ON RIGHTS AND OBLIGATIONS OF ORDINARY SHAREHOLDERS

In order for a shareholder or a group of shareholders to have certain rights such as Access to or extract the meeting minutes, resolutions and decisions of the Board of Directors, financial statements, reports of the Inspection Committee, contracts and transactions subject to approval by the Board of Directors, convene the GMS, etc.

Law on Enterprise 2014

Law on Enterprise 2020

Clause 2 Article 114 stipulated that: To have the above benefits, a shareholder or a group of shareholders must meet 02 conditions: (i) holding at least 10% of the total ordinary shares (ii) for at least 6 consecutive months.

Clause 2 Article 115 amends the (i) condition: holding at least 5% of the total ordinary shares.

 

2. AMENDMENTS ON CONDITIONS FOR HOLDING THE GENERAL MEETING OF SHAREHOLDERS

Law on Enterprise 2014

Law on Enterprise 2020

Clause 1 Article 141 of the Law on Enterprise 2014 stipulated that the GMS shall be held when it is attended by a group of shareholders that represent at least 51% of votes.

Clause 1 Article 145, the GMS is held when it is attended by a group of shareholders that represent more than 50% of the total votes.

 

3. THE MINUTES OF GMS ARE STILL EFFECTIVE WITHOUT THE SIGNATURES OF THE CHAIR AND SECRETARY

Law on Enterprise 2014

Law on Enterprise 2020

Point i Clause 1 Article 154 of the Law on Enterprise 2014 stipulated: The minutes of the GMS must be signed by the chair and secretary.

Point i Clause 1 Article 150 stipulates: In case the chair and the secretary refuse to sign the minutes, they will be effective if they are signed by the other members of the Board of Directors and contain all necessary information.

4. RIGHTS TO FILE A LAWSUIT OF A SHAREHOLDER AND A GROUP OF SHAREHOLDERS

Law on Enterprise 2014

Law on Enterprise 2020

Clause 1 Article 161 of the Law on Enterprise 2014 stipulates that a shareholder or a group of shareholders holding at least 1% of the total ordinary shares for 06 consecutive months has the right to file a lawsuit.

Clause 1 Article 166 stipulates that a shareholder or a group of shareholders that holds at least 1% of the total ordinary shares has the right to file a lawsuit (abolish the conditions on 06 consecutive months).

5. THE TERM OF OFFICE OF INDEPENDENT DIRECTORS SHALL NOT EXCEED 02 TERMS

Law on Enterprise 2014

Law on Enterprise 2020

Not setting the term limit for independent directors.

Clause 2 Article 154 stipulates that Independent directors may only be elected for up to 02 consecutive terms.

6. SUPER-VOTING SHARES CAN BE TRANSFERRED

Law on Enterprise 2014

Law on Enterprise 2020

Super-voting shares cannot be transferred.

 

Clause 3 Article 116 stipulates that super-voting shares can be transferred if it is demanded by an enforceable court judgment or decision or transferred in accordance with inheritance laws.

7. SHAREHOLDERS CAN AUTHORIZE OTHER PEOPLE TO ATTEND THE GENERAL MEETING OF SHAREHOLDERS

Law on Enterprise 2014 Law on Enterprise 2020
Clause 1 Article 140 stipulated that shareholders can directly attend the meeting or make a written authorization to another person to attend the meeting. Allows authorization to one or some other organizations and individuals to participate in the GMS.

 

8. SOLE PROPRIETORSHIP HAS THE RIGHT TO BE CONVERTED INTO A JOINT STOCK COMPANY

Law on Enterprise 2014

Law on Enterprise 2020

Sole Proprietorship was only directly converted into Limited Liability Companies.

Clause 1 Article 205 of the Law on Enterprise 2020 allows Sole Proprietorship to be directly converted into a Limited Liability Company, Joint Stock Company, or Partnership.

PL and Partners Law Firm has introduced you to some new points regarding LIMITED LIABILITY COMPANY AND JOINT STOCK COMPANY under 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 1

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