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 developed economy as today.

In order to support businesses to update information in a timely and accurate manner in accordance with new regulations of law, 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 business, 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 be entitled 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 businesses to capital mobilization.

2. BOARD OF CONTROLLERS IS NOT REQUIRE

Law on Enterprise 2014

Law on Enterprise 2020

Article 55 stipulated that a multi-member limited liability company with more than 11 members must establish a Board of Controllers.

 

Only two cases in which it is necessary to establish a Board of Controllers:

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

– Subsidiaries of 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),..specifically:

1. AMENDMENTS ON RIGHTS AND OBLIGATIONS OF ORDINARY SHAREHOLDERS

In order for a shareholder or a group of shareholders to have a number of rights, likely: Access, extract the minutes of meetings, resolutions and decisions of the Board of Directors, financial statements, reports of the Board of Controllers, contracts and transactions subject to approval by the Board of Directors, demand that a GMS be convened…

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 of holding at least more than 10% of the total ordinary shares for at least 6 consecutive months.

Clause 2 Article 115 has amended to one condition of holding at least 5% of the total ordinary shares.

 

2. AMENDMENTS ON CONDITIONS FOR CONDUCTING 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 general meeting of shareholders shall be conducted when it is participated by a number of shareholders that represent at least 51% of the total votes.

Clause 1 Article 145, the general meeting of shareholders is conducted when it is participated by a number 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, it 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 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 stipulated 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 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 lawsuit (abolishment of 06 consecutive months).

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

Law on Enterprise 2014

Law on Enterprise 2020

Not setting the term limit for independent members being in the board of directors.

Clause 2 Article 154 stipulates Independent members may only be elected for up to 02 continuous 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 super-voting shares can be transferred if they are demanded by an effective court judgment or decision or transferred in accordance with inheritance laws.

7. SHAREHOLDERS CAN AUTHORIZE MANY 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. Allowing the authorization to one or some other organizations and individuals to participate in the GMS.

 

8. SOLE PROPRIETORSHIP HAS THE RIGHT TO BE CONVERTED INTO 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 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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