Revised enterprise law to not include household businesses

Thursday, Jun 18, 2020 08:28

A ship under construction at SOE Vinashin's Ha Long Shipyard. The revised Law on Enterprises is expected to improve SOE's management capacity, transparency, accountability and to ensure fairness for other businesses. — VNA/VNS Photo

The National Assembly (NA) passed the revised Law on Enterprises on Wednesday morning in Ha Noi, introducing several important changes to regulations overseeing business activities.

Notably, the NA ruled household businesses will require a different law and are not subject to the revised Law on Enterprises.

According to the Vietnam Small-and Medium-Sized Enterprises Association, there are more than five million household businesses in the country with a total revenue estimated at VND12.3 trillion (US$502 million) annually. They also employ nearly eight million people.

The vote put to rest a lengthy debate over whether household businesses should be governed under the Law on Enterprises. A majority of deputies voiced concerns that given the distinct characteristics of household businesses and how differently they operate compared to other businesses, there should be a seperate law for them.

Under existing regulations, a household business can only employ up to 10 workers and faces limitations in regards to ownership (can only be owned by an individual or by a family) with no access to the bankruptcy process.

In reality, however, some household businesses employ hundreds of workers and are capable of generating massive revenue. There have been calls by Government officials and NA deputies to include them under the country's business tax scheme.


Deputies also settled on the definition of State-owned enterprises (SOEs) as businesses with either 100 per cent or more than 50 per cent of charter capital owned by the State. Enterprises with more than 50 per cent of voting shares owned by the State are also considered SOEs.

Speaking on the matter, Chairman of the NA's Economic Committee Vu Hong Thanh said: "The definition of SOEs has been changed too frequently, making it difficult to reach uniformity on how they are managed and treated compared to other business enterprises."

Thanh said the revised law aimed to categorise SOEs according to the number of shares owned by the State and to regulate and improve SOE's management capacity, transparency and accountability, as well as to ensure fairness for other businesses.

Deputy Tran Van Tien from northern Vinh Phuc Province called for a comprehensive review of the number of SOEs and studies on the progress and impact of SOE equitisation.

"There is a need to separate State control and business management to make sure State's capital is best protected and provide clear job descriptions for managers in SOEs", said Tien.

International agreements

In the afternoon, deputies discussed potential legal complications that may arise from the numerous international trade agreements Viet Nam has signed.

Deputies voiced concerns over the ability to process and handle legal disputes by local governments, saying it may be unwise to allow localities, down to commune level, to qualify as signatories in trade agreements.

Deputy Truong Trong Nghia from HCM City said for now the Government should limit it to provincial governments as they are much better equipped to handle legal disputes with foreign partners. — VNS

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