New Law on Enterprises 2020 for Companies in Vietnam

Introduction

In June 2020, the National Assembly passed a new Law on Enterprises 2020 (Enterprise Law 2020) to replace the Enterprise Law 2014 from 1 January 2021. The Enterprise Law 2020 was issued just four years after the Enterprise Law 2014 came into effect. So, in just 20 years Vietnam already has four different versions of the Law on Enterprises. Such frequent changes could cause concerns to investors since they will not know for sure that their rights as a member or shareholder in a company in Vietnam will not be adversely affected by another set of changes in 2025. The fact that many of the changes introduced under Enterprise Law 2020 are just wording changes (but at the same time fail to clarify various unclear issues under the Enterprise Law 2014) also raises questions about the quality of the law-making process in Vietnam.

This post is written by Nguyen Quang Vu. Our comments are based on the version of the Enterprise Law 2020 supplied by Mr. Truong Trong Nghia, a member of the National Assembly and Vietnam Business Lawyers Club (VBLC). Since the official version of the Enterprise Law 2020 has not been released, our comments are subject to change. For easy reference, a compared version between the Enterprise Law 2020, and the Enterprise Law 2014 in Vietnamese can be downloaded here.

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Rules of interpretations of Vietnamese law contracts

Under Vietnamese law, the rules of interpretation of contract are mostly provided under Article 404 of the Civil Code 2015. According to this provision, the order of priority in interpreting a contract seems to be (1) “mutual intention” (ý chí chung) of the parties; (2) contract wording; and (3) each party’s intention and customary practice. In particular:

Mutual intention has priority over contract wording, and therefore the top priority in contract interpretation. This is because according to Article 404.5, in case of conflict between the “mutual intention” of the parties and the wording used in a contract, the mutual intention of the parties will be used in order to interpret the contract.

Unlike common law principles, under the Civil Code 2015, determining “mutual intention” of the parties is a subjective exercise (as opposed to an objective exercise using reasonable person’s standard), which requires examination of the parties’ intention before and at the time of execution and performance of the contract. Therefore, it would be difficult to determine “mutual intention” of the parties without concrete evidence of the same.

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Internal restructuring and merger filing in Vietnam

The Competition Law 2018 does not exempt internal restructuring within the same group of companies from merger filing requirements. That said, arguably, internal restructuring between companies which are under the control of the same ultimate parent company is not subject to merger filing in Vietnam. This is because:

Under the competition law, the market share of a company is calculated by reference to the market share of the group of companies that such a company belongs to (the Group). Therefore, an internal restructuring does not have any impact on the market share of the Group and accordingly any anti-competitive impact on the market. Relying on Article 1 of the Competition Law 2018 which provides for the scope of application of the Competition Law 2018, one could argue that an internal restructuring transaction is not governed by the Competition Law 2018;

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New Decision on incentives for the development of solar power projects in Vietnam

On 6 April 2020, the Prime Minister issued a new Decision (Decision 13/2020) to replace Decision 11 dated 11 April 2017 on incentives for the development of solar power projects in Vietnam (Decision 11/2017), which expired 10 months ago. The summaries of certain key issues of this new Decision are here.

This post is written by Le Thanh Nhat and Nguyen Thuc Anh.

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