New Procedures to Coordinate Various Business Commencement Steps for Vietnamese Companies

In October 2020, the Government issued the new Decree 122/2020 on the coordination between various separate procedures relating to the business commencement steps of a company in Vietnam including enterprise incorporation procedures, employee usage declaration, social insurance registration code, and registration of tax invoice. In particular,

  • Decree 122/2020 provides for a company registration application which also includes information necessary for tax and invoice registration, social insurance registration, and employee usage declaration. Previously, the company registration application only include company registration information and tax registration information; and

  • The Enterprise Registration Authority will act as the single contact point to receive the application submitted by the relevant company’s founders and will electronically transfer necessary information to the tax authority, social insurance authority, and labour authority.

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Written by Nguyen Quang Vu On In ,

Can “actual and direct loss” due to a breach of contract include losses incurred by non-defaulting party under another contract with a third party?

Under the Commercial Law 2005, the value of damage that the non-defaulting party could claim due to a breach of contract will comprise (i) the value of the “actual and direct loss” incurred by the non-defaulting party due to the defaulting party’s breach; and (ii) the “direct profits which the non-defaulting party would have earned” in the absence of such breach. Apparently, the amount that the non-defaulting party must compensate a third party (e.g. non-defaulting party’s customer) as a result of the breach of the defaulting party (Third Party Damage) is not considered as lost profits at (ii). However, it is not clear whether and how Third Party Damage could be included in “actual and direct loss” (Direct Loss) suffered by the non-defaulting party.

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Written by Nguyen Quang Vu On In ,

The burden of proof regarding mitigation obligation in case of a damage claim under Vietnam contract law

Under the Commercial Law 2005, when a non-defaulting party makes a claim for damage due to a breach of contract, the non-defaulting party has the obligations to mitigate the damages it has suffered (Duty To Mitigate). However, Commercial Law 2005 is silent on whether the responsibility to prove the non-defaulting party’s fulfillment or (non-fulfillment) of Duty To Mitigate belongs to the defaulting party or the non-defaulting party. That said, it is likely that the defaulting party will have the obligation to prove that the non-defaulting party fails to mitigate the damages it has suffered.

One could argue that the non-defaulting party has the burden of proof of its fulfillment with the Duty To Mitigate because Article 304 of Commercial Law 2005 provides that the party claiming for damage must prove the “the loss, the extent of the loss” caused by the breach of the defaulting party. Arguably, “the extent of loss” must be proved by the non-defaulting party should exclude the amount of loss which could have been mitigated if the non-defaulting has fulfilled its Duty To Mitigate (i.e. all reasonable measures have been taken to mitigate the loss). In other words, to prove or request the defaulting party to compensate for a specific amount of damage, the non-defaulting party must take into account the fulfillment of its Duty To Mitigate and is responsible for proving that it has complied with its Duty To Mitigate.

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Written by Nguyen Quang Vu On In

Would transactions between parties outside Vietnam (offshore transactions) be caught by merger control legislation?

Under the Competition Law 2018, any transaction “causing the effect or being capable of causing the effect of significantly restricting competition in the market of Vietnam” is prohibited. As such, an offshore transaction will be caught by merger control requirement if it has actual or potential anti-competitive impact on a relevant market of Vietnam. In particular, an offshore transaction may be subject to notification requirement under Vietnamese laws where a party to the transaction or its affiliates have assets, sale revenue or purchase costs in Vietnam and the transaction triggers any of the applicable notifying thresholds discussed here (except for size of transaction test). ‎

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Written by Nguyen Quang Vu On