What is a family company? Is the family company model allowed to operate as a business household?

1. What is a family company?

Business law does not define the family business model. But to put it simply, family companies (Family Business) are companies established and operating under corporate law, company members are people who belong to the same family and hold most of the total charter capital or shares, assets and the right to manage and operate the company.

2. Can a family company operate as a business household?

According to the provisions of Article 79 of the Law on Enterprises 2020, business households can be understood to include the following contents:

– A business household is registered to be established by an individual or household members and is responsible for all of their assets for the household’s business activities. In case household members register a business household, one member shall be authorized to act as the business representative. The individual who registers the business household, the person authorized by the household members to act as the business household representative, is the business household owner.

– Households engaged in agricultural, forestry, fishery, salt making and street vendors, snacks, traders, mobile businesses, seasonal businesses, and low-income service providers do not have to register as business households, except in the case of doing business in conditional business investment sectors. The People’s Committees of provinces and centrally run cities regulate low income levels applicable locally.

Note, household business is not a type of enterprise.

3. What are the rights and obligations to register and establish a business household?

(i) Individuals and household members who are Vietnamese citizens with full civil act capacity according to the provisions of the 2015 Civil Code have the right to establish a business household according to the provisions of this Chapter, except for the following cases:

– Minors and people with limited civil capacity; people who have lost their civil act capacity; People who have difficulty in cognition and behavior control. – People who are being prosecuted for criminal liability, detained, are serving prison sentences, are serving administrative measures at compulsory detoxification facilities, compulsory education establishments or are banned by the Court from holding certain positions, practicing professions or doing certain jobs.

– Other cases as prescribed by relevant laws.

(ii) Individuals and household members specified in clause (i) above are only allowed to register one business household nationwide and are entitled to contribute capital, buy shares, and purchase capital contributions in the enterprise as individuals.

(iii) An individual or household member registering a business cannot simultaneously be the owner of a private enterprise or a general partner of a partnership unless otherwise agreed by the remaining partners.

(Article 80 of Law on Enterprises 2020)