May a Private Enterprise Owner Contribute Capital to Establish a Joint Stock Company?

What is a private enterprise?

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

“Article 188. Private enterprises
1. A private enterprise is an enterprise owned by one individual who is liable for all activities of the enterprise with all of his or her assets.
2. A private enterprise may not issue any type of securities.
3. Each individual may establish only one private enterprise. The owner of a private enterprise may not concurrently be the owner of a household business or a general partner of a partnership.
4. A private enterprise is not entitled to contribute capital to establish, or purchase shares or capital contributions in, a partnership, limited liability company or joint stock company.”

Accordingly, a private enterprise is an enterprise owned by one individual who is liable for all activities of the enterprise with all of his or her assets.

How is the investment capital of the private enterprise owner regulated?

Article 189 of the Law on Enterprises 2020 provides for capital of the private enterprise owner as follows:

“Article 189. Investment capital of the private enterprise owner
1. The investment capital of a private enterprise owner shall be registered by the owner. The private enterprise owner is obliged to accurately register the total investment capital, specifying the capital in Vietnamese dong, freely convertible foreign currency, gold and other assets; for capital in other assets, the type, quantity and remaining value of each type of asset must also be specified.
2. All capital and assets, including borrowed capital and leased assets used in the enterprise’s business activities, must be fully recorded in accounting books and financial statements of the enterprise in accordance with law.
3. During operations, the private enterprise owner has the right to increase or decrease his or her investment capital in the enterprise’s business activities. The increase or decrease of the owner’s investment capital must be fully recorded in accounting books. Where the investment capital is reduced below the registered investment capital, the private enterprise owner may only reduce the capital after registering with the business registration authority.”
Accordingly, the investment capital of a private enterprise owner is registered by the owner. The owner is obliged to accurately register the total investment capital, specifying the capital in Vietnamese dong, freely convertible foreign currency, gold and other assets; for capital in other assets, the type, quantity and remaining value of each type of asset must also be specified.

May a private enterprise owner contribute capital to establish a joint stock company?
Pursuant to Clause 4 Article 188 of the Law on Enterprises 2020:

“Article 188. Private enterprises
1. A private enterprise is an enterprise owned by one individual who is liable for all activities of the enterprise with all of his or her assets.
2. A private enterprise may not issue any type of securities.
3. Each individual may establish only one private enterprise. The owner of a private enterprise may not concurrently be the owner of a household business or a general partner of a partnership.
4. A private enterprise is not entitled to contribute capital to establish, or purchase shares or capital contributions in, a partnership, limited liability company or joint stock company.”
Accordingly, a private enterprise is not entitled to contribute capital to establish, or purchase shares or capital contributions in, a partnership, limited liability company or joint stock company. Thus, the law restricts these rights only for the private enterprise and does not provide a restriction applicable to the owner of the private enterprise. Therefore, a private enterprise owner may contribute capital, establish, or purchase shares or capital contributions in a limited liability company or joint stock company.

How is management of a private enterprise carried out?
Article 190 of the Law on Enterprises 2020 provides for management of private enterprises as follows:

“Article 190. Management of private enterprises
1. The private enterprise owner has full authority to decide all business activities of the private enterprise and the use of profits after tax payment and fulfillment of other financial obligations in accordance with law.
2. The private enterprise owner may directly act as, or hire another person to act as, Director or General Director to manage and operate the 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 requester for settlement of civil matters, plaintiff, defendant, person with related rights and obligations before arbitration or court, and representing the private enterprise in exercising other rights and obligations in accordance with law.”
Accordingly, the private enterprise owner has full authority to decide all business activities of the private enterprise and the use of profits after tax payment and fulfillment of other financial obligations in accordance with law.