On April 1st 2021, the Government promulgated ‘Decree No. 47/2021/ND-CP’ detailing a number of regulations of the ‘Law on Enterprises’ which replaced ‘Decree No. 81/2015/ND-CP’, ‘Decree No. 93/2015/ND-CP’, ‘Decree No. 96/2015/ND-CP’, ‘Decision No. 35/2013/QD-TTg’.
This newsletter shall explain a number of provisions pertaining to enterprises.
Regarding social enterprises, Decree No. 47/2021/ND-CP supplements and regulates more clearly that social enterprises must maintain social and environmental objectives, retain earnings for reinvestment and other stipulations recorded on the ‘Commitment on implementing social and environmental objectives during the operation term’. Except for cases of termination of social and environmental objectives before committed duration, social enterprises have to return all incentives, aids, and sponsorships that such enterprises enjoyed to implement their registered social and environmental objectives. If they do not implement or incompletely implement their ‘Commitment on implementing social and environmental objectives’ and retain earnings for reinvestment.
Accordingly, Decree No. 47/2021/ND-CP has regulated on taking responsibility for not implementing or incompletely implementing the contents mentioned above. Precisely, the owner of a private company, partnership members of partnership company, members of limited liability company and related subjects being shareholders of joint stock company, members of Board of Directors, Director, and General Director in the corresponding term or period take joint responsibility for the arising damages in case the social enterprises violate such regulations.
Conversion of social protection establishments, social funds and charitable funds into social enterprises:
Decree No. 47/2021/ND-CP regulates that a social protection establishment, social fund or charitable fund may use all of its property, rights and obligations for conversion into a social enterprise, after obtaining the written approval from the authority that issued the license for establishment. After successfully converting, the social enterprise shall inherit all lawful rights, interests, debts including tax debts, employment contracts and other obligations of the social protection establishment, social fund or charitable fund. Such social protection establishment, social fund or charitable fund shall terminate operation from the date on which the Enterprise Registration Certification was granted.
For termination of social and environmental objectives before the committed duration and the dissolution of social enterprises, the remaining assets or finances received by the social enterprise shall be returned to the providers, or transferred to other social enterprises or organizations with similar social objectives or transferred to the State as prescribed by the Civil Code.
Regarding the disclosure of information of state-owned enterprises, ‘Decree No. 47/2021/ND-CP’ regulates on means of information disclosure, including: (i) The enterprise’s website, (ii) The state ownership representative body’s website, and (iii) Business information Portal.
In case the information disclosure date is a public holiday prescribed by law, the enterprise shall disclose information on the day succeeding such public holiday.
Previously, it was only obliged for State-owned enterprises whose 100% charter capital is held by the State to disclose periodic information. However, the new Decree has supplemented new subjects under which State-owned enterprises whose 50% of charter capital or voting shares are held by the State have to disclose periodic information as follows:
- Basic information about the enterprise and its charter.
- Report on implementation of the annual business plan according to Form No. 3 in Appendix II. This information shall be disclosed before June 30th of the year preceding the succeeding year.
- 6-month report on administration and organizational structure of the enterprise according to Form No. 5 in Appendix II. This information shall be disclosed before July 31st every year.
- Annual report on administration and organizational structure of the enterprise according to Form No. 6 in Appendix II. This information shall be disclosed before June 30th of the execution year.
- The annual financial statements and summaries thereof audited by an independent audit organization, including the financial statement of the parent company and the consolidated financial statement (if any) as prescribed by regulations of law on corporate accounting. This information shall be disclosed within 150 days from the end of the fiscal year.
Cross-ownership between companies in a group of companies:
Decree No. 47/2021/ND-CP regulates on the capital contribution as follows:
Capital contribution, purchase of shares of other enterprise or establishment of an enterprise prescribed in Clause 3, Article 195 of the Law on Enterprise (which is a State-owned enterprise whose 65% of charter capital or voting shares or more is held by the State) includes:
- Joint contribution of capital to establish a new enterprise.
- Joint purchase of stakes/shares of existing enterprises.
(iii)Joint acquisition of stakes/shares from members, or shareholders of existing enterprises.
It can be seen that Decree 47 has concretized a number of issues which were not recorded during the effective time of the old law. This shall facilitate enterprises in their operational and management activities. Since these are subjects with special operation objectives as well as capital, the State’s management is genuinely close. Hence, understanding and complying with the provisions of law will prevent enterprises from running into risks and obstacles like inspection of competent authorities etc.
Writing time: June 21, 2021
This article is based on the current laws at the above recorded time and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases which the readers want to apply. Therefore, this article is for reference only.