Following the issuance of the new Law on Enterprise 2020 by the Government, which took effective on 1 January 2021, the Ministry of Planning and Investment released Decree 1/2021/ND-CP covering enterprises registration on 4 January 2021 (“Decree 1”). The Decree came into effect on the same date of release.
Through the newly issued Decree 1, the Ministry follows the Government’s recent approach in further reducing “unnecessary” licensing procedures, as well as providing further guidance on elements previously in Decrees 78/2015/ND-CP and 108/2018/ND-CP that required further clarification (these Decrees are replaced by Decree 1). In addition, Decree 1 also includes the legalization of procedures that have been applied in practice by some licensing agencies in recent years.
Decree 1 does introduce regulations that differ compared to the previous Decrees. This article covers some of the changes in licensing processes for company establishment in Vietnam and the amendment of company information from the Decree.
Company establishment process
- The Decree removes the licensing procedure requiring the announcement of the company’s stamp after establishment. Companies now will take responsibility to engrave and manage the stamp under their internal policy and in accordance with the companies charter. This provision also applies where there is a change/update on the company’s stamp specimen or for a number of stamps.
- A company establishment application no longer requires an enterprise to affix a stamp on the following documents: request for company establishment registration, and resolution/decision/meeting minutes. For other documents, enterprises need to affix their stamp following other stamping rules in other legal documents
- Decree 1 affirms the business registration number of a company is also the company’s tax code, and furthermore, be the company’s number for units participating in the social insurance system
- The Decree sets out the language for licensing applications which was not regulated clearly in previous Decrees. In particular, the application language is Vietnamese. Where the application is prepared in Vietnamese and foreign languages, the Vietnamese version will be used in the company registration process
*note that where the legal documents of the investor is presented in a foreign language, the documents need to be legalized and enclosed with a notarized Vietnamese translation when submitting to the licensing authority
- When establishing a company through conversion of an existing enterprise, if the company wishes to change the legal representative simultaneously, the licensing process will not require the signature of this new legal representative. Alternatively, the person who has right to sign company establishment application should be one of the following: Company chairperson or Chairperson of the Members’ Council (for single-member LLC); Chairperson of the Members’ Council (for multi-member LLC); Chairperson of the Board of Management (for JSC). This results in the authority permitting the registration of a conversion of enterprise type and the change of the legal representative to be processed at the same time.
- Decree 1 supplements the conditions for updating registration information for credit institutions, branches of foreign banks, representative offices of foreign credit institutions, and representative offices of other foreign organizations engaging in banking activities. Accordingly, the Decree requires that any changes to registration information for the abovementioned entities has to first be approved by the State Bank of Vietnam in advance and such approval has to be enclosed in the application on changes submitted to the licensing authority
- Decree 1 has a new provision that the company’s owner or the company can request for the suspension on the enterprise registration process if it has not yet been approved on the National Enterprise Registration Portal. The company or the owner can submit a request letter to the enterprise registration division that received the application for this process. The division will then approve the request within 3 working days from receiving of the request letter
Amendments to enterprise registration information
- The process to change a company’s manager has been removed. Accordingly, changes of the (General) Director, any members of the Board of Management (for JSC), or any other managers of the company who holds neither the legal representative position nor the investor’s authorized representative position will not be required to be notified to the licensing authority. The Government empowers the management authority to the company
- As for any amendments of the company that has yet to register a contact phone number on the Enterprise Registration Certificate, Decree 1 requires the inclusion of this information, otherwise the application of any other amendments of the company will be deemed invalid. This provision was brought by the Government from the Circular 20/2015/TT-BKHDT of the Ministry of Planning and Investment issued previously
- There will be no statutory fees applied where the change of the company’s address resulting from the change of administrative locations from the Government
Seven types of legal status of companies
Additionally, Decree 1 has introduced definitions of the legal status of companies posted on the National Enterprise Registration Portal, including:
- Temporary suspension of business;
- No longer doing business at the registered address;
- The Enterprise Registration Certificate has been revoked due to tax administration enforcement;
- Undergoing dissolution process, separated, consolidated or merged;
- Undergoing bankruptcy process;
- Dissolved or bankrupt; and
Online registration using business registration account
As previously provided by Decree 78/2015/ND-CP and Decree 108/2018/ND-CP, the enterprise was required to lodge hard-copy application with the authority. A significant change in Decree 1 is that it does not require the enterprise to submit the physical application to collect the documents issued by the authority where the enterprise uses the business registration account for submission.
In conclusion, other than they key changes as discussed above, Decree 1 generally follows similar contents of previous Decrees in relation to licensing processes. However, there are still some contents which remain vague as in the previous Decrees, and these have yet to be detailed/advised in this new Decree, such as the definition of “legal documents of the foreign investor”. This still results in risks that licensing authorities may ask the investor to provide further documents that were not prepared or otherwise believed necessary for a process.
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