Enterprise Law 2005 Amendments Under Discussion

May 30, 2014 Posted by Vietnam Briefing Reading Time: 3 minutes

HANOI – Amendments to the Enterprise Law 2005 are projected to be passed at the 13^th National Assembly this October. These draft amendments have received significant attention and opinions from related departments, economic experts and enterprises.

Law on Prohibited and Conditional Business Sectors

According to Mr. Nguyen Dinh Cung, acting director of the Central Institute for Economic Management (CIEM), there are currently 52 prohibited business sectors written into the laws on Investment, Enterprise and Trade. Additionally, there are 335 conditional business sectors specified in 255 legal documents issued by ministries, municipalities and provinces. In fact, there could be other prohibited business sectors speculated in other legal documents but not yet listed in the report. An exact number will be declared when the drafting amendments group finishes its assessment test.

The draft amendments to the Enterprise Law 2005 prohibit business activities that do harm to national defense, security, social order and safety, historical and cultural traditions of Vietnam, people’s health, natural resources and the environment. Mr. Nguyen Sinh Hung, Chairman of the National Assembly, is deeply concerned about a lack of clarity in the law as it will affect almost all business sectors.

In response to this concern, Mr. Dang Huy Dong, Deputy Minister of the Ministry of Investment and Planning, said that all prohibited business sectors will be specifically included in one law to ensure firms’ full awareness of the whole list.

Law on business registration

According to the draft amendments, all citizens are free to conduct any business lines that are not banned by the law. Enterprises do not need to include their business lines in the business registration certificate, which helps to simplify bureaucratic procedures and reduce a large amount of work for the business registration office in local departments.

Mr. Cung also commented that not specifying business scope helps enterprises to reduce commercial and legal risks. Previously, enterprises were fined for conducting unspecified business lines in the business registration certificate. All related signed transactions would be declared invalid, which caused a huge loss to enterprises.

This new amendment is strongly supported by many foreign-owned enterprises as they argue that the removal of business line registration will improve their operation and bring in more business opportunities.

A representative of Honda Vietnam said that engineers in its Vietnam factory can produce highly accurate processing machine operators now. Thus, Honda Vietnam receives several purchasing requests from Honda’s many branches in different countries but it cannot process them because its business scope does not include this business activity. In order to export these operators, according to the 2005 law, Honda Vietnam would have to register for another business line and summon an Advisory Board meeting, which is a very time-consuming process. As a result, the amendment is projected to create a more favorable business environment for enterprises in the near future.

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