Management of Private Enterprises under Vietnamese Law

How is the management of a private enterprise regulated? What is the owner’s responsibility in leasing or selling a private enterprise?

1. What are the regulations on private enterprises?

Article 188 of the Law on Enterprises 2020 provides as follows:

“Article 188. Private enterprises

1. A private enterprise is an enterprise owned by one individual who is liable with all of his/her assets for all activities of the enterprise.

2. A private enterprise may not issue any type of securities.

3. Each individual is entitled to establish only one private enterprise. The private enterprise owner may not concurrently be a household business owner or a general partner of a partnership.

4. A private enterprise is not entitled to contribute capital to establish or buy shares or contributed capital in a partnership, limited liability company or joint-stock company.”

At the same time, capital investment by the private enterprise owner is provided in Article 189 of the Law on Enterprises 2020, specifically:

“Article 189. Investment capital of the private enterprise owner

1. The investment capital of the private enterprise owner is self-registered by the enterprise owner. The private enterprise owner is obliged to accurately register the total investment capital, specifying the amount in Vietnamese Dong, freely convertible foreign currencies, gold and other assets; for capital in other assets, the type of asset, quantity and residual value of each type of asset must also be stated.

2. All capital and assets, including loans and leased assets used in the enterprise’s business operations, must be fully recorded in the enterprise’s accounting books and financial statements as prescribed by law.

3. During operation, the private enterprise owner has the right to increase or decrease his/her investment capital in the enterprise’s business operations. The increase or decrease of the private enterprise owner’s investment capital must be fully recorded in the accounting books. Where the investment capital is reduced below the registered investment capital, the private enterprise owner may only reduce capital after registering with the Business Registration Authority.”

Accordingly, the private enterprise owner is an individual, and each individual may only own one private enterprise. The enterprise owner self-registers and is liable with all of his/her assets for all activities of the enterprise.

2. How is the management of a private enterprise regulated?

Article 190 of the Law on Enterprises 2020 provides on the management of private enterprises as follows:

“Article 190. Management of private enterprises

1. The private enterprise owner has full decision-making power over all business activities of the private enterprise and the use of after-tax profits and after performing other financial obligations as prescribed by law.

2. The private enterprise owner may directly or hire another person as Director or General Director to manage and operate business activities; in this case, the private enterprise owner remains liable for all business activities of the private enterprise.

3. The private enterprise owner is the legal representative, representing the private enterprise as the petitioner for civil matters, plaintiff, defendant, person with related rights and obligations before Arbitration and Courts, and representing the private enterprise in exercising other rights and obligations as prescribed by law.”

Under the above provisions, the enterprise owner is the legal representative of the company, with full decision-making power over the company’s activities. He/she may directly or hire another person as Director or General Director to manage and operate the company’s business activities.

3. Is it permitted to lease or sell a private enterprise?

The private enterprise owner has the right to lease or sell his/her enterprise under Article 191 of the Law on Enterprises 2020 and Article 192 of the Law on Enterprises 2020, specifically:

“Article 191. Leasing a private enterprise

The private enterprise owner has the right to lease his/her entire private enterprise but must notify in writing, enclosed with a notarized copy of the lease contract, to the Business Registration Authority and the tax authority within 03 working days from the date the lease contract takes effect. During the lease term, the private enterprise owner remains legally liable as the owner of the private enterprise. The rights, obligations and responsibilities of the owner and the lessee regarding the business activities of the private enterprise are provided in the lease contract.

Article 192. Selling a private enterprise

1. The private enterprise owner has the right to sell his/her private enterprise to other individuals or organizations.

2. After selling the private enterprise, the private enterprise owner remains liable for debts and other asset obligations of the private enterprise arising before the date of enterprise handover, unless the private enterprise owner, the buyer and creditors of the private enterprise agree otherwise.

3. The private enterprise owner and the buyer of the private enterprise must comply with labor law provisions.

4. The buyer of the private enterprise must register the change of the private enterprise owner as prescribed by this Law.”

Under the above provisions, the enterprise owner has the right to lease or sell his/her enterprise to other individuals or organizations.

– For leasing, written notification enclosed with a notarized copy of the lease contract must be sent to the Business Registration Authority and the tax authority within 03 working days from the date the lease contract takes effect.

– For selling, the private enterprise owner remains liable for debts and other asset obligations of the private enterprise arising before the date of enterprise handover.

– Where you lease and the lessee wants you to bear part of the responsibility for the company’s operations, the Law has no specific provision on this matter. However, the law provides that “During the lease term, the private enterprise owner remains legally liable as the owner of the private enterprise. The rights, obligations and responsibilities of the owner and the lessee regarding the business activities of the private enterprise are provided in the lease contract” under Article 191 of the Law on Enterprises 2020.