The case against Mr Nguyen Duc Kien and its potential implication

The first hearings of the criminal cases against Mr Nguyen Duc Kien, former Board member of Asia Commercial Bank (ACB) and Ms Huynh Thi Huyen Nhu, former staff of Vietinbank, a large State-owned bank have raised many fundamental issues about the business law framework in Vietnam. Unfortunately, without a full transcript of the hearings, one cannot comment on the legal interpretation adopted by the courts.

That being said, newspaper reports about Mr Kien’s conviction of illegally doing business (tội kinh doanh trái phép) have shed some light about the court’s interpretation of “doing business” under Article 4.2 of the Enterprise Law. The background of the case is as follows:

  • Mr Kien set up two companies which do not register for the business lines of sale and purchase of shares but for other business lines;

  • These two companies acquire and/or sell shares in other companies;

  • The procurator takes the view that the two companies have illegally done business which are not recorded in their business registration certificates. Under Article 9.1 of the Enterprise Law, a company is required to do business within the scope of its business registration certificates;

  • Mr Kien takes the view that under Article 13 of the Enterprise Law, a company is entitled to acquire shares in another company. Therefore, there is no need for Mr Kien’s companies to register for the business lines of sale and purchase of shares. In practice, the approach taken by Mr Kien’s companies is widely common. Some business registration authorities even refuse to register the business line of sale and purchase of shares on the basis that this activity is permitted by the Enterprise Law already; and

  • The first instance court hold that because Mr Kien’s companies do not do any business other than sale and purchase of shares, these companies are considered as engaging in the business of sale and purchase of shares.

 Article 4.2 of the Enterprise Law provides that “doing business” (kinh doanh) means the continuous conduct of one, several or all of the stages of the investment process, from production to sale of products or provision of services in the market for profits. There is no further interpretation of the term “continuous conduct”. Now, it seems that the court will consider a business conduct by a company to be a continuous conduct if such business conduct is the only business conduct of the company. In light of this interpretation, owners of companies in Vietnam will likely pay more attention to ensure that their companies will at least actually engage in some business lines as provided in their business registration certificates.


Can a limited liability company in Vietnam sell its new capital contribution for a premium?

A profitable and well-run company usually demands a “premium” when it issues new equity to investors. This means that in a profitable company, a new investor may be required to pay more than the price paid by an existing investor for the same amount of equity and voting rights in the past. Usually, the difference between the price of the new equity portion and the nominal value of such equity portion is referred to as premium.

However, it appears that a limited liability company (LLC) in Vietnam may not be able to do so without changing the voting rights of existing members. This is because:

  • Other than in the context of a joint stock company (JSC), there is no legal concept of equity capital premium in the Enterprise Law and in accounting regulations. “Par value” of shares only exists in the context of shares in JSCs. And under Circular 19/2003, the difference between issuance price of new shares by a JSC and their aggregate par values could be recorded as “capital premium accounts”. On the other hand, capital contribution in a charter capital of a LLC does not have a “par value”.  There is no legal concept for the difference between the price of the new capital contribution portion and the nominal value of such capital contribution portion. Therefore, LLC does not have capital contribution premium if it issues new capital contribution;
  • Decree 102/2010  further provides that charter capital of a LLC with two or more members is “the total value of capital portions” already contributed or undertaken to be contributed within a certain period by its members and is stated in the company charter. If the value of all assets contributed by members of a LLC including new members constitutes the charter capital of such LLC then there is no capital contribution premium in a LCC. In addition, under Decree 102/2010, all amounts paid by a new member of a LLC should carry voting rights; and
  • Tax regulations only expressly exempt corporate income tax on share premium received by a JSC. Therefore, there is no certainty that a LLC will be exempted from capital contribution premium.

In light of the above, a LLC wishing to issue new capital contribution at a premium may consider an alternative structure which allows such a LLC to record the actual value of the amount to be contributed by the new member and at the same time maintains the desired ownership percentage and voting among all members.

“Legal capital” for companies in Vietnam

In other countries, legal capital is often understood to be “the amount of a company's equity that cannot legally be allowed to leave the business and cannot be distributed through a dividend or any other means. The closest meaning to this under Vietnamese law is “charter capital”.

However, for a Vietnamese company, the term “legal capital” has a different meaning than it is usually understood in other countries. Currently, under the Enterprise Law, “legal capital” (vốn pháp định) is defined as the minimum amount of capital required by law for the establishment of an enterprise engaging in certain conditional business (e.g. real estate, banking or securities). “Charter capital” is the amount actually contributed or will be contributed by the shareholders of a company. Therefore, the “charter capital” must be at least equal to the “legal capital”, and in most cases are much higher than the “legal capital”. Usually, legal capital is fixed at a specific number. For instance, an entity engaged in real estate business must have a “legal capital” of VND 6 billion. This means that the entity must have a charter capital of VND 6 billion or more.

The above difference may cause certain confusion when interpreting Vietnamese law. For example,

  • Before 1 July 2006, for foreign-invested enterprises, under the old Foreign Investment Law, the term “legal capital” is defined to mean the equity capital contributed (or to be contributed) by the investors in a foreign invested enterprise. Certain laws or regulations still use the term “legal capital” in this sense. These laws and regulations are usually issued before 1 July 2006. However, by mistakes, some laws or regulations issued after 1 July 2006 still use the term “legal capital” in this sense (e.g. the amendment to the Law on Cinematography issued in 2009).
  • The WTO Commitments of Vietnam also contain various references to “legal capital” in the context of applicable foreign ownership limits. Again the term “legal capital” in this context should be understood as “charter capital”.  

That being said, there is no express guidance about how to interpret the term “legal capital” used in the above scenarios. Therefore, if the authority happens to take a restrictive view then the foreign ownership limit in certain sectors provided in the WTO Commitments or certain laws and regulations may be subject to a much lower limit.

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“Bailiff” services in Vietnam

Vietnam has just introduced bailiff services (dịch vụ thừa phát lại) on a nationwide scope under a Joint Circular 9/2014 between the Ministry of Justice and the Supreme Court issued on 28 February 2014. A bailiff service company may provide services:

  • To serve notices relating to court proceedings;
  • To prepare certified written minutes (vi bằng) to serve as evidence for use before the courts; and
  • To verify the conditions of the debtor for enforcement of a court judgements and to enforce court judgments.

The introduction of bailiff services will hopefully improve the poor state of dispute settlement through courts in Vietnam. 

Vietnam Business Law Blog

Introduction

From 1 July 2025, Vietnam’s local Government system formally operates according to a new “two-tier” system in 34 provinces as opposed to the old “three-tier” system in 63 provinces. In the new system, there are only two levels of local Government including provinces (tỉnh) and wards (xã, phường). Government agencies at district level no longer exist. Vietnam also combines several existing wards to form a larger ward. As a result, we estimate that Vietnam now has about 3,300 local people’s committees down from 10,000 local people’s committees.    

To achieve this, by 1 July 2025, the National Assembly and the Government have, among other things, amended the Constitution, amended the Law on Organisation of Local Government, issued 34 resolutions and 28 Decrees to restructure the local government system. Unfortunately, despite such herculean efforts, it appears that the new regulations have not addressed adequately various legal issues arising from the restructuring. In this post we will discuss some of these issues. More information can be found from the attached research generated by the latest AI LLM from Google (Gemini Pro 2.5).

No clear geographical boundaries between various local authorities at wards levels.  

It appears that on 1 July 2025, the Government did not establish clear geographical boundaries between the newly established wards. This is because the Standing Committee of the National Assembly sets a deadline of 30 September 2025 for the Government to do so for each province. Until a source of truth of the geographical boundaries at wards level is set up, many companies and individuals may not know for sure the correct addresses that they may use in their operations including application submitted to the authorities, invoices issued to clients, or contracts.

In 2024, the National Assembly of Vietnam enacted the new Law on Organization of the People’s Court (Law on Courts), which implemented significant reforms to the structure of the People’s Court system in comparison to the 2014 Law on Courts. Shortly after the promulgation of the 2024 Law on Courts, Vietnam initiated a substantial reorganisation of its administrative divisions, transitioning from a three-tier (province, district, commune) model to a two-tier (province, commune) model. Consequently, in 2025, the National Assembly approved an amendment to the 2024 Law on Courts to align the court system with the updated two-tier administrative division model (2024-2025 Law on Courts). Below are our discussions on the key changes under the 2024-2025 Law on Courts when compared to the 2014 Law on Courts.

1)           Complete Restructuring of the Court Hierarchy

The court system is majorly reformed with the removal of the High People's Courts (Tòa án nhân dân cấp cao) and replacement of District Courts with Regional Court (Tòa án nhân dân khu vực).

In this post, we continue to discuss certain aspects of the new provisions on beneficial owners (BOs or commonly called as “UBOs”) under the new amendments to the Enterprise Law 2020 passed in June 2025 (2025 Enterprise Law Amendment) and the new Decree 168/2025 on enterprise registration. We have discussed some of the issues in our earlier post.

UBOs with joint controls

Under the 2025 Enterprise Law Amendment and Decree 168/2025, the criteria to determine whether an individual is an UBO seem to apply to a single individual only. As such, it is not clear if the information about related persons of such individual (e.g., his/her relatives) should be taken into account when determining an UBO. For example, it is not clear if an individual together with his/her spouse hold more than 25% voting rights of an enterprise should be declared as an UBO. A literal reading of Decree 168/2025 suggests that declaration of UBOs is not required in case of joint control. However, such an approach is likely not consistent with the purpose of the provisions on UBOs.

The law amending the Enterprise Law 2020 (Amended Enterprise Law 2020), effective 1 July 2025, introduces the following key changes:

1.         The New Beneficial Owner Regime

1.1.      The Amended Enterprise Law 2020's most significant change is the introduction of a Beneficial Owner (BO) regime, designed to enhance transparency and align Vietnam with international anti-money laundering standards.

Who are BOs?

1.2.      The Amended Enterprise Law 2020 defines a BO as the individual who ultimately owns or controls an enterprise. The recently issued Decree 168/2025 on enterprise registration (Decree 168/2025) further clarifies the specific criteria for identifying a BO. In particular, an individual is considered a BO if they meet one of the following conditions:

In Vietnam, industrial parks are usually developed by private investors (IP Developer), rather than the State. The IP Developer will directly lease a large land parcel from the State, build necessary infrastructure, and then sublease land with ready-built infrastructure to the ultimate tenants (IP Tenant) for their investment projects.

From a legal standpoint, the nature of these land sublease agreements (sublease contract) between the IP Developer and the IP Tenant is an interesting issue. Should the sublease contract be treated as a property sale or a traditional lease? The answer has significant implications for the rights and obligations of both parties.