Vietnamese Business Law

INTRODUCTION TO
VIETNAMESE BUSINESS LAW

(FOR STUDYING PURPOSE ONLY)
TRAN, VIET DUNG (Dr. J)

DEAN OF INTERNATIONAL LAW FACULTY
HO CHI MINH CITY UNIVERSITY OF LAW
HO CHI MINH CITY 2014

Tran Viet Dung 2014
Table of Contents
CHAPTER 1: VIETNAMESE LEGAL SYSTEM ........................................................................................... 6
I.
II.
OVERVIEW OF VIETNAMESE LEGAL SYSTEM ..................................................................... 6

1.1.
General .............................................................................................................................. 6
1.2.
Common law vs. Civil law .................................................................................................. 6
1.3.
Vietnam as a civil law country........................................................................................... 8
1.4.
Public law versus Private law ............................................................................................ 9
CONSTITUTION OF VIETNAM ......................................................................................... 10

2.1.
General ............................................................................................................................ 10
2.2.
Constitution of Vietnam .................................................................................................. 11
III. ORGANIZATION OF THE STATE IN THE LEGAL SYSTEM .................................................... 11

3.1.
Legislative Branch: the National Assembly ................................................................... 12
3.2.
The President of the State ............................................................................................. 13
3.3.
Executive Branch: the Government ............................................................................... 14
3.4.
Judicial Branch: the Courts ............................................................................................. 15
3.5.
The Peoples Procuracy .................................................................................................. 16
CHAPTER 2: THE LAW OF OBLIGATIONS ............................................................................................ 18

CIVIL TRANSACTIONS ................................................................................................................. 18
I.
II.
1.1.
Definition ........................................................................................................................ 18
1.2.
A civil transaction is only valid if it meets the following requirements: ...................... 18
1.3.
Capacity of civil act of individuals and legal capacity of legal entities ......................... 19
1.4.
Civil obligations .............................................................................................................. 21
CONTRACT FORMATION................................................................................................ 21
2.1.
Definition of contract ..................................................................................................... 21
2.2.
Offer and acceptance ..................................................................................................... 22
2.3.
Types and contents of contracts .................................................................................... 24
2.4.
Interpretation of contracts ............................................................................................ 25
2.5.
Principles for performance of civil contracts................................................................. 26
2.6.
Termination of contracts................................................................................................ 26
III. SECURING OBLIGATIONS ............................................................................................... 27

3.1.
General ........................................................................................................................... 27
3.2.
Means of security ........................................................................................................... 28
IV. BREACH OF CONTRACT.................................................................................................. 33

4.1.
General ........................................................................................................................... 33
4.2.
Exempted from liability .................................................................................................. 35
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CHAPTER 3: OVERVIEW OF CORPORATE LAW................................................................................... 39

I.
II.
BASIC CONCEPTS ........................................................................................................... 39

1.1.
Separate Personality & Limited Liability ....................................................................... 39
1.2.
Corporate representation Legal Representative ........................................................... 40
1.3.
Rights & obligations of enterprises related to doing business ..................................... 41
CORPORATE CONSTITUTION.......................................................................................... 42
III. COMPANY FORMATION ................................................................................................ 43

3.1.
Right to establish enterprises ........................................................................................ 43
3.2.
Business lines of enterprises .......................................................................................... 43
3.3.
Dossiers for registration of enterprises ......................................................................... 44
3.4.
Issuance of business registration certificate ................................................................. 44
3.5.
Pre-incorporation contracts ........................................................................................... 45
IV. CAPITAL CONTRIBUTION ............................................................................................... 46
V.
4.1.
Loan capital vs. share capital ......................................................................................... 46
4.2.
Valuation of assets contributed as capital .................................................................... 46
PROHIBITED PRACTICES................................................................................................. 47
VI. FOREIGN INVESTMENT UNDER INVESTMENT LAW ......................................................... 48

CHAPTER 4: CORPORATE LAW - PARTNERSHIP ................................................................................. 49
I.
II.
GENERAL ...................................................................................................................... 49
1.1.
Definition ........................................................................................................................ 49
1.2.
Types of Partnership ...................................................................................................... 49
1.3.
Formation ....................................................................................................................... 49
1.4.
Termination of Partnership............................................................................................ 50
MANAGEMENT OF PARTNERSHIP .................................................................................. 50

2.1.
Partners Council ............................................................................................................ 50
2.2.
Partners .......................................................................................................................... 50
2.3.
Chairman, General Director (or Director) of Partnership ............................................. 52
III. AUTHORITY AND LIABILITY OF PARTNERS ...................................................................... 52

3.1.
Rights and obligations of general partners ................................................................... 52
3.2.
Rights and obligations of limited liability partners....................................................... 53
CHAPTER 5: CORPORATE LAW - SHAREHOLDING COMPANIES ........................................................ 55

I.
GENERAL ...................................................................................................................... 55
1.1.
Definition ........................................................................................................................ 55
1.2.
Classes of shares Ordinary shares.................................................................................. 55
1.3.
Offer for sale of shares ................................................................................................... 56
1.4.
Share-related documents Share certificates ................................................................. 56
1.5.
Redemption of shares .................................................................................................... 57
1.6.
Payment of dividents ..................................................................................................... 58
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II.
1.7.
Recovery of payments for redeemed shares or dividends ........................................... 58
1.8.
Management .................................................................................................................. 58
SHAREHOLDERS ............................................................................................................ 59
2.1.
Rights of ordinary shareholders..................................................................................... 59
2.2.
General Meeting of Shareholders ................................................................................... 59
III. BOARD OF MANAGEMENT ............................................................................................ 65

3.1.
Authority & composition ............................................................................................... 65
3.2
Meeting and resolutions ................................................................................................. 67
IV. GENERAL DIRECTOR ...................................................................................................... 68

V.
INSPECTION COMMITTEE .............................................................................................. 69
VI. DUTIES OF MANAGERS AND RELATED PARTY TRANSACTIONS ........................................ 70

6.1.
Duties .............................................................................................................................. 70
6.2.
Related party transactions ............................................................................................. 71
CHAPTER 6: CORPORATE LAW - LIMITED LIABILITY COMPANIES ..................................................... 72

I.
II.
GENERAL ...................................................................................................................... 72
1.1.
Definition ........................................................................................................................ 72
1.2.
Rights and obligations of members ............................................................................... 72
1.3.
Capital contribution ....................................................................................................... 73
1.4.
Capital redemption, transfer and changes .................................................................... 74
1.5.
Management Structure .................................................................................................. 75
MEMBERS COUNCIL ..................................................................................................... 75

2.1.
Authority......................................................................................................................... 75
2.2.
Members meetings ....................................................................................................... 77
III. GENERAL DIRECTOR ...................................................................................................... 77

IV. RELATED PARTY TRANSACTIONS.................................................................................... 78
V.
ONE-MEMBER LLC ......................................................................................................... 78
CHAPTER 7: THE LAW ON BANKRUPTCY ........................................................................................... 80

I.
II.
GENERAL ...................................................................................................................... 80
1.1
Insolvency definition ....................................................................................................... 80
1.2.
Petition for commencement of bankruptcy procedures .............................................. 80
1.3.
Decision on commencement of bankruptcy procedures .............................................. 81
BANKRUPTCY PROCEDURES .......................................................................................... 82

2.1.
Committee for management and liquidation of assets ................................................ 82
2.2.
Business activities after commencement of bankruptcy procedures .......................... 83
2.3.
Meetings of creditors ..................................................................................................... 84
III. RECOVERY OF BUSINESS OPERATIONS ........................................................................... 85

IV. LIQUIDATION ................................................................................................................ 85
4.1.
Liquidation cases ............................................................................................................ 85
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4.2.
Asset distribution ........................................................................................................... 86
4.3.
Bankruptcy declaration .................................................................................................. 86
V.
ASSET PROTECTION MEASURES ..................................................................................... 87

5.1.
Invalid transactions ........................................................................................................ 87
5.2.
Suspension of contract ................................................................................................... 87
5.3.
Temporary emergency measures .................................................................................. 88
CHAPTER 8: CORPORATE GOVERNANCE ........................................................................................... 89

1.
Ensuring the basis for an effective corporate governance framework: ........................... 89
2.
The rights of shareholders and key ownership functions;................................................ 90
3.
The equitable treatment of shareholders; ........................................................................ 90
4.
The role of stakeholders .................................................................................................... 90
5.
Disclosure and transparency .............................................................................................. 91
6.
The responsibilities of the board ....................................................................................... 91
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CHAPTER 1: VIETNAMESE LEGAL SYSTEM

The main legislation discussed in this chapter is the Constitution 1992 (as amended in
2001) and respective laws providing guidance on organization, authority and operation of
various States bodies (e.g. National Assembly, Government, Peoples Courts, Peoples
Procuracy).
I.
OVERVIEW OF VIETNAMESE LEGAL SYSTEM
1.1.
General
Law may be defined as a system of regulations designed to govern the conduct of the
people of a community, society or nation, in response to the need for regularity,
consistency and justice based upon collective human experience.
Society is a very complicated web of social relationship between individuals and entities
with each having his own interest and behavioral pattern, without laws there would be
chaos when everyone is acting in his own interest without regard to others. Social and
ethical sanctions against undesired behaviors would not be sufficient to effectively deter
people. This could be the short answer to why we need laws?
1.2.
Common law vs. Civil law
The terms common law system and civil law system are used to distinguish two
distinct legal systems and approaches to law.
The use of the term common law in this context refers to all those legal systems which
have adopted the historic English legal system. Foremost amongst these is, of course, the
United States, but many other Commonwealth and former Commonwealth countries
(e.g. Australia, Singapore, India, etc.) retain a common law system.
The term civil law refers to those other jurisdictions which have adopted the European
continental system of law derived essentially from ancient Roman law, but owing much
to the Germanic tradition. Civil law countries include German, France, China, Russia, etc.
Common law system
The common law system comprises the body of principles and rules, which derive their
authority solely from usage and custom, or from the judgments and decrees of the courts
recognizing, affirming and enforcing such usages and customs.
Precedent is the basis of the common law. The doctrine of binding precedent is known as
the doctrine of stare decisis, which means in Latin as to stand by/adhere to decided
cases, i.e. to follow precedent. In other words, once a principle is decided it should be
followed in future cases. The doctrine refers to the fact that, within the hierarchical
structure of the English courts, the decision of a higher court will be binding on a lower
court. In general terms, this means that when judges try cases they will check to see if a
similar situation has come before a court previously. If the precedent was set by a court
of equal or higher status to the court deciding the new case, then the judge in the present
case should follow the rule of law established in the earlier case. Where the precedent is
from a lower court in the hierarchy, the judge in the new case may not follow but will
certainly consider it.
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For example, if a fireman during the course of extinguishing a house has destroyed
some furniture in the house and, upon a lawsuit by the house owner to claim
compensation for such furniture, the judge has concluded that the firemans acts were
reasonable within the urgent requirements to extinguish the house, thus he was not
liable. Later on when there is similar pattern to the acts of the fireman, the lower or
equivalent courts shall base on the precedent set by the previous case, unless the acts
are beyond reasonable requirements.
Civil law system
On the other hand, civil law system is based on a very detailed set of written laws and
codes to universally govern the behaviours of citizens and organizations in the same
country. The law making power is often rested with the national assembly and, to a
certain extent, by delegated governmental agencies. In the civil law system the courts
can only interpret and apply the written laws and are not allowed to create laws.
In the above example, under the civil law system the fireman is exempt from liability
only if the law has clearly provided that persons acting within the requirements of
emergency shall not be* liable. Otherwise he will be liable to compensate.
Differences
The usual distinction to be made between the two systems is that the common law
system tends to be case-centred and hence judge-centred, allowing scope for a
discretionary, pragmatic approach to the particular problems that appear before the
courts. The law can be developed on a case-by-case basis. On the other hand, the civil
law system tends to be a codified body of general abstract principles which control the
exercise of judicial discretion. In reality, both these views are extremes, with the former
overemphasising the extent to which the common law judges can impose their
discretion and the latter underestimating the extent to which civil law judges have the
power to exercise judicial discretion. There have been a convergence tendency of the
two legal systems, i.e. the countries with civil law system have increasingly recognized
the benefits of establishing a body of case law, even if unofficially, on the other hand
common law countries have also codified laws in many areas for consistent application.
The following are the differences between common law system and the civil law system:
(a) Origin, nature and characteristics - In the common law system, legal precedents
come from people, containing elaborate reasoning. It is flexible and adaptable to
the changing conditions of time. In the civil law system, legislation comes from
experts, ie legislators. It is rigid and formal in nature.
(b) History - The common law system was developed by custom and practice which
were dated before there were any written laws and continue to be applied by
courts after written laws were passed. The civil law system developed from Roman
law, a set of codified statues.
(c) Making of laws (enactment) - In the common law system, the judiciary creates
laws. Laws or rules are set down by the courts as precedents. In the civil law
system the judiciary does not create laws. In a civil law country, laws are created
by the legislative branch, e.g the national assembly in Vietnam. Regulations guiding
laws are prescribed by competent authorities in a formal, express manner.
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(d) Legal methodology and application - In the common law system, the court is
concerned with the spirit, rather than the letter, of the law. Court opinions
normally discuss prior cases and academic writing extensively. Cases are the
primary source of law, while statutes are only seen as incursions into the common
law system and thus interpreted narrowly. In the civil law system, courts base their
judgements on the provisions of legislation as the primary source and have to
resort to the very words in which they are enacted. Judges cite only legislation, but
not prior cases. However, this does not mean that judges do not consider prior
cases when drafting opinions. Courts have to reason extensively on the basis of
general rules and principles of the regulations, often drawing analogies from
statutory provisions.
(e) Division of public law and private law - The common law system does not recognise
the division of public law and private law, whereas the civil law system does
recognise the division.
(f) Sources of judges - In the common law system, judges are usually selected from
accomplished and reputable attorneys. In the civil law system, judges are trained
and promoted separately from within.
(g) Separation of powers - In the common law system, judges are usually seen as
balancing the power of the other branches of government. The civil law system
assigns different roles to legislator and to judges, with the judges only applying the
law.
1.3.
Vietnam as a civil law country
Source of laws
The legal system of Vietnam is based on a codified, or civil law system, which means that
laws are written down, anticipating matters that have to be defines or resolved in
society.
The Consitution is the highest source of law, with which all laws have to be consistent.
The Consitution lays down the most fundermental priciples, regimes of politics and
economcis; policies of culture, education, science and technoligy; the rights and
obligations of citizens; define the structures of the State institutions.
Legal codes provide fundamental principles that govern specific spheres of everyday life.
Codes are general in nature upon which more specific regulatory acts can be build, e.g
Civil Code, which regulates the legal status of individuals and corporations, their conduct
and civil relations.
Legislative acts relate to specific areas of activity and are usually more detailed than legal
codes, e.g Law on Enterprises, Commercial Law...
Legal codes and legislative acts are issued, modified, extend or repeal by The National
Assembly. This is called primary legislation.
Other state bodies are delegated legislative power, which is called secondary legislation.
The government provides guidelines for implementation of legal codes and legislative
acts by way of decrees, which is then further guided by circulars or decisions from the
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relevant ministry or ministry level agency.

The Peoples Committees or Peoples Councils at provincial or centrally-run city levels
may also issue limited legislation in the forms of resolutions or decisions, which only
apply to their respective territories.
Vietnam is a signatory to many international treaties, which are also a source of law,
subservient only to the Constitution, and higher than other statutes.
Custom and tradition is also a source of law in case where there is no legislation applied.
Such custom and tradition must not be inconsistent with the principles of legal codes and
legislative acts.
Vietnamese legal system does not recognise judicial precedent as a source of law.
However, this does not mean that judges do not consider prior cases when drafting their
opinions and reaching decisions. As a matter of practice, every year, the Supreme Court
produces a collection of typical cases with comments and instructions. These treatises are
relied on seriously by the inferior courts as a source of laws. Custom may be a source of
law where there is no legislation applied.
What happens when there is a lack of law?
Legislation is often static and fails to keep up with changes in life, therefore it is not
unusual that the courts or other state bodies have to face many cases for which no
suitable legislation is available, the below examines some approaches which can be used
in such circumstance.
First of all, if the competent authorities consider that there is a need for new legislation
to regulate the circumstances because they are likely to occur in the future, they may
submit draft laws or propose changes to the existing laws to the National Assembly for
approval, alternatively the authorities may issue guidance on these new cases based on
the principles set out by existing laws of the NA.
Technically judges in civil law system are not bound to base their judgment on
precedents, but in practice they may still consider prior cases when reasoning and
providing judgments to the case in hand.
Alternatively the courts may consider the principles of the laws. This may involve
considering the historic, conceptual base upon which existing laws are drafted and
extending those principles to deal with the current problem scenario. In effect, this is an
attempt to interpret the original intention of the legislator. This may be appropriate when
the law is ambiguous, as the court will consider the underlying spirit of the law to
overcome the ambiguity.
In addition, in the absence of a law to deal with a situation the court may be influenced
by custom and tradition, including its perception of what would be regarded as a fair
outcome based on these factors.
Finally, the court may adopt a teleological approach by considering the social purpose of
the legislation and then apply it in a manner that is consistent with this purpose.
1.4.
Public law versus Private law
Public law concerns relationships between the State and the individual or entity, such as
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criminal laws, taxation laws, etc.

The rights and obligations of citizens are set out in the Constitution as well as legal codes
and regulatory acts. When a citizen or legal entity fails in duties imposed by such sources
of law, the matters are resolved according to the legal norms derived from written laws.
Likewise, a citizen whose rights are infringed by the State has recourse against the State.
Private law concerns the relationships between legal persons such as private citizens and
legal entities. The framework is also imposed by legal codes and regulatory acts, though
the courts often have to consider cases for which there is no direct solution prescribed by
the laws of Vietnam. Such cases are resolved by analogy with existing laws, or with
reference to the intent of existing laws.
An example of the operation of private law is the resolution of contractual disputes.
Another is where a legal person seeks remedy against another for non-contractual
obligations, often described as torts.
In many cases a code contains both public law and private laws. For ex on Enterprises
there are many provisions governing the relationship between the enterprises and the
State, in addition the relationship between shareholders, between shareholders and the
boards, etc. (i.e. between private citizens or entities) are also governed by this law.
Criminal law versus Civil law
Criminal law (public law) is concerned with regulating behaviour of which the State
disapproves. Such behaviours can be trivial offences, such as minor traffic transgressions,
or serious offences such as murder and treason.
Criminal law is codified in Vietnam, which means that citizens should know whether they
are breaking the law or not. When a citizen or legal entity is accused of breaking the law,
the citizen or entity is prosecuted by the State. This may result in criminal sanctions, such
as a warning not to repeat the offence, a fine or imprisonment. In all cases, the burden of
proof lies with the prosecutor to establish that the individual or entity has contravened
the relevant law.
Civil law (private law) is concerned with resolving disputes and other issues between legal
persons, such as private citizens and legal entities. Such disputes may be related to
contracts and other obligations, as well as other instances in which one party causes
damage, injury or loss to another.
Actions in civil law are between the entities themselves, with no involvement of the State.
Any individual or entity can seek remedy at law, so the case is heard by the court as a
matter between the parties.
If a case in civil law is proven, the legal codes and legislation of Vietnam provide for a
range of legal remedies, which may include damages (financial compensation for injury or
loss), performance of the obligation or injunction not to behave in a particular manner.
Generally, the transgressor will not be punished by fines or imprisonment.
II.
CONSTITUTION OF VIETNAM
2.1.
General
Constitution is the most basic legal code of the State enacted by the highest legislative
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body representing the people of the country, under a special process or passed by the
people through a referendum.
Some of the special features of the constitution are as follows:
Procedure: enacted by the highest legislative body representing the people of the
country through a special process, or directly by a referendum;
Content: provides for the most basic matters governing the political, economic,
social regimes, righst and obligations of citizens, organization and operation of the
government, based on which these matters are provided into details in other
legislation;
Scope: broadest and most general in terms of scope of application;
Legal effect: highest legal effect in comparison with other legislation, which must be
based on and consistent with the constitution.
2.2.
Constitution of Vietnam
From the first version enacted in 1946, the constitution of the Socialist Republic of
Vietnam has gone through several changes, the current of which is the 1992 Constitution,
as amended by a National Assemblys resolution in 2001.
The main contents of the Constitution include the following:
Political regime of Vietnam: role of the Communist Party of Vietnam, classes of
society, basic principles of political regime, etc.
Economic regime: economic principles, ownership of resources, protection of

private ownership, etc.;
Culture, education, science and technology: policy of the State on these areas;
Basic right and obligations of citizens:
III.
Rights: equality, voting, doing business, property ownership; freedom of speech,

residence and religion; presumption of innocence (i.e. not criminal until an
effective judgment of competent court)
Obligations: loyalty to the nation, national defense, compliance with the laws, tax
payment, protection of public interest, etc.
Organization, authority and operation of the National Assembly, President,
Government, Peoples Court, Peoples Procuracy,
ORGANIZATION OF THE STATE IN THE LEGAL SYSTEM
Vietnamese government is not structured based on the theory of the separation of

powers. The National Assembly is constitutionally the body of highest power of Vietnam.
It exercises the legislative power, determines the economic and social policies, domestic
and international policies and financial and monetary policies of the country, approves
the national budget, and supervises the activities of the Government, the People's Court
and the People's Procuracy. Accordingly, the names of the three branches below may not
have equivalent meaning with other countries.
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3.1.
Legislative Branch: the National Assembly1
National Assembly (NA) is the body entrusted with the law making power by the
constitution. It is the only body who can create and amend and repeal legal codes and
legislative acts. The law making power of the National Assembly is also called the power
of primary legislation. In addition to the law making power, the NA also has the following
authority:
Supervise the compliance with constitution and laws, operations of the
President, NAs Standing Committee, Government, Supreme Peoples Court,
Supreme Peoples Procuracy;
Decide the national socio-economic policies, national budget, taxation;
Decide on fundamental foreign policies, to ratify or nulify international treaties
Appoint and remove key personnel such as President, Prime Minister, Chief
Justice of Supreme Court, Head of Supreme Procuracy, etc.;
Create, dissolve or merge Government ministries, provinces, etc.
Approve important projects proposed by the Government
Overrule sub-legislation which is in contrary to the laws or constitution
Declare war, hold referendum on important matters
The NA comprises of fulltime and part-time members (of which the latter is the majority)
and meets regularly twice a year or in extraordinary meetings convened by the NAs
Standing Committee either based on its own decision or requests from the President,
Prime Minister or at least one-third of the NA members.
The rights to submit proposals for new legislation are set down in Article 87 of the
Constitution. The individuals and bodies that may do so are as follows:
The President.
The Standing Committee of the National Assembly.
The Council of Ethnic Nationalities.
Committees of the National Assembly.
The Government.
The Supreme Peoples Court.
The Supreme Peoples Procuracy.
The Vietnamese Fatherland Front and its member organizations2.
In addition to the above, representatives sitting in the National Assembly may make
recommendations on laws and draft laws.
A simple majority (i.e. more than 50% of attending members) is required for approval of
bills or resolutions, however, at least two-third of positive votes is required for removal of
NAs members, change in term of the NA or amendments to constitution.
Once a bill becomes law, only the National Assembly has the right to amend, replace or
repeal such law, generally based on submission of the individuals or bodies who
submitted the original law.
1
2
CHAPTER VI, Constitution

Example include the National Association of Women, Vietnam Labour Union, etc.
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The National Assembly comprises of many committees and councils on each area of the
society (e.g. economic committee, council of ethnic nationalities, etc.) and the Standing
Committee. As its name suggests, the Standing Committee of the National Assembly is a
permanent executive organ of the National Assembly. It comprises the chairman and
deputy chairman of the National Assembly and a number of members deemed
appropriate by the same body.
Specifically the Standing Committee has the following major authority:
Organize the election of NAs members;

Convene and chair NA meetings;
Interpret constitution, laws and ordinances;
Issue ordinances3 on matters delegated by the NA; Resolution
Supervise the implementation of the laws, operations of the Government,
Supreme Court, Supreme Procuracy;
Suspend the implementation of texts adopted by the Government, the Prime
Minister, the Supreme People's Court, the People's Inspectorate General which are
incompatible with the Constitution, laws and resolutions of the National Assembly
and submit to decision of the National Assembly recommendations on the
abrogation of those texts; to abrogate texts adopted by the Government, the
Prime Minister, the Supreme People's Court, the Supreme People's Procuracy,
which are incompatible with decrees and resolutions of the Standing Committee of
the National Assembly.
To supervise and guide activities of the People's Councils; to repeal improper
resolutions of the People's Councils of provinces and cities under the central
authority; to dissolve the People's Councils of provinces and cities under the
central authority if they cause serious damage to the interests of the people.
Declare war in case of emergency.
The organization, authority and operation of the NA are provided in details in the Law on
Organization of the National Assembly.
3.2.
The President of the State4
The President is the Head of State, acting on behalf of the Socialist Republic of Vietnam in
domestic and foreign affairs. The President is elected from among National Assembly
representatives. The President is responsible and accountable to the National Assembly.
The term of office of the President is co-extensive with that of each legislature of the
National Assembly.
The President has the following duties and powers:
Promulgate the Constitution, law and ordinances
Recommend to the National Assembly the election, removal or dismissal of the
Vice President, the Prime Minister, Chief Justice of the Supreme People's Court,
and Chief Prosecutor of the People's Inspectorate General.
Appoint, remove and dismiss Deputy Prime Ministers, Ministers and other
3
Ordinances are technically laws, but issued by the Standing Committee and subject to the NAs approval in the next
session
4
Chapter VI, Constitution
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3.3.
members of the Government on the basis of resolution of the National Assembly.

Appoint, remove and dismiss the Deputy Chief Justice, Judges of the Supreme
People's Court, the Deputy Chief Prosecutor and members of the People's
Inspectorate General.
Recommend to the Standing Committee of the National Assembly to review
ordinances within 10 days of their approval; if these ordinances or resolutions are
still approved by the National Assemblys Standing Committee but the President
does not concur, they can be submitted by the President to the National Assembly
for decision at the earliest session.
Proclaim decisions on declaration of the state of war, decisions on general or local
mobilization, to declare a state of emergency, to sign decrees granting general
amnesties on the basis of resolution of the National Assembly or of the Standing
Committee of the National Assembly.
Decide on the granting, withdrawal or deprivation of Vietnamese citizenship.
Sign decrees granting special amnesties.
Executive Branch: the Government5
The Government is the highest administration body under the management of and
responsible before the National Assembly. It manages the matters related to political,
socio-economic areas, national defense and external relations based on the laws enacted
by the National Assembly.
The Government comprises of various ministries, other agencies and peoples committees
at all administration levels, led by the Prime Minister.
Under the constitution, the Government has the following major authority:
Ensure the implementation of the laws to all organizations and individuals in the
country;
Submit draft laws, ordinances and large projects to the NA and/or its Standing
Committee for consideration and approval;
Manage the development of the economy, implement the national financial and
monetary policies, manage and use the States assets; implement the plan and the
State budget
develop culture, education, health care, science and technology
Implement measures to protect the rights and benefits of citizens;
Ensure national defense, society order and security;
Manage the external relations, conclude international treaties and agreements;
Implement other policies (e.g. social, ethnic, religious) set out by the Constitution
and laws of the NA.
Even though the Constitution only provides the NAs Standing Committee with the right to
interpret laws, the Government and its subordinate agencies are allowed to issue the
following legal documents in order to provide guidance on the implementation of the
laws, which constitute part of the legislation system.
Government: decrees;
5
Chapter VIII, Constitution
14 | P a g e
Prime Minister: decisions;

Ministers: circulars.
It is also important to note that the Government is entrusted with the right to submit
draft laws and ordinances to the National Assembly. In practice, the National Assembly
does not consist of professional and specialized legislators. Its members are working
people gathering only during two 30-day sessions per year. Its mandate of approving the
country's economic and social development plans, financial and monetary policies, the
national budget, as well as questioning the Government's activities takes up a large
amount of time, leaving a modest agenda to legal debate and approval of laws. On the
other hand, its legislation workload increased tremendously under the country's
commitment in its adhesion to the World Trade Organization. Most of laws are passed
after one or two session of debate by the National Assembly, lasting only a few days at
most. The input of the National Assembly on the country's laws is therefore still limited.
In practice, the real legislators are the administrators, particularly the Ministries. A set of
rules on a specific issue in Vietnam typically includes: (i) a law drafted by a relevant
Ministry, consented first by the Government, then approved by the National Assembly; (ii)
an implementing Decree drafted by that Ministry and issued by the Government; and (iii)
an implementing Circular issued by the same Ministry. Adding to this, a significant
number of parliamentarians are administration officials. This has important impacts on
the National Assembly's decision. Laws are usually drafted in such general terms that they
are not enforceable without the implementing decrees and circulars.
This legislation process magnifies the power of the executives, conferring them the
unwritten power to interpret law. Constitutionally, this is in the power of the Standing
Committee of the National Assembly. In the absence of a specialised and effective
supervisor of the constitutionality and legality of legal documents, interpretation of the
executive bodies sometimes results in a de facto amendment to the law.
The organization, authority and operation of the Government are provided in details in
the Law on Organization of the Government.
3.4.
Judicial Branch: the Courts6
The judicial organ comprises the courts of law. Its role is to apply the law to given sets of
circumstances placed before it. The term judicial independence means the judicial organ
of the legal system is separated from the legislative organ and the executive organ. It also
means that judges must act in an objective and impartial manner. They apply the laws
regardless of personal views or bias in any given case. They must be free from the
influence of others in order to ensure that cases put before them are decided with
reference only to the legal principles that govern the situation. Political and other
pressures should be disregarded.
The courts deal with a wide range of criminal and civil matters. Where an individual or
entity is alleged to have failed to comply with criminal law, the court hears the case and
take a decision based on the facts placed before it. If the case is proven, penal sanctions
may then be imposed as required by legislation.
Chapter X, Constitution
15 | P a g e
In civil cases there is usually a dispute between two individuals or bodies and this is
resolved, again by considering the facts and taking a decision that is consistent with the
provisions of statute law.
Apart from that, courts also deal with administrative and labour matters, insolvency cases
or making other judicial declaration upon request such as loss of civil capacities.
Unlike in common law systems such as in Australia, the UK and the USA, the courts in a
civil law system are limited to interpreting and applying the laws as they stand rather than
creating legal principles through judicial precedent. It is usually necessary to consider the
literal meaning and intention of the relevant law. In case of lack of laws, the courts may
consider prior cases to reason and decide the case in hand. The courts may also apply the
principles of the law, custom or analogy of laws.
The court system consists of the Supreme Peoples Court, provincial courts and district
courts. In addition Vietnam also has the military courts at central level (belonging to the
Supreme Court) and regional levels which are in charge of criminal cases related to
military personnel.
Generally the courts are divided into 5 areas (except for the district court): criminal, civil,
economic, labour and administrative courts. The Supreme Court also has the Appellate
Court which is in charge of cases appealed from lower levels.
Courts principles: independent; public trial; collective trial and majority decision; defense
rights for defendants are secured
The organization, authority and operation of the courts are provided in details in the Law
on Organization of Peoples Courts.
3.5.
The Peoples Procuracy
The Peoples Procuracies shall exercise the right to prosecution and control of judiciary
activities according to the Constitution and laws.
Most often, the courts are entitled to hear cases when there is a dispute and the
party(ies) to the dispute bring the case before it for judgment (civil dispute). However, for
criminal cases, the courts can only consider and apply the criminal laws to the case after
the Peoples Procuracy has decided to bring the case to the courts. In this respect, the
Procuracy is acting on behalf of the State to sue other parties when they commit
criminal offences.
The Peoples procuracies also has the following tasks and functions:
1. Exercising the right to prosecution and control of law observance in the
investigation of criminal cases by investigating bodies and other agencies tasked to
conduct a number of investigating activities;
2. Investing some types of offenses against judiciary activities, committed by officials
of judicial bodies;
3. Exercising the right to prosecution and control of law observance in adjudication of
criminal cases;
4. Controlling the settlement of civil, marriage and family, administrative, economic
and labor cases as well as other matters under the provisions of law;
5. Controlling the law observance in the execution of judgments and decisions of the
16 | P a g e
Peoples Courts;
6. Controlling the law observance in the custody, detention, management and
education of imprisonment debtors.
The organization structure of the procuracy is corresponding to the court system as
discussed above.
The National Assembly provides detailed guidance on the organization, authority and
operation of the procuracies in the Law on Peoples Procuracies.
17 | P a g e
CHAPTER 2: THE LAW OF OBLIGATIONS

The main legislation discussed in this chapter is the Civil Code 2005.
I.
1.1.
CIVIL TRANSACTIONS7
Definition
Civil transactions are defined to include contracts or unilateral legal action which give rise
to, change or terminate civil rights or obligations.
The scope of civil transactions are therefore very broad, covering almost all activities in
the society, for instance, when we buy something for breakfast, we are carrying out a civil
transactions which involve the right to enjoy the meal and the obligation to make
payment on our side, concurrently the seller is obliged to provide the foods as promised
and the right to collect payment. Alternatively when someone signs a will to leave assets
to someone else, this action is unilateral but also gives right to the heir to collect assets
for which he or she is entitled to under this will.
1.2. A civil transaction is only valid if it meets the following requirements:
The transacting parties have capacity of civil acts, for example, sale of a house to a
teenager may be deemed invalid due to the fact that the buyer does not have legal
capacity for such transactions.
The purpose and the contents of the transactions do not violate prohibitions of
the laws or morality of the society.
For example, a contract for buying and selling a wife is invalid as it is prohibited by
the criminal laws.
The parties carry out the transactions based entirely on their willingness;
In addition, civil transactions are only valid if executed in certain forms if there are
laws requiring such forms, even though most of transactions can be expressed
either orally, in writing or by certain actions.
For example a contract for sale of land use right must be made in writing and
notarized.
A civil transaction may be declared void for not meeting the above conditions, for
example when a party is forced to sign a contract against his will, the transaction in the
contract is invalid. Article 137 Civil Code provides that when a civil transaction is invalid, it
shall not give rise to civil rights and obligations of the parties, who must restore
everything to its original state and shall return to each other what they have received and
the party at fault must compensate for anv damage8
Invalidity of civil contracts due to impossibility of performing subject matter9
- If, immediately as from the time a contract is signed, it is impossible to perform the
subject matter of the contract for objective reasons, the contract shall be invalid.
- If, when entering into a contract, one party knew or should have known that it was
impossible to perform the subject matter of the contract for objective reasons but failed
to notify the other party which entered into the contract, the first party must compensate
7
Chap VI, Civil Code

This also applies to invalid contracts.
9
Article 41.1 of the Civil Code
8
18 | P a g e
the other party for damage, unless the other party knew or should have known that it was
impossible to perform the subject matter of the contract.
1.3.
Capacity of civil act of individuals and legal capacity of legal entities
Capacity of civil act of individuals10 is defined as the ability of that individual to have civil
rights and civil obligations. Capacity of civil act is a condition for an individual to enter a
civil transaction.
Individuals of 18 years of age or more shall have full capacity of civil act to enter into civil
transactions, except for the below cases:
When a person has an illness (e.g. mental or any other illness) which make him
unable to perceive and control his activities and the competent court has declared
that he loses his legal capacity.
Drug addicts may be deprived of certain legal capacities, upon declaration of the
competent courts;
These persons can only transact via their appointed representatives.
Individuals of 6-18 years of age can only transact via their legal representatives, except for
transactions for daily living purposes. However, individuals of 15 years of age or more
having their own assets can carry out their civil transactions, provided that their assets
can secure the performance of their obligations.
Individuals can carry out their civil rights and obligations either by themselves or through
their legal representatives or authorized representatives. Individuals aged 18 or more can
be full authorized representatives while those aged between 15 and 18 can only act as
authorized representative when the laws do not require persons with full legal capacity to
transact11.
Legal entities12 are different from individuals from the fact that legal entities are artificial
persons. Each entity is established for certain purposes and activities. Their legal capacity
is limited to carrying out civil transactions which are appropriate to their operational
purpose. Legal capacity of a legal entity is also its capacity of civil act.
An organization can be recognized as a legal entity with legal capacity with the following
conditions:
It has been established according to the laws;
It has a concrete organizational structure;
It has assets independent from other individuals and entities
(including
its
founders) and is responsible with those assets. It follows that the founders are not
responsible for the transactions entered into by the legal entity.
It enters the transactions in its own name independently.
It can be seen that the first and the third conditions are most important to determine the
legal entities who can carry out civil transactions. For example a company without a
certificate of business registration is likely not a legal entity, or a dependent branch of a
10
Section 1, Chapter III Civil Code

Chap VII Civil Code
12
Section 1, Chapter IV Civil Code
11
19 | P a g e
company shall not be considered as a legal entity, even if it is established with a license
from the authorities, because its assets belong to its parent company13.
Because legal entities are not natural persons, they can only carry out transactions via
individual legal representatives or authorized representatives. The representatives shall
not be held personally liable if they act in the name of the entities and in accordance with
the regulations under which the entities operate.
Attention should also be paid to the consequences when civil transactions (e.g. contracts)
were entereed into by unauthorized persons or beyond the scope of authorization as
provided in the following articles of the Civil Code, as follows:
Article 145 Consequences of civil transactions entered into and performed by
unauthorized persons
1. A civil transaction entered into and performed by an unauthorized person shall not
give rise to rights and obligations with respect to the principal, unless the
representative or principal so agree. Any person transacting with an unauthorized
representative must notify the principal or representative for such principal in order
to reply within a specified time; if there is no reply upon expiry of that time, such
transaction shall not give rise to rights and obligations with respect to the principal,
but the person who was the unauthorized representative must, nevertheless, fulfil
obligations to the person with which he or she transacted, unless such person knew
or should have known that the representative was unauthorized.
2. A person having transacted with an unauthorized person has the right to terminate
unilaterally the performance of or to rescind the civil transaction entered into and to
demand compensation for any damage, except where such person knew or should
have known that the representative was unauthorized.
Article 146 Consequences of civil transactions entered into and performed by
representatives beyond scope of representation
1. A civil transaction entered into and performed by a representative beyond his or her
scope of representation shall not give rise to rights and obligations of the principal
with respect to that part of the transaction which exceeded the scope of
representation, unless the principal consents or knew and did not object; if [the
principal] does, not consent, the representative must fulfil obligations owing to the
person with which he or she has transacted in respect of that part of the transaction
which is beyond the scope of representation.
2. A person having entered into a transaction with such representative has the right to
terminate unilaterally or rescind the civil transaction with respect to that part which
is beyond the scope of representation or with respect to the entire transaction and
demand compensation for any damage, except where such person knew or should
have known that the scope of representation was exceeded.
3. Where a person and a representative enter into and perform a civil transaction
deliberately beyond the scope of representation of the representative and thereby
cause damage to the principal, they shall be jointly liable to compensate for the
13
The company can authorize its branch director to carry out certain transactions but these must be in the name of
the company, which is responsible for the transactions the branch carried out.
20 | P a g e
damage.
1.4.
Civil obligations14
Civil obligations means acts whereby one or more subjects (obligors) must transfer
objects, transfer rights, pay money or provide valuable papers, perform other acts or
refrain from performing certain acts in the interests of one or more other subjects
(obligees).
Civil obligations arise from the following bases:
Civil contracts.
Unilateral legal acts, e.g. giving an inheritance;
Unauthorized performance of acts, an employee of a company sells the companys
asset without authorization, which may result in an obligation to compensate the
company.
Unlawful possession or use of or receipt of benefits from property, i.e. a person
using up all the money the bank mistakenly transferred to this ATM account is
obliged to pay back.
Causing damage through unlawful acts, e.g. a driver carelessly hits someone on the
street, resulting obligations to compensate for damages.
Other acts as provided by law.
Accordingly, civil obligations may be classified either as contractual obligations or noncontractual obligations (e.g. torts) which shall be discussed below.
II. CONTRACT FORMATION15
2.1. Definition of contract
Contract is defined by the Civil Code simply as an agreement between parties in relation
to the establishment, modification or termination of civil rights or civil obligations.
Civil contract may be concluded verbally, in writing or by an act, except when the laws
provide that certain contracts must be expressed in a specific form. It is a common
perception that written contract has stronger validity than a verbal contract but it is not
necessarily so, written contracts are just better in term of proving what the parties have
initially agreed to.
It should be noted that an act may constitute a contract, for example if the seller displays
an item with a specific price and somebody walks in, presents the seller with that amount
of money and takes the goods, a sale contract has been concluded without any verbal or
written agreements.
Specific regulations may require that a particular type of contract must be in written form
and certified by competent authorities or notarized before the contract becomes valid.
We can see in practice that in many cases the contracts have a standard form offered by
one party which the other party may take it or leave it without ability to modify any terms
and conditions, for example loan contract between banks and borrowers, life insurance
policies, etc.. In such a case the Civil Code provides that the standard form contracts shall
14
15
Section 1, Chapter XVII Civil Code

Section 7, Chapter XVII Civil Code
21 | P a g e
be interpreted in a manner adverse to the party giving the form (e.g. in interpreting the
unclear terms or in considering the liability exclusion, etc.).
2.2. Offer and acceptance
2.2.1. Offer
Offer to enter into a contract means a clear expression by the offeror of its intention to
enter into a contract and to be bound by such offer made to another specific party.
Where an offer to enter into a contract has specified the time for reply and the offeror
enters into a contract with a third person during the time-limit for reply by the offeree, if
the offeror fails to enter into the contract with the offeree and the offeree suffers
damage, the offeror must compensate the offeree for such damage.
Offer may also be in verbal, written form or by a specific act, for example a company may
send a written quotation by fax to its perspective customers, listing the goods, prices and
other conditions for a sale. Alternatively an authorized saleman can discuss face to face
with a customer about the detailed terms and conditions of an offer for sale.
Offers may be classified into 2 categories: unilateral (i.e. offers which are made to the
world at large and the offerors have no ideas whether they will ever be taken up and
accepted) or bilateral (i.e. offers made to a named offeree or a small group of potentially
interested parties).
In practice, it is difficult to determine whether the expression is an offer or just an
invitation to treat, i.e. an invitation made at a preliminary stage in the making of an
agreement where one party seeks to ascertain whether the other would be willing to
enter into a contract and, if so, on what terms. The distinction is usually based on the
intention of the person making the expression given the surrounding circumstances. For
example, an advertisement for sale of a house in the newspaper which briefly indicates
the status of the house and the asking price may not be an offer for sale, just an invitation
to treat. However, if that advertisement includes instruction on how to make a deposit to
a bank account without having to informing the seller, then it is an offer for which the
seller shall be bound if someone makes the deposit.
The moment an offer to enter into a contract comes into effect
The moment an offer to enter into a contract comes into effect is determined as follows:
(a) Where an offeror has specified;
(b) Where an offeror has not specified, the offer to enter into the contract is effective
as from the time the offeree receives the offer.
The following cases shall be deemed to be receipt of an offer to enter into a contract:
(a) The offer is delivered to the place of residence if the offeree is an individual, or the
offer is delivered to the head office if the offeree is a legal entity;
(b) The offer is placed into the official information system of the offeree;
(c) When the offeree knows about the offer to enter into a contract by way of other
means.
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Changes, withdrawal and cancellation of offers:

An offeror may modify or withdraw an offer to enter into a contract in the following
cases:
(a) If the offeree receives notice of modification or withdrawal of the offer prior to or
at the same time as receipt of the offer;
(b) The offeror clearly specified the circumstances in which the offer could be modified
or withdrawn and such circumstances have in fact arisen.
When the offeror has changed the content of the offer, that changed offer becomes a
new offer.
While the above regulations aim to impose a requirement for seriousness of the offerors,
in practice offerors may change or withdraw their offers at anytime before the
acceptance from the offerees. Of course it is always better to note in the offer that terms
and conditions are subject to change upon notice offerors.
When the offeror modifies the contents of the offer, that offer shall be deemed to be a
new offer.
The offeror can cancel an offer only when the cancellation right has been stated in the
offer, in that case the offeror must notify the offeree and such notice shall only be
effective if the offeree receives the notice prior to the offeree providing its acceptance of
the offer to enter into the contract.
Termination of offers
An offer to enter into a civil contract shall terminate in the following cases:
The offeree replies that the offer is not accepted.

The time-limit for acceptance has expired.
When notice of modification or withdrawal of the offer becomes effective.
When notice of cancellation of the offer becomes effective.
As agreed by the offeror and the offeree within the time-limit within which the
offer to enter into a contract remains effective.
2.2.2. Acceptance of offers
Acceptance of an offer to enter into a contract means a reply by the offeree to the offeror
accepting the entire contents of the offer.
When the offeree sends back the acceptance with modification to the terms and
conditions in the offer, or when the offer acceptance is sent after the expiry of the offer,
the offeree is deemed to have made a new offer to the original offeror, for which the
original offeror may rejects or accept.
Time-limits for acceptance of offers to enter into civil contracts
Where an offeror has specified a time-limit for reply, a reply accepting shall only be
effective if it is made within that time-limit. If the offeror receives an acceptance after the
time-limit has expired, such acceptance shall be deemed to be a new offer from the party
which is late in replying.
23 | P a g e
Where the parties communicate directly, including conversations by telephone or other

means of communication, the offeree must reply immediately as to whether or not it will
accept, except where there is an agreement on the time-limit for reply.
Withdrawal of notice of acceptance to enter into contract
The offeree may withdraw an acceptance to enter into a contract if an notice of withdraw
arrives prior to or at the same time as the offeror receives the reply accepting the offer to
enter into a contract.
Timing of contract conclusion
A civil contract is entered into at the time when the offeror receives the reply
accepting to enter into the contract.
A civil contract shall also be deemed to be entered into when the time-limit for
reply has expired and the offeree remains silent provided that the parties have
agreed that silence shall constitute an acceptance. This is not very common in
practice, except for parties with long-established relationship and routine orders
for goods or services.
The time when a verbal contract is entered into is the time when the parties have
reached agreement on the contents of the contract.
The time when a written contract is entered into shall be the time when the last
party signs the contract.
Effectiveness of civil contracts
Unless otherwise stated by the parties or by the laws, the contracts shall become
effective upon conclusion.
2.3.
Types and contents of contracts
The Civil Code distinguishes between different types of contracts as follows:

Bilateral contracts are contracts in which each of the parties has obligations to
each other. This is the most common type of contracts. For example in a sale
contract the seller is responsible to deliver the goods as stated and the buyer is
also responsible to make payment to the seller on time.
Unilateral contracts are contracts in which only one party has obligations to the
other. This type of contract is less popular. For example, in a contract to give assets
as a gift, only the person making the gift has obligations to fulfill the promise while
the recipient has no obligations in return.
A principal contract is a contract the effectiveness of which does not depend on
another contract, most of the contracts are in this type.
An ancillary contract is a contract the effectiveness of which depends on a principal
contract. For example, a mortgage contract for a secured loan is ancillary to the
loan contract because the effectiveness of the mortgage depends on the
performance of the loan contract.
A contract for the benefit of a third person is a contract whereby contracting
parties must perform obligations for the benefit of a third person and the third
person enjoys benefits from such performance. Examples include a service contract
where the service provider is instructed to provide such service to a third party
24 | P a g e
who is not a party to this contract. Accordingly the third party has the right to
reject or demand the service but does not have any obligations to the service
provider.
A conditional contract is a contract the performance of which depends on the
occurrence, modification or termination of a specified event. An insurance contract
is typical for this type, i.e. the insurer is obliged to make compensation to the
insured upon occurrence of certain events.
Because the laws allow parties freedom to transact provided that the transactions do not
violate laws or social moralities, the Civil Code also leave parties to decide on what to
agree in a contract and only provides a guidance on the major contents which parties can
agree in the contract, as follows.
Subject matter of the contract which is property to be delivered or which is an act to be
performed or not performed.
2.4.
Quantity and quality.

Price and method of payment.
Time-limit, place and method of performing the contract.
Rights and obligations of the parties.
Liability for breach of contract.
Penalties for breach of contract.
Other contents.
Interpretation of contracts
When the contents of the contracts are not clear, the contracts shall be interpreted based
on the principles provided in Article 409 of the Civil Code, specifically:
Where a contract contains terms and conditions which are unclear, the
interpretation of such terms and conditions shall be based not only on the wording
of the contract but also on the mutual intentions of the parties.
Where a term of a contract may be interpreted in different ways, it shall be
interpreted in the way which, when effective, will best benefit the parties.
Where the wording of a contract may be interpreted in different ways, such
wording shall be interpreted in the way most appropriate to the nature of the
contract.
Where a contract contains a term or wording which is difficult to understand, such
term or wording shall be interpreted in accordance with the customary practice of
the place where the contract was entered into.
Where a contract lacks a number of terms, such terms may be added to the
contract in accordance with the customary practice for that particular type of
contract at the place where the contract was entered into.
The terms of a contract must be interpreted in relation to each other so that the
meanings of the terms conform with the entire content of the contract.
Where there is a conflict between the mutual intentions of the parties and the
wording used in the contract, the mutual intentions of the parties shall be used in
order to interpret the contract.
25 | P a g e
Where the party in a powerful position inserts into the contract contents which are
disadvantageous to the party in a weak position, the contract shall be interpreted
in a manner favouring the party in a weak position.
It should be noted that the above principles are not ranked in any order, as such
interpretation of an unclear provision may be interpreted using any or more than one
principle.
2.5.
Principles for performance of civil contracts
The performance of a civil contract must comply with the following principles:
1. Proper performance of the contract in compliance with the agreed subject matter,
quality, quantity, type, time-limit, method and other matters;
2. Performance in good faith, in the spirit of co-operation, for the best benefit of the
parties and in mutual trust;
3. No infringement of the interests of the State or the public or the legal rights or
interests of other persons.
2.6.
Termination of contracts
According to Article 424 of the Civil Code, a civil contract shall terminate in the following
cases:
(a) The contract has been completed;
(b) The parties so agree;
(c) Where a contract can only be performed by the particular
contracting
party
(individual, legal entity) and that particular individual dies, or that legal entity
ceases to exist;
(d) The contract is cancelled or unilaterally terminated (e.g one party breaches the
contract and the other one unilaterally terminated it);
(e) The contract is not able to be performed because the subject matter of the
contract no longer exists. For example the parties agree to buy and sell a car but
after signing that car is stolen. In such case, the parties may agree to substitute the
subject matter of the contract with another subject matter or to compensate for
any damage (if one party is at fault).
Cancellation of civil contracts16
1. A party has the right to cancel a contract and shall not be liable to compensate for
damage where the parties agree or the law provides that a breach of contract by
the other party gives rise to cancellation.
2. A party cancelling a contract must notify the other party immediately of the
cancellation [and] must compensate if the failure to notify causes damage.
3. Where a contract is cancelled, it shall be [deemed to have been] ineffective as from
the time when it was entered into and each party must return the assets it has
received from the other party. If restitution is not able to be made in kind, it must
be paid in money.
4. A party at fault in relation to the cancellation of a contract must compensate for
16
Article 425 of the Civil Code
26 | P a g e
any damage.
Unilateral termination of performance of contracts17
A party has the right to terminate unilaterally the performance of a contract if so agreed
by the parties or so provided by law.
A party terminating unilaterally the performance of a contract must notify the other party
immediately of its termination of the contract [and] must compensate if the failure to
notify causes damage.
Where the performance of a contract is terminated unilaterally, it shall terminate from
the time when the other party is notified of the termination. [In such case,] the parties do
not have to continue to perform their obligations. A party which has already performed
its obligation may demand the other party to make payment.
The party at fault in the case of unilateral termination of a contract must compensate for
any damage.
III. SECURING OBLIGATIONS
3.1. General
In many cases, civil transactions can only be carried out if one or more parties to the
transactions are provided with some forms of assurance that the other parties shall
perform their obligations. For example, the lender of money is unsure if the borrower
shall repay any of the money and would not be willing to lend unless the borrower put up
some of his assets in the hand of the lender to ensure that the lender shall have
something to dispose in the event of default by the borrower. Therefore security is
important to enable many transactions to realize, security measures may also lower the
costs of transactions between parties18.
Items used for security may be physical assets, money, valuable papers, property rights or
the assets to be formed in the future19, provided that these items belong to the security
providers and are allowed for transaction20. The items may be used to secure the entire or
part of the transactions, as agreed by the parties, for a certain period of time21.
Under the Law on registration of security transactions, many secured transactions must
be registered before they are effective, for example a mortgage of land use right must be
registered with the local authorities and becomes effective at the time of registration.
The order of priority for payment upon disposal of a security property shall be determined
as follows:
Where security transactions are registered, the order of priority for payment upon
disposal of a security property shall be determined according to the order in which
the security transactions were registered.
17

For example if the lender does not have any security from the borrower, he may demands a very high interest rate
to compensate the risk and put more efforts in monitoring the borrower, thus increasing the costs of transactions.
19
For mortgage, not pledge
20
For example the pledge of a gun as security would be invalid because guns are prohibited from circulation.
21
If not provided then the period shall be deemed to end when the secured obligations have been fulfilled.
18
27 | P a g e
When a single item of property is used as security for performance of several civil
obligations and there are security transaction[s] which are registered and security
transactions] which are not registered, the registered security transaction[s] shall
have priority for payment.
When a single item of property is used as security for performance of several civil
obligations and none of the security transactions are registered, the order of
priority for payment shall be determined according to the order in which the
security transactions were established.
3.2.
(a)
Means of security
Pledge22
Pledge of property means the delivery by one party (the pledgor) of property under its
ownership to another party (the pledgee) as security for the performance of a civil
obligation. If a pledgor fails to perform or performs improperly a civil obligation when it
falls due, the pledged property may be disposed of in accordance with the agreed
methods, or auctioned in accordance with law, in order to fulfill the obligation. The
pledgee shall have priority to payment from the proceeds of sale of the pledged property
with the remaining to be paid back to the pledgor.
A pledge of property must be made in writing, either in a separate document or stated
within a principal contract and becomes effective as from the time of delivery of the
property to the obligee.
Obligations of pledgors
To deliver the pledged property to the pledgee as agreed, this can be a physical
property or the papers evidencing ownership of property rights.
To notify the pledgee of any third person rights with respect to the pledged
property. This must be made at the time of conclusion of security transaction and
aims to ensure that the pledgee has full rights over the pledged property or
advance knowledge of any encumbrance over the property so that he can decide
whether to accept the pledge or not. For instance, if a vehicle was bought on an
installment basis with some outstanding payment and is now proposed for a
pledge, the pledgor must notify the pledgee of the installment purchase because
the seller may have some rights over this vehicle if the pledgor fails to pay as
agreed.
To pay the pledgee reasonable expenses for taking care of and preserving the
pledged property, unless otherwise agreed. This is because the pledgor as the
owner is entitled to enjoy the benefits of the property even during the pledge
period.
Rights of pledgors
To demand the pledgee to suspend use of the pledged property if the pledged
property is in danger of losing its value or depreciating in value as a result of such
use.
22
Part II, Section 5, Chapter XVII, Civil Code.
28 | P a g e
To sell the pledged property if the pledgee agrees.

To substitute the pledged property with other property if so agreed.
To demand the pledgee holding the pledged property to return the pledged
property after the obligation secured by the pledge has been fulfilled.
To demand the pledgee to compensate for any damage caused to the pledged
property.
Obligations of pledgees
To take care of and preserve the pledged property. If the pledgee loses or damages
the pledged property, the pledgee must compensate the pledgor for the damage.
Not to sell, exchange, give, lease or lend the pledged property and not to use it as
security for the performance of another obligation.
Not to exploit, nor to enjoy the benefits or income derived from, the pledged
property without the consent of the pledgor. This is because the property is still in
the ownership of the pledgor.
To return the pledged property upon fulfillment of the secured obligation or where
the pledge is substituted with another security.
Rights of pledgees
To demand a person unlawfully possessing or using the pledged property to return
the property.
To demand the disposal of the pledged property in accordance with the methods
as agreed or as provided by law in order to satisfy the obligation.
To exploit, and to enjoy the benefits and income derived from, the pledged
property if so agreed.
Upon returning the pledged property to the pledgor, to be reimbursed for
reasonable expenses incurred in taking care of the pledged property.
(b)
Mortgage
Mortgage of property means the use by one party (the mortgagor) of property under the
ownership of the obligor as security for the performance of a civil obligation to the other
party (the mortgagee) without transferring such property to the mortgagee23 . If an
obligor fails to perform or performs incorrectly a civil obligation when it falls due, the
mortgaged property shall be disposed in a manner similar to pledge mentioned above.
Property mortgage must be made in writing, either in a separate document or stated
within a principal contract; and if so required by law, the written document must be
notarized, certified and/or registered.
Generally the mortgagors are required to transfer the documents proving ownership of
the property to the mortgagees because the property itself is not transferred. Mortgage
of many property such as immovable property, land use rights, etc. are required to be
registered with the competent authorities.
23
This is the primary difference from a pledge
29 | P a g e
The rights of obligations of the parties discussed below are generally similar to those of
pledge, the differences are due to the fact that the mortgaged property is not transferred
to the mortgagee.
Obligations of mortgagors of property
To take care of and preserve the mortgaged property. If the mortgaged property is
in danger of losing its value or depreciating in value due to its exploitation, to take
necessary remedial measures, including ceasing the exploitation of the mortgaged
property.
To notify the mortgagee of any third person rights with respect to the mortgaged
property.
Not to sell, exchange or give the mortgaged property, except when allowed by the
mortgagee or when the mortgaged property is the goods circulating in the
business/production cycle24.
Rights of mortgagors of property
To exploit, and to enjoy the benefits and income derived from, the property,
except where the benefits and income also form part of the mortgaged property as
agreed. This is because the mortgagor is still the owner and keeping the property.
To invest in order to increase the value of the mortgaged property.
To sell or replace mortgaged property being goods rotating during the production
and business process.
To sell, exchange or give other mortgaged property, if the mortgagee agrees.
To lease or lend the mortgaged property provided that notice must be provided to
the lessee and the borrower that the property is being mortgaged and that the
mortgagee must also be notified that such notice has been provided.
To recover the mortgaged property held by a third person when the obligation
secured by the mortgage is terminated or is substituted by other security.
Obligations of mortgagees of property
Where the parties agree that the mortgagee will hold the documents relating to
the mortgaged property, to return to the mortgagor such documents upon
termination of the mortgage.
To request the competent State body for registration of security transactions to
remove the registration upon termination of the mortgage.
Rights of mortgagees of property
To require the mortgagor or the borrower of mortgaged property to terminate use
of the mortgaged property if such use causes loss of value or depreciation in value.
To examine and inspect directly the mortgaged property provided that such
examination
and inspection does not hinder or cause difficulty to the use and exploitation of the
mortgaged property.
To require the mortgagor to provide information on the current status of the
mortgaged property.
24
In effect the mortgage is on the receivables from the goods, rather than the goods themselves.
30 | P a g e
To require the mortgagor to apply necessary measures to preserve the property

and the
value of the property if there is a danger that use and exploitation of the
mortgaged property will cause loss of value or depreciation in value of the
property.
To require the mortgagor or a third person holding the mortgaged property to
deliver it to the mortgagee for disposal if, upon expiry of the term for fulfillment of
the obligation, the obligor has failed to perform or performed incorrectly the
obligation. This right is essential because under a mortgage the mortgagee does
not keep the property.
To supervise and inspect the process of formation of property in the case of a
receipt of a mortgage of property to be formed in the future.
To demand disposal of the mortgaged property and to enjoy priority right to
payment in case the mortgagor does not fulfill his obligations properly.
(c) Performance bond25
Performance bond means a sum of money, precious metals, gemstones or other valuable
objects (performance bond property) delivered by one party to another party for a period
of time as security for the entering into or performance of a civil contract. A performance
bond must be recorded in writing.
Upon a civil contract being entered into or performed, any performance bond property
shall be returned to the party which delivered the bond, or deducted from the amount of
an obligation to pay money (which is more common). If the party which delivered the
bond refuses to enter into or perform the civil contract, the performance bond property
shall belong to the recipient of the bond. If the recipient of the bond refuses to enter into
or perform the civil contract, it must return the performance bond property and pay an
amount equivalent to the value of the performance bond property to the party which
delivered the bond, unless otherwise agreed.
For example when the buyers and sellers of a house have agreed on all the terms and
conditions, the buyer shall deliver to the seller a sum of money (e.g. 10% of the sale price)
as performance bond that he will conclude the official sale contract. If the buyer later
decides not to buy, he will lose such money. If the contract is concluded, normally the
money is deducted from the total sale price. On the other hand, the seller has to pay back
to the buyer the amount he received plus one time of that amount as compensation for
not concluding the sale contract.
This security measure is one of the oldest means of security and also the most popular in
daily transactions.
(d)
Security Deposit26
Security deposit means a sum of money, precious metals, gemstones or other valuable
objects (hereinafter referred to as security deposit property) delivered by a lessee of
25
26
Part IV, Section 5, Chapter XVII Civil Code, commonly referred to as deposit, i.e. t cc
Part IV, Section 5, Chapter XVII Civil Code, k cc in Vietnamese
31 | P a g e
moveable property to the lessor for a period of time as security for the return of the
leased property.
Where the leased property is returned, the lessee is entitled to recover the security
deposit property after any outstanding rent is deducted therefrom. If the lessee does not
return the leased property, the lessor is entitled to reclaim the leased property. If the
leased property is no longer able to be returned, the security deposit property shall
belong to the lessor.
(d)
Escrow Deposit27
Escrow deposit means a sum of money, precious metals, gemstones or other valuable
papers deposited by an obligor into an escrow account at a bank as security for the
performance of an obligation.
Where an obligor fails to perform or performs incorrectly an obligation, the obligee is
entitled to be paid, and compensated for any damage that the obligor causes, by the bank
where the account is held, after bank service charges are deducted. Generally the escrow
agreement with the banks shall clearly provide what is the trigger point for making
payment to the obligee.
The procedures for making deposits and making payments shall be as provided by the law
on banking.
Example: the purchaser of a majority shares in the company from an existing shareholder
may require that after the sale the seller must cause its people to resign from the board
of the company and propose the purchasers representatives to replace. Part or the entire
sale price may be paid to an escrow deposit which is only released to the seller upon the
board of the company approves the above proposal. If not then the bank will pay back an
agreed amount to the purchaser.
(e)
Guarantee28
Guarantee means an undertaking made by a third person (the guarantor) to an obligee

(the beneficiary) to perform an obligation on behalf of an obligor (hereinafter referred to
as the principal) if the obligation falls due and the principal fails to perform or performs
incorrectly the obligation. The parties may agree that the guarantor shall only be obliged
to perform the obligation if the principal is incapable of performing it.
When more than one person guarantee an obligation, those persons must perform jointly
the guarantee, except where it is agreed or provided by law that the guarantee comprises
separate portions. The obligee may demand any of the joint guarantors to perform the
obligation in its entirety (who shall then be able to recover the respective costs from
other guarantors).
If a guarantor fails to perform or performs incorrectly the obligation on behalf of the
principal when it falls due, the guarantor must provide property under its ownership in
order to pay the beneficiary.
27
28
Part IV, Section 5, Chapter XVII Civil Code, k qu in Vietnamese

Part IV, Section 5, Chapter XVII Civil Code, bo lnh in Vietnamese
32 | P a g e
A guarantee must be made in writing, either in a separate document or stated within a

principal contract; and if so required by law, the written guarantee must be notarized or
certified.
IV.
4.1.
BREACH OF CONTRACT29
General
Breach of contracts may take the form of non-performance or improper performance of

certain contractual obligations which the party at fault has committed to perform.
Because the parties are free to enter into transactions which are not prohibited by the
laws, it follows that they may also negotiate and agree measures to deal with breaches of
contract, e.g. compensation for damages, penalties, etc30... Otherwise the relevant
provisions in the Civil Code or other laws on specific types of contracts shall apply, the
major of which are discussed below31.
Fail to deliver the goods
If one party fails to deliver the goods, it will be forced to do so or to pay value of
the goods to the other party. The other party may also claim compensation if the
non-performance of obligations results in damages.
Fail to perform an act/ not to perform acts
If one party fails to perform an act, the other party may carry out the act by itself
or engages another party to perform then claim the reasonable costs and damages
from the party at fault.
If one party has an obligation not to perform an act but, nevertheless, performs
such act, the obligee has the right to demand the obligor to cease performing the
act, make restitution and compensate for any damage.
Late in performance (e.g. delay in delivering the goods):
Article 285(1) of the Civil Code states that the time limit for the performance of a
civil obligation is agreed by the parties to the obligation or as stipulated by law.
Where this is the case, the obligation must be performed in compliance with the
time limit agreed or imposed.
The obligation may be performed before the time limit if agreed by the parties. If
one party fulfills the obligation before the time limit without such agreement, but
the other party accepts the performance, the obligation is considered to have been
discharged on time.
Late performance of a civil obligation is the failure to have performed the civil
obligation in whole or only performed the civil obligation in part as at the expiry of
the time-limit for the performance of such obligation. The party being late in
performance of a civil obligation must notify immediately the obligee about the
failure to have performed the civil obligation in a timely manner.
If an obligor delays in performing its obligations, the obligee may either (i) extent
the time of performance (ii) demand for performing the obligations and claim for
damages or (iii) reject the performing of obligations and claim for damages. If the
29
Section 3, Chapter XVII Civil Code on breach of civil obligations

Dealing with breaches is one of the main contents of the contracts as guided by the Civil Code.
31
Article 303-308 Civil Code
30
33 | P a g e
obligation involves the payment of money and the payment is late, the obligee
must pay interest on the overdue amount for the period of the delay. The interest
is set with reference to the basic rate announced by the State Bank or at a rate
otherwise agreed.
Late in acceptance of performance (Le, delay in receiving the goods):
Article 288 provides for late acceptance of the performance of an obligation. This
occurs when the time limit for performance has expired and the obligation has
been fulfilled by one party but this has not been accepted by the other party.
If the subject matter of the late acceptance of the obligation is property, the
obligor must take the necessary steps to preserve the property and is entitled to
expect the reimbursement of reasonable expenses in this respect.
If the property is in danger of damage or is deteriorating, the obligor has the right
to sell the property and must pay the proceeds of sale to the obligee after
deducting the necessary expenses incurred for preservation and sale.
Article 306 states that when the obligee is late in accepting the performance of the
obligation and causes damage to the obligor, the obligee must pay compensation
for any damage and must accept all risks arising from the time at which acceptance
fell due.
The obligation to deliver an object shall be fulfilled at the moment when the object
is deposited for bailment in the quantity, quality and other conditions as agreed by
the parties.
Liability to compensate for damage
Liability to compensate for damage comprises the liability to compensate for
physical damage and the liability to compensate to make up for spiritual damage.
The liability to compensate for physical damage is the responsibility to make up for
those actual physical losses caused by the party in breach which is able to be
calculated in terms of money, comprising loss of property, reasonable expenses to
prevent, mitigate or restore damage, and the actual loss or reduction of income.
A person causing spiritual damage to another person by harming his or her life,
health, honour, dignity or reputation must, in addition to ceasing the harmful acts
and making a public apology and retraction, pay a sum of money to such other
person to make up for the spiritual damage caused.
It should be noted that the person claiming damages must be able to prove the
actual damages, unless otherwise agreed in the contracts32.
32
For example parties may agree on a punitive damage, which does not depend on the actual damage
(compensatory damage)
34 | P a g e
4.2.
Exempted from liability
A party may be considered as not breaching contractual obligations in the following cases:
Non-performance or improper performance because of a force majeure event. In
order for an event to be considered a force majeure which results in exemption of
obligation performance, that event must be beyond the knowledge and control of
the party(ies) at the time of committing the obligation, even though available
remedial measures have been tried. Examples include wars, hurricane, fire, etc.
If the obligor is able to prove that the failure is the fault of the obligee
Cases on which are agreed by the parties
It should be noted that Chapter XVIII of the civil Code provides guidance on different
types of contracts and liability for breach of these contracts. However, this is not the
focus of this lecture notes and it is sufficient to apply the general principles discussed
above.
4.3.
Dispute resolution
In most of contracts, the parties shall agree on a dispute resolution process, which can be
either or all of the following means:
Negotiation between the parties;

Mediation by an independent party;
Arbitration by competent arbitrators; or
Resolution by the courts.
Even though the parties do not initially provide for the above means in the contracts, they
can still choose them upon mutual agreement. Otherwise the case is normally brought
directly to the competent courts for resolution.
Statute of limitation
Article 427 of the Civil Code provides that the statue of limitation to bring the case to the
courts is 2 years from the day the legitimate rights or benefits of a contractual party are
infringed.
The 2-year limitation may be extended in certain cases such as force majeure, lack of
representatives when the party does not have legal capacity to sue, etc.
V.
5.1.
NON-CONTRACTUAL LIABILITIES (TORT)33

Basis for tort
A person intentionally or unintentionally harming the life, health, honour, dignity,

reputation, property, or other legal rights or interests of an individual, or harming the
honour, reputation, or property of a legal entity or other subject, thereby causing
damage, must compensate for such damage. The non-contractual liability also arises even
if the party causing damages is not at fault if the laws so provide.
33
Chapter XXI Civil Code.
35 | P a g e
For example, if a driver negligently hits someone crossing the street, causing personal
injuries, he is liable to pay damages for health deterioration, loss of income, medical
expenses, etc.
There are four conditions for tort to arise:
There are damages, which are discussed further below;
The acts causing damag : are illegal. Therefore legal acts c'aiisiitg damages may not
result in liabilities such as a fireman destructing a house in order to extinguish a
fire, etc.
There is fault of the person causing damages, except when the laws provide
otherwise (e.g. owners of highly dangerous items may be liable even if they are not
at fault in causing damages.
There is a cause-effect relationship between the illegal acts and the damages.
Statute of limitation for bringing to the courts of non-contractual cases is also 2 years
from the day the rights or benefits are infringed.
5.2.
Capacity for compensation liability
A person of eighteen (18) or more years of age who causes damage shall be personally
liable to compensate because that person is considered under the Civil Code as having full
capacity of civil act.
Where a minor under fifteen (15) years of age causes damage, his or her parents, if any,
must compensate for the total damage. If the parents have insufficient property to
compensate and the minor who has caused the damage has property of his or her own,
such property shall be used to satisfy the outstanding amount of compensation.
Where a person who is between fifteen (15) and eighteen (18) years of age causes
damage, such person must compensate by recourse to his or her own property. If such
person has insufficient property to compensate, the parents of such person must satisfy
the outstanding amount by recourse to their own property.
Where a minor, or a person who has lost the capacity for civil acts, causes damage but
there is a guardian, such guardian shall use the property of the ward to compensate. If in
sufficient the guardian must use his property to compensate, unless the guardian is able
to prove that he or she was not at fault with respect to guardianship.
5.3.
Damages
Principles of compensation for damage34

Damage must be compensated in full and promptly. Unless otherwise provided by law,
parties may agree on the amount of compensation; on the form of compensation, which
may be money, in kind or the performance of an act; on one-off payment or payment in
instalments; and on the method of compensation.
The compensation payable by a person having caused damage may be reduced if such
damage was caused unintentionally and is very large in comparison to the short-term and
long-term financial positions of such person.
34
36 | P a g e
If the amount of compensation [determined] becomes unrealistic, the aggrieved person,

or the person having caused damage, has the right to request a court or another
authorized State body to change the amount of compensation.
The below list some major types of damages provided in the Civil Code:
Damage caused by infringement of property
-
Loss of property, damages or destruction of property,

Benefits associated with the use of property and
The reasonable expenses incurred to minimize the damages.
Damage caused by harm to health

-
Reasonable costs for medical treatment, functional losses and impairment of the
aggrieved person;
Loss of or reduction in the actual income of the aggrieved person.
Reasonable costs and actual income losses of the caretaker of the aggrieved
person during the period of treatment. If the aggrieved person loses his or her
ability to work and requires a permanent caretaker, the damage shall also include
reasonable costs for taking care of the aggrieved person.
Mental suffering
Damage caused by harm to life

-
Reasonable costs for treating, nursing and caring for the aggrieved person prior to
the death of the aggrieved person;
Reasonable funeral costs;
Support for the dependents of the aggrieved persons;
Mental suffering
Damage caused by harm to honour, dignity or reputation

5.4.
Reasonable costs for mitigating and remedying the damage;

Loss of or reduction in actual income.
Mental suffering.
Specific cases
Section 3, Chapter XXI of Civil Code provides for various cases in which specific
compensation liabilities are required. The below discussed some common cases.
Compensation for damage caused by persons belonging to legal entity
A legal entity must compensate for any damage caused by any person belonging to the
legal entity during the performance of duties assigned by it [to such person]. If a legal
entity has compensated for any damage, it has the right to demand the person at fault for
causing the damage to reimburse it an amount of money in accordance with law.
Compensation for damage caused by workers and trainees
An individual, legal entity or other subject must compensate for any damage caused by
any worker or trainee belonging to it during the performance by the employee or trainee
of his or her assigned duties. The individual, legal entity or other subject has the right to
demand such worker or trainee reimburse it an amount of money in accordance with law.
37 | P a g e
The above provisions are designed to protect the interest of the aggrieved persons
because it is normally easier to claim damages from the legal entity or from the
employers, rather than to the persons under the management/employment of such
entities or employers.
Exemption from compensation liability
A person causing damage while acting in reasonable self-defense or within the
requirements of an emergency situation shall not be liable to compensate any aggrieved
person. If it is proven that the acts are beyond the reasonable self-defense or in excess of
requirements in an emergency situation then liability may arise.
Compensation for damage caused jointly by several persons
Where several persons jointly cause damage, they must jointly compensate any aggrieved
person. 109 Liability for compensation of each person having jointly caused the damage
shall be determined in proportion to the degree of fault of each person. If the degree of
fault is not able to be determined, the persons causing damage must compensate in equal
shares.
Compensation for damage where aggrieved person is at fault
If an aggrieved person is at fault for causing the damage, the person having caused the
damage shall only be liable for a share of the damage in proportion to the degree to
which such person is at fault for causing such damage. If the aggrieved person is totally at
fault for causing the damage, the person causing the damage shall not be liable to
compensate.
Compensation for damage caused by infringement of consumer interests
An individual, legal entity or other subject carrying out production or business and failing
to ensure quality of goods, thereby causing damage to consumers, must compensate for
such damage.
38 | P a g e
CHAPTER 3: OVERVIEW OF CORPORATE LAW

I.
1.1.
BASIC CONCEPTS
Separate Personality & Limited Liability
Separate legal personality

Separate legal personality refers to the existence of an enterprise as a distinct entity,
separate from both those who own it (members, or shareholders) and those who manage
it. Once incorporated according to the laws (e.g. through the issuance of a business
registration certificate by the State authorities), the enterprise become an artificial
person, also called legal person or legal entity. Accordingly, shareholding companies or
Limited liabilities under Vietnamese law are a kind of legal entities.
This legal fiction means that the law allows these legal persons to act as persons for
certain limited purposessuch as own property, enter into contract, incur noncontractual obligation, file and defend themselves with lawsuits.
Any investments of the members or shareholders in cash or in assets will become the
capital of the company and their shares represent a claim against these assets. For
example, a shareholder who owns 10% of the shares in a company does not own 10% of
its various types of asset but does have right to 10% of the residual value should the
enterprise cease to exist.
A legal entity can continue to operate beyond the lifetime of the shareholders. Ownership
of the enterprise is therefore transient, as shareholders transfer or bequeath their shares
to their sucessors.
The company can own assets and create liability on its own behalf within the value of its
own assets. The shareholders cannot be held liable for any sum over their investment in
the company However, the separation of the legal entity from the individuals is not
absolute, for example the Law on Enterprise holds directors or shareholders personally
liable if they transact outside the scope of delegated authorities or for their personal
interests35. Or in the case of fraud, the courts may lift the corporate veil to look at the
shareholders or directors to impose liabilities.
The company can generate its own income and expenditure. Any profit generated by the
company may be retained or distribute to the shareholder in compliance with regulation
of the laws.
The company can enter transactions in its own name independently (such as enter into a
contract). It can take legal action and can also subject to litigation in its own name.
Under the Civil Code of Vietnam, entities are considered to have separate legal
personality if they meet the following conditions:
It has been established according to the laws;
It has a concrete organizational structure;
It has assets independent from other individuals and entities (including its
founders) and is liable for its obligation within the value of its own assets. It follows
that the founders are not responsible for the transactions entered into by the legal
35
For example: Article 80.5 for shareholders, 108.4 for Board of Management, 116.4 for General Director.
39 | P a g e
entity.
It enters the transactions in its own name independently.
Limited liability
Limited liability is a concept derived from the principle of separate legal personality,
whereby a person's financial liability is limited to a fixed sum, most commonly the value
of a person's investment in a company or partnership with limited liability. A shareholder
in a limited company or shareholding company is not personally liable for any of the debts
of the company, other than for the value of his investment in that company. The same is
true for the limited liability partners in a partnership. Thus, if a company becomes
insolvent the shareholders cannot usually be called upon to contribute to the losses
suffered by creditors and others.
By contrast, sole proprietors and general partners partnerships are each liable for all the
debts of the business (unlimited liability).
Although a shareholder's liability for the company's actions is limited, the shareholder
may still be liable for its own acts either by law or by contracts. For example, the directors
of small companies (who are frequently also shareholders) are often required to give
personal guarantees of the company's debts to those lending to the company. They will
then be liable for those debts in the event that the company cannot pay, although the
other shareholders will not be so liable. This is known as co-signing. Or when shareholders
carry out business in the name of the companies without authorization, they will be held
liable.
Limited liability is supposed to encourage enterprise because few would be willing to
invest in business knowing that they would be held liable for their business with all of
their personal property.
Again, this is not an absolute shield against potential liability. For example, where a
shareholder has purchased shares for which the full nominal value has not been paid, he
may be called upon to contribute the balance if the company is insolvent.
It is important to stress that limited liability does not refer to the liabilities of the business
itself, as these are the full responsibility of the business while it remains a going concern.
Nor does limited liability apply to those who manage the company, except to the extent
that they may also be shareholders in the enterprise.
Types of enterprises
Based on the concepts of separate legal personality and limited liability, enterprises may
be grouped into 2 categories: (i) enterprises with unlimited liabilities for owners, including
private enterprise (i.e. individual entrepreneurs) and partnerships with unlimited liability
partners; and (ii) enterprises with limited liability for owners, including limited liability
companies and shareholding companies.
1.2.
Corporate representation Legal Representative
Legal Representation
For limited liability companies or shareholding companies, the chairman or general
director shall be the legal representative of the company as stipulated in the charter of
40 | P a g e
the company. The legal representative of the company must permanently reside in
Vietnam; if he is absent from Vietnam for more than 30 days, he must provide a power of
attorney to another person in accordance with the provisions in the Charter of the
company to exercise the rights and discharge the duties of the legal representative of the
company.
Authorized Representative36
Upon performing the rights and obligations, the legal representative of the companies
may delegate the powers to one or more persons within the organization. For example HR
director may be authorized to negotiate and sign labour contracts on behalf of the
general director. Authorization must be made by appropriate power of attorney in
writing. The Law on Enterprise does not govern this issue, therefore the Civil Code would
be the governing legislation37.
1.3.
Rights & obligations of enterprises related to doing business
Under the Law on Enterprises, enterprises shall have the following rights and obligations
related to doing business:
Rights
Conduct business autonomously in respect of business lines, investment location or
forms;
Select appropriate form and manner of raising, allocating and using capital.
Take initiative in seeking markets and customers and signing contracts.
Conduct import and export business.
Recruit, employ and use labour in accordance with business requirements.
Decide autonomously on business affairs and internal relations.
Possess, use and dispose of assets of the enterprise.
Refuse any demand for supply of any resources not sanctioned by law.
Participate directly or via the authorized representative in legal proceedings
Obligations
Conduct business strictly in accordance with the lines of business recorded in the
business registration certificate, subject to business conditions, if any;
Organize accounting works, to prepare and submit truthful and accurate financial
statements on time in accordance with the law on accounting.
Register, declare and pay taxes and to perform other financial obligations as
provided for by law.
Ensure rights and interests of employees in accordance with labour legislation,
social insurance, medical insurance and other insurance for employees in
accordance with the law on insurance.
Ensure and be responsible for the quality of goods or services in accordance with
registered or published standards.
Periodically report fully information relating to the enterprise and its financial
36
This should be differentiated with authorized representative of members or shareholders of companies who are
organizations, appointed to perform the rights of such members or shareholders.
37
Refer to Chapter VII, Civil Code for details.
41 | P a g e
position in the stipulated forms with the authorized State body;

Comply with the law on national defend, security, social order and safety,
protection of natural resources and the environment, protection of historical and
cultural sites and places of interests.
II.
CORPORATE CONSTITUTION
Charter of the enterprise can be seen as the constitution of the enterprise because it
provides the framework for formation, operation and dissolution of enterprises, for
instance how to inject capital, organizational structure and management authority and
duties, etc.
The charter of the enterprise must contain the following contents:
Name, addresses of the head office, branch, representative office.

Lines of business.
Charter capital; method of increasing and reducing the charter capital.
Full names, addresses, nationality and other basic characteristics of founding
shareholders, partners, members of enterprises, depending on the type of
enterprise.
Details about capital contribution of each party to the enterprise;
Rights and obligations of members, partners or shareholders;
Management and organizational structure;
Legal representative in the case of a limited liability company or a shareholding
company;
Procedures for passing resolutions of the company; rules for resolution of internal
disputes;
Bases and method of calculating remuneration, wages and bonuses of managers
and members of the inspection committee or of inspectors.
Circumstances in which a member may require the company to redeem its share of
capital contribution in a limited liability company or shares in a shareholding
company;
Rules for distribution of after tax profits and dealing with losses in the business;
Cases of dissolution, procedures for dissolution and procedures for liquidation of
the assets of the company;
Procedures for amendments of or additions to the charter of the company;
Full names and signatures of all unlimited liability partners in the case of a
partnership; of the legal representative, of the company owner, of members or of
the authorized representative in the case of a limited liability company; of the legal
representative of founding shareholders in the case of a shareholding company.
Other matters as agreed by the members or shareholders but may not be
inconsistent with provisions of the law.
Generally, the laws allow flexibility for shareholders to agree on the contents of the
charter, except for those specifically required in the Law on Enterprise. For instance, the
laws allow the shareholding companies to decide on the required quorum for passing
ordinary resolutions, but cannot be lower than 65% of the total votes of sharehoders
present at the meetings. In case anything in the charter contravenes with the laws, then
that provision shall be deemed invalid and the respective provisions of the law shall apply.
42 | P a g e
III.
3.1.
COMPANY FORMATION
Right to establish enterprises
Generally all Vietnamese and foreign organizations or individuals have the right to
establish and manage enterprises in Vietnam, subject to certain restrictions.
Some organizations and individuals shall not have the right to establish and manage
enterprises in Vietnam such as state bodies, units of peoples armed forces of Vietnam
using State assets to establish business enterprises to make profits for their own bodies or
units, state officials and employees, minors, persons whose capacity for civil acts is
restricted or lost, prisoners, etc.
The following organizations and individuals shall not have the right to establish and
manage enterprises in Vietnam:
(a) State bodies, units of peoples armed forces of Vietnam using State assets to
establish business enterprises to make profits for their own bodies or units;
(b) State officials and employees in accordance with the law on State officials and
employees;
(c) Officers, non-commissioned officers, career servicemen, national defend workers
in bodies and units of the Peoples Army of Vietnam; officers, career noncommissioned officers in bodies and units of the Peoples Police;
(d) Management personnel, professional management personnel in enterprises with
one hundred (100) per cent State owned capital, except for those appointed to be
authorized representatives to manage the States share of capital contribution in
other enterprises;
(e) Minors; persons whose capacity for civil acts is restricted or lost;
(f) Persons serving prison sentences or who are prohibited by a court from conducting
business;
(g) Other cases as stipulated by the law on bankruptcy.
3.2. Business lines of enterprises
Enterprises in all economic sectors shall have the right to conduct lines of business which
are not prohibited by law.
Enterprises may have to meet the conditions to conduct certain business lines if the laws
so require. The' conditions may include a business license, certificate of satisfaction of
conditions for business, practicing certificate, certificate of professional indemnity-insurance, requirement for legal capital, etc.
Generally the conditional business lines are provided in details in other legislation, for
example the Law on Real Estate Business requires enterprises to have legal capital of at
least 6 billion VND to operate real estate business, the Law on Lawyers requires a legal
practicing license to open a law firm, etc.
Certain business lines are prohibited to enterprises when they adversely affect national
defense, security, social order and safety, historical, cultural and ethical traditions, fine
customs and traditions of Vietnam and the peoples health or deteriorating natural
resources or destroying the environment. The list is published by the Government.
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3.3.
Dossiers for registration of enterprises
Depending on the types of enterprises, different registration dossiers are required,

however the following basic documents must be submitted to the business registration
authorities:
Business registration request under prescribed forms, which generally contains
details about the enterprise to be set up (name, head office, business lines, charter
capital, legal representative, etc.), details about the shareholders/owners (name,
address, capital contribution ratio, etc.),
Draft charter;
List of shareholders, owners, partners or members of the enterprises, attached
with documents proving identity of such persons/organizations (ID card for
individuals, certificate of business registration for entities, etc.);
Certification of legal capital, if so required for the registered business lines;
Practicing licenses.
Documents, order, procedures, conditions for and contents of business or investment
registration of foreign investors making the first investment in Vietnam shall also be
subject the Law on Investment. The investment certificate shall also be the business
registration certificate.
3.4.
Issuance of business registration certificate
Conditions for issuance of business registration certificates

Having submitted a proper set of registration documents, an enterprise shall be issued
with a business registration certificate within 10 working days when it satisfies all of the
following conditions:
1. Its line of business to be registered does not fall within the sectors in which
business is prohibited;
2. The name of the enterprise complies with the Law (no identical name or confusing
name, prohibited name)
3. Having its head office within Vietnam territory and definite address;
4. Having valid business registration documents in accordance with law;
5. Having paid in full the prescribed business registration fee in accordance with
law.
Business registration fees shall be determined on the basis of the number of lines of
business for which business registration is made; the Government shall provide specific
fee rates.
In the case of any changes to the name or addresses of the head office, branch,
representative office, objectives and lines of business, charter capital, quantity of shares
which may be offered for sale, investment capital of the owner of an enterprise, change
of the legal representative of an enterprise and other matters included in the business
registration documents, the enterprise must register with the business registration body
within 10 working days from the date the alteration is decided upon.
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Name of enterprises
Name of the enterprise is relatively important upon business registration. The Law on
Enterprise provides that the name of an enterprise must be written in Vietnamese, can
contain numbers and signs, must be pronounceable and contain at least the two following
elements: (a) Type of enterprise and (b) Own name. For example Cong ty TNHH Mot
thanh vien Chung khoan Ngan hang Ngoai Thuong, Cong ty Co phan Vincom, etc. Foreign
language translation is allowed.
The Law also prohibits the following practices in naming enterprises:
To use the name of a State body, armed forces, political organization, social
organization
as the whole or a part of the own name of an enterprise unless otherwise
approved by such organization;
To use terms which contravene national historical traditions, culture, ethics and
fine customs;
To use names which are identical to, or cause confusion with, the name of a
registered enterprise.
Identical names mean that the name of an enterprise requesting registration, when
written and pronounced in Vietnamese, is completely identical to the name of a
registered enterprise. Confusing names are cases whereby the proposed names shall, if
approved, cause confusion to third parties with the names of enterprises already
registered with the licensing authorities, for example:
Identical pronunciation, eg. T & M & t & m;
The only difference is sign e.g Cong ty TNHH Anh Em and Cong ty TNHH Anh &
Em";
The abbreviated names are identical;
The only difference in the own name is an ordinal number (e.g. 1st, 2nd),
a
cardinal number (1,2) or Vietnamese letters immediately after the own name;
The only difference is the word Tn, Mi or location indication Min Bc,
Min
Nam, etc. or words of similar meanings
3.5.
Pre-incorporation contracts
In many cases the investors shall need to enter into certain transactions before the
incorporation of the enterprises, which may serve the incorporation purposes (e.g. hiring
consultants) or preparation for the business of the enterprises (e.g. lease of offices, hiring
employees, etc.). Article 14 of the Law on Enterprise contains provisions governing these
contracts, as follows:
A member, founding member or an authorized representative may sign contracts for the
purpose of the establishment and operation of the enterprise prior to business
registration.
Where the enterprise is established, the enterprise shall assume the rights and obligations
arising from the signed contracts. Where the enterprise is not established, the person(s)
45 | P a g e
who signed the contracts shall be liable or jointly liable for the performance of such
contracts
IV.
4.1.
CAPITAL CONTRIBUTION
Loan capital vs. share capital
The company may raise financing by either loan capital or share capital.
Share capital is a security representing the owners equity, or stake, in a company. The
stake that the owner has is represented by the nominal value of the share as determined
by the Charter of the company. It defines the rights of the owner of the share capital and
any limitations on those rights. The owner of the share capital is a member or shareholder
of the company.
A share capital is the companys permanent capital. Shareholder has a claim against the
company. This claim is deferred until the company ceases to exist, except where the law
or the Charter provide for redemption of the share. Significantly therefore, shares are
normally permanent capital in that the owner does not recover the capital unless the
share is redeemed according to rights under the law or the Charter, or if the company is
liquidated and happens to be insolvent. When the company is liquidated, the right to
claim against the share is subordinate to the claims of the liquidator and the creditors (i.e.
the owners of loan capital).
A share confers significant membership rights and hence an entitlement to participate in
decision taking. Under the Vietnamese Law on Enterprises, the general meeting is the
supreme decision taking body of the company, with rights of different classes of
shareholder determined by the Charter. The shareholder has a right to attend meetings,
vote and propose matters for consideration by the meeting; the right to be provided with
information on the company (such as its financial statement, management ...); the right to
a dividend if the company makes profits and if, declared.
Loan capital is also a claim against the company. It represents the relationship between a
debtor and creditor with terms and conditions determined by specific clauses contained
in the contract between the loan provider and the company. The most important clause is
to repay the principal capital and make payments of interest according to the terms of the
contract, irrespective of the profitability of the company. Failure to abide by the
conditions of the loan gives the creditors the power to litigate for recovery of monies due.
If the company liquidated, creditors have priority of repayment ahead of the shareholder.
Creditors may have a right to financial or other information produced by the company as
the creditors may require such information as a condition for the loan. However, creditors
have no rights to participate in the decision taking of the company at general meetings as
of the shareholders.
4.2.
Valuation of assets contributed as capital
Members of a limited liability company or partnership and shareholders of a shareholding

company must transfer ownership of assets to the company for the purpose of capital
contribution. This does not apply to a private enterprise.
Capital contribution may be in the form of Vietnamese currency, freely convertible
foreign currency, gold, value of land use rights, value of intellectual property rights,
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technology, technical know how, or other assets recorded in the charter of the company
as being contributed by the members to form the capital of the company.
In respect of registered assets or value of land use rights, the person contributing capital
must transfer the ownership of such assets or the value of land use rights to the company
by completing the procedures at the authorized State body.
Registration fees shall not be payable in respect of transfer of ownership of assets
contributed as capital;
In respect of assets the ownership of which is not registered, capital contribution must be
made by handing over assets contributed as capital, as evidenced by minutes.
Assets contributed as capital which are not cash or gold must be valued by members,
founding shareholders or professional valuation organization.
Assets contributed to an enterprise upon its establishment shall be valued by members or
founding shareholders on an agreed basis; where the assets contributed as capital are
valued more than their actual value at the time of capital contribution, the members or
founding shareholders shall be jointly responsible for debts and other property
obligations of the company for an amount equal to the difference between the agreed
value and the actual value of the assets contributed as capital at the time of completion
of the valuation.
Assets contributed as capital during the course of operations shall be valued on the basis
of agreement between the enterprise and the person making the capital contribution or
by a professional valuation organization. Where a professional valuation organization
conducts the valuation, the value of the assets contributed as capital must be accepted by
the person making the capital contribution and the enterprise; where the assets
contributed as capital are valued more than their actual value at the time of capital
contribution, the person making the capital contribution or the valuation organization and
the legal representative of the enterprise shall be jointly responsible for debts and other
property obligations of the company for an amount equal to the difference between the
agreed value and the actual value of the assets contributed as capital at the time of
completion of the valuation.
Capital contribution to shareholding companies must be made within 90 days while the
capital contribution to limited liability companies shall be made in accordance to the
schedule agreed by the members (not later than 36 months since the date of issuing the
business registration certificate or of issuing certificate of amendment of members).
Consequences of failure to contribute capital are discussed in each type of the companies
below.
V.
PROHIBITED PRACTICES
1. To
issue business registration certificates to persons not satisfying the
conditions or refusing to issue business registration certificates to persons
satisfying the conditions stipulated in this Law; to cause any delay, trouble,
obstruction, or hassle to persons requesting business registration or business
activities of enterprises.
2. To conduct business in the form of an enterprise in accordance with the Law on
Enterprises without carrying out business registration, or to continue to conduct
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business after the business registration certificate has been revoked.

3. To declare dishonestly or inaccurately the contents of the business registration
documents; to declare dishonestly, inaccurately or in an untimely manner the
alterations to the business registration documents.
4. To declare wrongly the registered capital or failing to contribute capital in full and
on time as registered; to deliberately value assets contributed as capital not at
their actual value.
5. To operate illegally or to deceive; to conduct prohibited lines of business.
6. To conduct conditional lines of business without satisfying all the business
conditions stipulated by law.
7. To prevent owners, members or shareholders from exercising their rights in
accordance with the Law on enterprise and the charter of the company.
8. Other prohibited practices as stipulated by law.
VI.
FOREIGN INVESTMENT UNDER INVESTMENT LAW
Even though the Law on Investment applies to both domestic and foreign investment
projects, rules regarding foreign investment are still the main focus of this law, at least in
practice.
The Law sets out the general rule that foreign investors may invest in all sectors not
prohibited by laws and are required to obtain an investment certificate from the licensing
authorities to carry out an investment projects. When the investment also involves the
incorporation of a company, the investment certificate also serves as the certificate of
business registration of the newly created company.
Investment from foreign investors can be made under the following forms:
Establishment of 100% foreign-owned companies;
Establishment of joint venture with other domestic or foreign investors;
Business Co-operation Contracts, Build-Operate-Transfer, Build-Transfer-Operate
or Build-Transfer contracts;
M&A activities.
Generally investors must submit the following documents in order to be issued with an
investment certificate:
Investment registration form;
Statement of financial capacity of the investors;
Business registration dossiers, as discussed in 3.3 above, if the investment project
comes with a new company;
Technical-economic feasibility study for certain projects.
An investment project may be subject to investment registration procedures if the
invested capital is under VND300billlion and the business lines do not fall within the
conditional sectors (e.g. financial & banking, real estate business, training & education,
natural resources exploration, etc.), otherwise it will be subject to investment evaluation
procedures.
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CHAPTER 4: CORPORATE LAW - PARTNERSHIP38

I.
1.1.
GENERAL
Definition
A partnership is an enterprise including at least two individual members being co-owners

of the company jointly conducting business under one common name (general
partners39), who shall be liable for the obligations of the company to the extent of all of
their assets. A partnership may also have limited partners40 who shall only be liable for the
debts of the company to the extent of the amount of capital they have contributed to the
company.
A partnership is recognized as a legal entity because its assets are independent from its
partners, regardless of the fact that some partners bear unlimited liability for the
partnerships obligations. The assets of a partnership include the following:
Assets contributed as capital by partners the ownership of which has been
transferred to the company.
Assets created in the name of the company.
Assets derived from business activities conducted by general partners in the name
of the company and from business activities in the registered lines of business of
the company conducted by general partners in their personal name.
1.2.
Types of Partnership
A partnership may be entirely unlimited, i.e. it includes all unlimited liability partners who
are responsible for partnerships obligations with all personal assets41. Or the partnership
may include limited liability partners, which is generally called limited partnership. It
should be noted that Vietnamese laws do not permit the form of limited liability
partnerships which has been adopted by many countries such as the US, Singapore, UK,
etc, in which all partners are provided with limited liability protection.
1.3.
Formation
A partnership shall be recognized as a legal entity upon issuance of the business

registration certificate by the business registration body.
Partnership registration dossiers must include the following:
Standard form of business registration;

Draft corporate charter;
List of partners and their personal identification documents;
Confirmation of legal capital contribution if required for their business lines; and
Practice certificate if required for their business lines.
38
Chapter V, Law on Enterprise.

Thnh vin hp danh, which may also be referred to as unlimited liability partners
40
Thnh vin gp vn, which may also be referred to as limited liability partners
41
Which may be referred to as limited partnership or general partnership
39
CHAPTER 4: CORPORATE LAW - PARTNERSHIP
49 | P a g e
1.4.
Termination of Partnership
A partnership may be brought to an end by way of dissolution if at least % (or a different

quorum provided in a charter) of all general partners approves such dissolution.
Alternatively, a partnership may be declared bankrupt by the courts under the Law on
Bankruptcy.
II.
2.1.
MANAGEMENT OF PARTNERSHIP
Partners Council
The highest body of a partnership is the Partners Council, which comprises of all partners.
Any general partner shall have the right to request that a meeting of the Partners' Council
be convened to discuss and resolve the business affairs of the company. The requesting
partner must prepare agenda, content and documents for the meeting.
The Partners' Council shall have the right to resolve all of business affairs of the company,
which shall be approved if agreed by at least 2/3 of the general partners (or a higher
quorum provided by the partnership charter), except that the following issues shall require
the approval of at least 3/4 of the total number of general partners (or a different quorum
provided in the partnership charter):
Development policies of the company;

Amendments of or additions to the charter of the company;
Admission of a new general partner;
Approvals for a general partner to withdraw from the company or resolution on
dismissal of a partner;
Approval of investment projects;
Raising finance valued at 50% or more of charter capital, sales or purchases of
assets
which are valued at 100% or more of the charter capital of the company, or a higher
percentage is stipulated in the charter of the company;
Approval of annual financial statements, total profits distributable and amount of
profits to be distributed to each partner;
Dissolution of the company.
It should be noted that only general partners have the right to vote for the above issues.
The right to vote of limited partners is discussed below. .
2.2.
Partners
General partners shall be entitled to be legal representatives before the law and organize
management of the daily business of the company. All restrictions on general partners in
conducting the daily business of the company shall only be effective against a third party if
such party knows of such restrictions. It means that even if some general partners are
subject to certain authority restrictions internally, any transactions conducted by such
partners are still binding on the company unless the outside parties are aware of such
restrictions before or at the time of entering into the transactions. This provision aims at
protecting third parties transacting with the partnership in good faith.
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In management of business activities of the company, general partners shall allocate

amongst them the tasks of management and control of the company. Where a number of
or all the general partners together carry out a number of business activities, decisions
shall be passed by a majority.
Activities carried out by a general partner beyond the scope of registered lines of business
of the company shall not fall within the companys liability, unless such activities are
approved by the other partners.
A general partner shall not be allowed to act as the owner of a private enterprise or as a
general partner of another partnership, unless otherwise approved by other general
partners.
A general partner shall not be allowed to conduct in his or her own name or in the name of
another person the same line of business as the partnership for his or her personal benefit
or to serve the benefit of another organization or individual. When this happens, any
benefits from the transactions shall be deemed as belonging to the partnership.
A general partner shall not be allowed to transfer all or part of its share of capital in
company to another person without the consent of other unlimited liability partners.
the
Admission of new partners

An existing partnership may admit new general partners or limited partners, subject to
approval by the Partners Council.
Newly admitted partners must contribute capital in full as undertaken to the company
within 15 days from the approval date, unless the Partners Council decides on a different
time-limit.
The new general partner must be jointly liable for the debts and other property obligations
of the company to the extent of all his assets, unless such partner and other partners have
agreed otherwise.
Termination of partner status
General partner status shall be terminated in the following cases:
(a) Voluntarily withdraws capital from the company. A general partner shall be entitled
to withdraw capital from the company if the Partners Council so agrees. In this
case, the partner who wants to withdraw capital from the company must give
written notice of the capital withdrawal request no later than six months prior to
the withdrawing date. He or she may only withdraw capital at the end of the
financial year after the financial report of such year had been approved.
(b) Has been excluded from the company in the following cases:
Unable to contribute capital or fails to contribute capital as undertaken after the
company makes its request for the second time;
Violates prohibitions of the laws (e.g. to be owner of private enterprise, to carry out
same business of the partnership personally, etc.)
Does not carry out the business activities truthfully and diligently or carries out
other inappropriate acts causing serious damage to the interests of the company
and other partners;
Does not perform the obligations of a general partner properly.
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During the two years from the date of termination of the general partner status as
stipulated in (a) and (b) above, such individual remains jointly liable to the extent of all his
or her assets for the partnerships debts which arise prior to the termination date of the
partner status.
(c) Dies or has been declared dead by a court;
(d) Has been declared by a court as missing or having restricted capacity for civil acts or
as having lost the capacity for civil acts;
(e) Other cases stipulated in the charter of the company.
2.3. Chairman, General Director (or Director) of Partnership
The Partners' Council shall elect a general partner to be the chairman of the Partners'
Council who may concurrently act as the director or general director of the company, who
shall have the following duties and authority:
To manage and operate the daily business activities of the company in the capacity
of a general partner;
To convene and organise meeting of the Partners' Council; to sign decisions or
resolutions of the Partners' Council;
To allocate tasks, co-ordinate business activities among the general partners; to sign
decisions on internal rules and regulations and other internal organization matters
of the company;
To organise, arrange and store books of account, invoices, vouchers and other
documents of the company fully and truthfully;
To represent the company in relationship with state bodies, to represent the
company as defendant or plaintiff in lawsuits, commercial disputes or other
disputes;
III.
3.1.
AUTHORITY AND LIABILITY OF PARTNERS

Rights and obligations of general partners
Rights
To attend meetings, to discuss and vote on matters of the partnership; each general
partner shall have one vote or another number of votes as stipulated in the charter
of the partnership;
To conduct business activities in the name of the partnership in the registered lines
of business; to negotiate and sign contracts, agreement or covenants on terms that
such general partner considers most favourable for the partnership;
To use the seal and assets of the partnership for the business activities in the
registered lines of business; if such partner advances his or her own money in order
to conduct the business activities of the partnership, he or she shall be entitled to
require the partnership to refund the principal and interest at the market rate of
interest on the amount of principal advanced;
To claim compensation from the partnership for damage arising from the business
activities within his or her authority if such damage is not caused by a personal
mistake of such partner;
To request the Partnership and other unlimited liability partners to provide
information on the business of the Partnership; to inspect assets, books of account
52 | P a g e
and other documents of the Partnership where he or she considers necessary;

To be distributed with profits in proportion to his or her share of capital or as
agreed in the charter of the Partnership;
Upon dissolution or bankruptcy of the Partnership, to be distributed with part of the
remainder of the value of assets of the Partnership in proportion to his or her share
of capital in the Partnership unless the charter of the Partnership provides for
another ratio;
The heir of general partners shall be entitled to his share of assets in case of death
Obligations
To manage and conduct business activities honestly, diligently to the best of his or
her ability in the best lawful interests of the Partnership and all members;
To manage and conduct business activities of the Partnership strictly in accordance
with law, the charter of the Partnership and resolutions of the Partners' Council; he
or she shall be responsible for compensation for damage caused by his or her
breach of the provision of this clause;
To not use the assets of the Partnership for his or her personal benefit or for the
benefit of another organization or individual;
To return to the Partnership any amount of money or assets received and
compensate for any damage caused to the Partnership in the case where he or she
receives such money or assets from the business activities in the registered lines of
business of the Partnership in the name of the Partnership or in his or her name or in
the name of another person, but fails to pay [such money or assets] to the
Partnership;
To be jointly liable to discharge in full outstanding debts of the Partnership in the
case where the assets of the Partnership are insufficient for the discharge of its
debts;
To bear losses in proportion to its share of capital in the Partnership or as agreed in
the charter of the partnership in the case where the partnership suffer losses during
its business;
To submit regular truthful and accurate reports on his or her business operations
and results to the Partnership on a monthly basis; to provide information on his or
her business and business results to any partner who so requests;
3.2. Rights and obligations of limited liability partners
Rights
To attend meetings, to discuss and vote at Partners Council on amendments of and
additions to the charter of the partnership; amendments of and additions to the
rights and obligations of limited partners, on re-organization and dissolution of the
Partnership and other content of the charter of the Partnership directly relating to
his or her rights and obligations. It means that for other issues limited liability
partners do not have the right to vote.
To be distributed with annual profits in proportion to his or her share of capital in
the charter capital of the partnership;
To be provided with the Partnerships annual report; to request the chairman of the
Partners Council and the unlimited liability partners to provide complete and
53 | P a g e
accurate information on the business of the Partnership; to check books of account

and minute books, contracts, transactions, files and other documents of the
Partnership;
To transfer his contributed capital in the Partnership to another;
To conduct business activities in the registered lines of business of the Partnership
in his or her own name or in the name of another. It should be noted that this does
not apply to general partners. In this respect, limited liability partners are similar to
a shareholder of a joint stock Partnership.
To dispose of his or her contributed capital by bequeathing, giving, donating,
mortgaging, pledging and other forms in accordance with law and the charter of the
Partnership;
To be distributed with part of the remainder of the value of assets of the
Partnership in proportion to his or her share of capital in the Partnership upon
dissolution or bankruptcy of the Partnership;
Obligations
To be liable for the debts and other property obligations of the Partnership to the
extent of his or her contributed capital as undertaken;
Not to manage the Partnership, not to conduct business activities in the name of
the Partnership;
To comply with the charter, internal rules of the Partnership and decisions of the
Partners Council.
54 | P a g e
CHAPTER 5: CORPORATE LAW - SHAREHOLDING COMPANIES42

I.
1.1.
GENERAL
Definition
A shareholding company is an enterprise in which the charter capital shall be divided into
equal portions called shares, owned by shareholders which may be organizations or
individuals. The minimum number of shareholders shall be three and there shall be no
restriction on the maximum number.
Shareholders shall be liable for the debts and other property obligations of the enterprise
only within the amount of capital contributed to the enterprise.
1.2.
Classes of shares Ordinary shares
Ordinary shareholders
Shareholding companies must have ordinary shares. Owners of ordinary shares shall be
ordinary shareholders.
Founding shareholders must together register to subscribe at least 20% of the number of
ordinary shares which may be offered for sale and must pay in full for the shares registered
to subscribe within 90 days from the date of issuance of the business registration
certificate of the company. Failure to do so will result in the unpaid shares taken up by
other founding shareholders or offered to third parties. The founding shareholders are
jointly liable for any obligations of the company up to the value of the unpaid shares.
Within a period of three years from the date of issuance of the business registration
certificate to the company, ordinary shares of founding shareholders may be freely
assigned to other founding shareholders, but may only be assigned to persons not being
founding shareholders if approved by the General Meeting of Shareholders. In this case,
shareholders intending to assign shares may not vote on the assignment of such shares
and the assignee shall automatically become a founding shareholder of the company.
After 3 years from the date of issuance of the business registration certificate to the
company, all restrictions on ordinary shares of founding shareholders shall be lifted.
Preference shares
Shareholding companies may have preference shares. Owners of preference shares shall
be called preference shareholders, which shall have rights and obligations similar to
ordinary shareholders, except for certain restrictions mentioned below.
(a) Voting preference shares: a voting preference share is a share which shall carry
more votes than an ordinary share. The number of votes that may be casted by a
voting preference sharehoders is specified in the charter of the company. Only
organizations authorized by the Government and founding shareholders may hold
42
Chap IV, Law on Enterprise
CHAPTER 5: CORPORATE LAW - SHAREHOLDING COMPANIES
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voting preference shares. The voting preference of founding shareholders shall be

valid for only three years from the date of issuance of the business registration
certificate of the company and are not transferable. After that period, voting
preference shares of founding shareholders shall be converted into ordinary shares.
(b) Dividend preference shares; A dividend preference share is a share for which
dividend shall be paid at a rate higher than that paid for an ordinary share or at an
annual fixed rate. Annually paid dividends shall include fixed dividends and bonus
dividends. Fixed dividends shall not depend on the outcome of the business of the
company. The specific rate of fixed dividends and method for determination of
bonus dividends shall be stated in dividend preference share certificates.
(c) Redeemable preference shares: a redeemable preference share is a share which
shall be redeemed by the company at any time upon demand by its owner or in
accordance with the conditions stated in the redeemable preference share
certificate.
Dividend and redeemable preference shareholders shall not have the right to vote, the
right to attend General Meetings of Shareholders or the right to nominate candidates to
the BoM and the Inspection Committee.
(d) Other types of preference shares stipulated in the charter of the company.
Shares are freely transferable, except for the restriction of founding shareholders and
voting preference shares.
1.3.
Offer for sale of shares
The BoM shall determine the timing and method of and the price at which shares shall be
offered for sale for the number of shares which may be offered for sale. The price at which
shares shall be offered shall not be lower than the market price at the time of offering or
the most recently recorded value in the books of shares, except in the following cases:
(a) Initial offering of shares to persons other than founding shareholders;
(b) Shares offered to all shareholders in proportion to the respective numbers of shares
they currently hold in the company;
(c) Shares offered to brokers or underwriters. In this case, the specific amount of
discount or rate of discount must be approved by the shareholders representing at
least 75% of the total number of shares with voting rights;
(d) Other cases stipulated in the charter of the company.
It should be noted that the restriction refers to market price rather than face value.
Therefore a share may be offered for sale at price lower than the face value if such offer
reflects market value.
1.4.
Share-related documents Share certificates
Share certificates
Share certificates are certificates issued by a shareholding company or book entries
certifying the ownership of one or more shares of such company. Share certificates may or
may not contain names of shareholders and must contain the certain particulars such as
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details of the company, number of shares, par value, details of the shareholders,
producers for share assignment.
Register of shareholders
A shareholding company shall establish and maintain a register of shareholders from the
date of issuance of the business registration certificate. The register of shareholders may
be in the form of a document or an electronic file, or both and must contain the following
certain particulars such as details about the company, number of shares, details of
shareholders, etc.
The register of shareholders shall be retained at the head office of the company or at the
centre for registration, depository, clearing and payment of securities and available for
shareholders to examine.
Shareholders owning 5% or more of the total number of shares must be registered with a
competent business registration body within seven working days from the date of
acquiring such ownership percentage.
1.5.
Redemption of shares
Redemption requested by the shareholders (applied to ordinary shares)

A shareholder voting against the re-organization of the company or against a change to the
rights and obligations of shareholders stipulated in the charter of the company may
demand the company to redeem its shares at the market price or the price determined on
the basis of the principle stipulated in the charter of the company. Where there is
disagreement relating to the price, such shareholder may sell shares to other people or the
parties may request valuation by a professional valuation organization. The company shall
recommend at least three professional valuation organizations for the shareholder to
select from and such selection shall be the final decision.
It should be noted that the law only accords the redemption right to shareholders
disagreeing with certain issues which affect their rights directly, not to every issues in
managing the company. This is to maintain the capital commitment in the company.
Redemption by the company (applied to ordinary shares and dividend preference shares)
A company may redeem maximum 30% of the total number of ordinary shares sold, and
part or all of the dividend preference shares sold, either by resolution of the BoM
(maximum 10% of the total number of shares of each class already sold within each 12month period) or General Meeting of Shareholders (if higher amount is proposed).
The BoM shall decide on the price for redemption of shares. The price for redemption of
ordinary shares shall not be higher than the market price at the time of redemption. In
respect of shares of other classes, unless otherwise provided in the charter of the company
or agreed between the company and the relevant shareholders, the price for redemption
shall not be lower than the market price;
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The company may redeem shares of each shareholder in proportion to the number of
shares each holds in the company, in this case the redemption price does not need to be
market price.
Conditions for payment and dealing with redeemed shares
A company may only pay shareholders for redeemed shares if, after such redeemed shares
are paid for, the company shall still be able to satisfy in full its debts and other property
obligations. All shares redeemed shall be considered shares not yet sold amongst the
shares which may be offered for sale.
1.6.
Payment of dividents
Dividends paid to preference shares shall be in accordance with the conditions applied
separately to each type of preference shares.
Dividends paid to ordinary shares shall be determined on the basis of the net profit
performed and payment for dividends shall be sourced from profits retained by the
company. A shareholding company may only pay dividends to shareholders when the
company has fulfilled its tax obligations and other financial obligations in accordance with
law; has appropriate all funds of the company and fully covered previous losses in
accordance with law and the charter of the company; and upon payment of all intended
dividends, the company is still able to satisfy its debts and other property obligations
which become due.
1.7.
Recovery of payments for redeemed shares or dividends
Where a payment for redeemed shares is made other than in accordance with article 92.1
of this Law or where dividends are paid other than in accordance with article 93 of this
Law, all shareholders shall surrender to the company the monies or other assets received;
where a shareholder cannot surrender same to the company, such shareholder and
members of the Board of Management shall be jointly liable for the debts of the company
within the scope of the monies or assets which have been paid to shareholders but have
not been surrendered
1.8.
Management
Shareholding companies shall have a General Meeting of Shareholders, a Board of

Management and a director or general director; and shareholding companies having more
than 11 shareholders being individuals or having organizations owning more than 50% of
the total shares of the company must have an Inspection Committee.
The chairman of the BoM or director or general director shall be the legal representative of
the company as stipulated in the charter of the company. The legal representative of the
company must permanently reside in Vietnam; if he is absent from Vietnam for more than
30 days, he must provide a power of attorney to another person in accordance with the
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provisions in the Charter of the company to exercise the rights and discharge the duties of
the legal representative of the company.
II.
SHAREHOLDERS
2.1. Rights of ordinary shareholders
To attend and express opinions at the General Meeting of Shareholders and to
exercise the right to vote directly or through an authorized representative; each
ordinary share shall carry one vote;
To receive dividends at the rate decided by the General Meeting of Shareholders;
To be given priority in subscribing for new shares offered for sale in proportion to
the number of ordinary shares each shareholder holds in the company;
To freely assign their shares to other shareholders and to non-shareholders, except
for the restriction of founding shareholders;
To sight, look up and make an extract of information of certain documents, such as
list of shareholders, the charter of the company, the book of minutes of meetings of
the General Meeting of Shareholders and resolutions of the General Meeting of
Shareholders;
Upon dissolution or bankruptcy of the company, to receive a part of the remaining
assets in proportion to the number of shares contributed to the company;
Other rights stipulated in this Law and the charter of the company.
A shareholder or a group of shareholders holding more than ten (10) per cent of the total
ordinary shares for a consecutive period of six months or more, or holding a smaller
percentage as stipulated in the charter of the company, shall have the following rights:
(a) To nominate candidates to the BoM and the Inspection Committee (if any);
(b) To sight and make an extract of the book of minutes and resolutions of the Board of
Management, mid-year and annual financial statements according to the forms of
the Vietnamese accounting regime and reports of the Inspection Committee;
(c) To request the convening of a General Meeting of Shareholders in the following
cases:
The BOM seriously breaches the rights of shareholders, managements duties or
makes decisions ultra vires.
The term of BOM has expired more than 6 months but no replacement has been
made.
(d) To request the Inspection Committee to inspect each particular issue relating to the
management and administration of the operation of the company where it is
considered necessary.
(e) To request that additional issues be included in the agenda of the General Meeting
of Shareholders.
2.2. General Meeting of Shareholders
2.2.1 Authority of General Meeting of Shareholders
Shareholders are generally not entitled to participate in the business management of
companies, instead they can only exercise their rights under certain circumstances, the
major of which is the General Meeting of Shareholders, which shall include all
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shareholders which may vote and shall be the highest decision-making authority of a
shareholding company.
Shareholders which are organizations shall have the right to appoint one or more
authorized representatives to exercise their shareholders rights in accordance with law; in
a case where more than one authorized representative is appointed, then the specific
number of shares and the specific number of votes of each representative must be
specified. The appointment, termination or change of an authorized representative must
be notified in writing to the company at the earliest possible time.
The General Meeting of Shareholders shall have the following rights and duties:
a. To pass the development direction of the company;
b. To make decisions on the classes of shares and total number of shares of each class
which may be offered for sale; to make decisions on the rate of annual dividend for
each class of shares, unless the charter of the company otherwise provides;
c. To elect, remove or discharge members of the BoM and members of the Inspection
Committee;
d. To make investment decisions or decisions on sale of assets43 valued at 50% or
more of the total value of assets recorded in the most recent financial statement of
the company unless the charter of the company stipulates some other percentage.
Anything below this limit shall be the authority of the BoM or the General Director.
e. To make decisions on amendments of and additions to the charter of the company;
f. To approve annual financial statements;
g. To make decisions on redemption of more than 10% of the total number of shares
of each class already sold;
h. To consider and deal with breaches by the BoM and the Inspection Committee
which cause damage to the company and its shareholders;
i. To make decisions on re-organization and dissolution of the company.
2.2.2 Authority to Convene General Meeting of Shareholders
The General Meeting of Shareholders shall take place on an annual44 or ad-hoc basis45, and
there shall be a General Meeting of Shareholders at least once per year within 4 months
from the end of the financial year (which may be extended at the request of BoM but not
later than 6 months from the end of the financial year).
The BoM must convene an ad-hoc meeting of the General Meeting of Shareholders in the
following cases:
The BoM considers it necessary to do so in the interests of the company;
The number of the remaining members of the BoM is less than the number of
members required by law;
Upon request by a shareholder or a group of shareholders of 10% shares or more;
Upon demand by the Inspection Committee;
43
Other transactions are within the authority of BoM even if value is more than 50% total asset.
Commonly referred to as annual generral meeting of shareholders, or AGM
45
Also called extra ordinary general meetng of shaerholders, or EGM
44
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In other cases stipulated by law and the charter of the company.

Where the BoM fails to convene a meeting of the General Meeting of Shareholders 30
days, the Inspection Committee shall replace the BoM in convening the General Meeting
of Shareholders in accordance with this Law. Chairman of the BoM shall be responsible
before the law and must pay compensation for any damage arising to the company.
If the Inspection Committee fails to convene a meeting as stipulated, then the head of the
Inspection Committee must be responsible before the law and must pay compensation for
any damage arising to the company.
Where the Inspection Committee fails to convene a meeting, the requesting shareholder
or group of shareholders of 10% shares or more shall have the right to replace the BoM
and the Inspection Committee in convening the General Meeting of Shareholders
2.2.3 Program and agenda of General Meeting of Shareholders
The convenor of the General Meeting of Shareholders must prepare a list of shareholders
entitled to attend the meeting and to vote; prepare the program, agenda and documents
for the meeting and draft resolutions on each of the items in the agenda; fix the time and
location of the meeting and send a written invitation to all shareholders entitled to attend
the meeting.
A shareholder or a group of shareholders holding more than ten (10) per cent of the total
ordinary shares for a consecutive period of six months or more, or holding a smaller
percentage as stipulated in the charter of the company may recommend items to be
included in the agenda of the General Meeting of Shareholders. The recommendation
must be made in writing and be sent to the company no later than 3 working days prior to
the date of opening, unless the charter of the company stipulates some other time-limit.
The convenor of the General Meeting of Shareholders may only refuse the
recommendation in any of the following cases:
(a) The recommendation is not sent on time, is insufficient, or is in relation to an
irrelevant matter;
(b) The item recommended does not fall within the decision-making authority of the
General Meeting of Shareholders;
(c) Other cases stipulated in the charter of the company.
The convenor of the General Meeting of Shareholders must accept and include the
recommendations into the draft program and agenda for the meeting, except in the cases
that may be refused; the recommendation shall be officially added to the program and
agenda for the meeting if the General Meeting of Shareholders so agrees.
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2.2.4 Invitations to General Meeting of Shareholders - Right to attend General Meeting

of Shareholders
The convenor of the General Meeting of Shareholders shall send a written invitation to all
shareholders entitled to attend the meeting no later than 7 working days prior to the date
of opening, if the charter of the company does not stipulate the time-limit. The written
invitation must be sent by a method guaranteed to reach the permanent address of each
shareholder.
Shareholders being individuals or authorized representatives of shareholders which are
organizations, may attend the General Meeting of Shareholders in person or authorize
another person in writing to do so.
The voting slip of the person authorized to attend a meeting within the
authorization shall remain effective in one of the following cases;
scope
of
his
(a) The principal dies, or his capacity for civil acts is lost or is restricted;
(b) The principal terminates the authorization.
However, if the company receives written notification about one of these circumstances
no later than twenty four (24) hours prior to the time of opening of the General Meeting of
Shareholders, the authorisation shall be ended.
Where shares are assigned between the date of completion of the list of shareholders and
the opening date of the General Meeting of Shareholders, the assignee shall be entitled to
attend the General Meeting of Shareholders in place of the assignor in respect of the
assigned shares.
2.2.5 Conditions for conducting General Meeting of Shareholders
The General Meeting of Shareholders shall be conducted where the number of attending
shareholders represents at least 65% of the voting shares or a higher percentage
stipulated in the charter of the company. This requirement aims to protect minority
shareholders.
Where the first meeting cannot take place due to lack of attending shareholders, the
meeting may be convened for a second time within 30 days of the intended opening of the
first meeting, which shall be allowed to take place if the number of attending shareholders
represents at least 51% of the voting shares.
Where a meeting convened for a second time cannot take place again due to lack of
attending shareholders, it may be convened for a third time within 20 days from the date
of the intended opening of the second meeting. In this case, the General Meeting of
Shareholders shall be convened irrespective of the number of attending shareholders, and
irrespective of the percentage of shares with voting rights of shareholders attending the
meeting.
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2.2.6 Procedures for conducting and voting at the General Meeting of Shareholders
The agenda and contents of the meeting must be passed by the General Meeting of
Shareholders in the opening session. The agenda must specify in detail the time applicable
to each issue in the contents of the agenda for the meeting.
The chairman and secretary of the General Meeting of Shareholders shall have the right to
take the necessary measures to direct the conduct of the meeting in an appropriate and
orderly manner, correctly in accordance with the agenda as passed and so that it reflects
the wishes of the majority of attendees.
The General Meeting of Shareholders shall discuss and vote on each issue in the agenda
for the meeting. Voting shall be conducted by collecting voting cards agreeing with the
resolution, thereafter collecting voting cards which do not agree, and finally checking the
overall numbers of votes which agree, which do not agree, and abstentions. The chairman
shall announce the results of the voting counts immediately prior to the closing of the
meeting.
Any shareholder or person authorized to attend the meeting who arrives after the opening
of the meeting shall be registered and shall have the right to participate in voting
immediately after registration. The chairman shall not delay the meeting so that late
attendees may register; in such a case, the effectiveness of any voting which has already
been conducted shall not be affected.
The chairman shall have the right to adjourn the General Meeting of Shareholders for
which sufficient attendees have registered as required by the regulations to another time
or to change the location of the meeting in the following cases:
(a) The location for the meeting does not sufficient suitable seating for all the
attendees;
(b) There is an attendee who obstructs the meeting or disrupts order, and there is a
danger that the meeting might not be conducted fairly and legally.
The maximum time for any adjournment of a meeting shall be three days as from the date
of the proposed opening of the meeting.
In a case where the chairman adjourns or postpones a General Meeting of Shareholders
contrary to the above cases, the General Meeting of Shareholders shall elect another
person from the attendees to replace the chairman in conducting the meeting until its
completion, and the effectiveness of voting conducted at such meeting shall not be
effected.
2.2.7 Voting and Resolution

The General Meeting of Shareholders shall pass resolutions which fall within its power by
way of voting in the meeting or collecting written opinions.
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If not regulated by the charter of the company, then a resolution of the General Meeting
of Shareholders on the following matters must be passed by way of voting at the General
Meeting of Shareholders:
(a) Amendment of or addition to the charter of the company;
(b) Approval of the development direction of the company;
(c) Decision on classes of shares and the total number of shares of each class which
may be offered for sale;
(d) Appointment, discharge or removal members of the Board of Management and
Inspection Committee;
(e) Decisions on investments or the sale of assets valued at equal to or more than fifty
(50) per cent of the total value of assets recorded in the most recent financial
statement of the company, if the charter of the company does not stipulate another
percentage;
By meeting
The following quorum is required for resolution of the General Meeting of Shareholders to
be passed in a meeting:
(a) 65% of the total votes of all attending shareholders, or a higher percentage
stipulated in the charter of the company46.
(b) 75% of the total votes of all attending shareholders or higher for the following
matters, unless otherwise provided by the charter of the company:
classes of shares and total number of shares of each class which may be offered;
amendments of and additions to the charter of the company;
re-organization or dissolution of the company;
investments or sale of assets equal to or more than 50% of the total value of assets
recorded in the most recent financial statement of the company.
(c) Voting to elect members of the BoM and of the Inspection Committee must be
implemented by the method of cumulative voting, whereby each shareholder shall
have as his total number of votes the total number of shares he owns multiplied by
the number of members to be elected to the BoM or Inspection Committee, and
each shareholder shall have the right to accumulate all his votes for one or more
candidates.
Resolutions passed by the General Meeting of Shareholders attended by shareholders
directly or by authorized persons which represents 100% of the total number voting shares
shall be legal and shall be immediately effective even if the order and procedures for
convening the meeting and the contents of the meeting agenda and the procedures for
conducting the meeting were not implemented correctly in accordance with the
regulations.
46
It should be noted that the companies can provide in the charter a quorum of 51% if they so wish, as stated in
Resolution 71/2006/QH11 of the National Assembly upon accession to the WTO.
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By collecting written opinions

Where a resolution is passed by collecting written opinions, a resolution of the General
Meeting of Shareholders shall be passed when it is approved by a number of shareholders
representing at least 75% of the total voting shares, or a higher percentage stipulated in
the charter of the company.
Resolutions of the General Meeting of Shareholders must be notified ) shareholders
entitled to attend the General Meeting of Shareholders within 15 days from the date of
approval thereof.
The minutes of the General Meeting of Shareholders must be completed and approved
prior to the closing of the meeting, contain the required details about the contents and
approvals made at the meeting, signed by the chairman and secretary of the meeting ,
who shall be jointly liable for the truthfulness and accuracy of the contents of the minutes.
The minutes of the General Meeting of Shareholders must be sent to all shareholders
within 15 days upon meeting closure.
Demand for cancellation of resolutions of General Meeting of Shareholders
Within 90 days upon receipt of the minutes of the General Meeting of Shareholders,
shareholders, members of the BoM, the director (or general director) and the Inspection
Committee shall have the right to request a court or an arbitrater to consider and cancel a
resolution of the General Meeting of Shareholders if they consider that (i) the procedures
for convening the General Meeting of Shareholders did not comply with the Law on
Enterprise and the charter of the company; or (ii) the procedures for issuing a resolution
and the content of the resolution breach the law or the charter of the company.
Accordingly, companies should be cautious with the procedures because any irregularity
may result in the cancellation of the results of the meetings.
III.
3.1.
BOARD OF MANAGEMENT
Authority & composition
The BoM is the body managing the company and shall have full authority to make
decisions in the name of the company and to exercise the rights and discharge the
obligations of the company which do nr?' V within the authority of the General Meeting of
Shareholders.
The BoM shall have at least 3 members, and not more than 11 members, unless otherwise
provided by the charter of the company and elected by the shareholders in the General
Meeting of Shareholders.
The term of the BoM shall be five years. The term of office of members of the BoM shall
not exceed five years; members of the BoM may be re-elected for an unlimited number of
terms.
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Members of the Board of Management must satisfy the following standards and
conditions:
(a) Have full capacity for civil acts, and not belong to the category of persons prohibited
from managing an enterprise pursuant to this Law47;
(b) Be an individual shareholder who owns at least 5% of the total number of ordinary
shares or having professional expertise and experience in business management or
in the line of business which is the main business of the company. Therefore, a
member of the BoM does not need to be a shareholder of the company. Instead
companies with good corporate governance practice often have a number of
independent experts sitting in the board to offer independent and subjective views.
The General Meeting of Shareholders or the BoM shall elect the chairman of the BoM in
accordance with the provisions of the charter of the company. In the case where the BoM
elects the chairman of the BoM, then the chairman shall be elected from the members of
the Board of Management. The chairman of the BoM may act concurrently as the director
or general director of the company, unless otherwise stipulated in the charter of the
company.
The role of the BoM is important in the management of shareholding companies,
specifically the BoM shall have the following rights and duties.
(a) To make decisions on medium term development strategies, and plans, and on
annual business plans of the company;
(b) To recommend the classes of shares and total number of shares of each class which
may be offered;
(c) To make decisions on offering new shares within the number of shares of each class
which may be offered for sale; to make decisions on raising additional fund in other
forms such as bond issuance;
(d) To make decisions on the price of shares and bonds of the company offered for sale;
(e) To make decisions on redemption of shares;
(f) To make decisions on investment plans and investment projects within the
authority
(g) and limits stipulated in the charter of the company;
(h) To make decisions on solutions for market expansion, marketing and technology; to
approve contracts for purchase, sale, borrowing, lending and other contracts valued
at 50% or more of the total value of assets recorded in the most recent financial
statement of the company, or a smaller percentage as stipulated in the charter of
the company. Anything below this limit shall be the authority of the General
Director.
(i) To appoint, dismiss or remove, and to sign contracts or to terminate contracts with
the director or the general director and other key managers of the company as
stipulated in the charter of the company; to decide salaries and other benefits of
such managers; to appoint an authorized representative to exercise ownership
rights of shares or of capital contributed to other companies and remuneration and
47
Generally this is also the requirement for legal representative, board member or authorized representative of
corporate shareholders, depending on the position there may be additional requirements.
66 | P a g e
other benefits of such persons;

(j) To supervise and direct the director or general director and other management
personnel in their work of conducting the daily business of the company.
(k) To make decisions on the organizational structure and internal management rules
of the company, to make decisions on the establishment of subsidiary companies,
the establishment of branches and representative offices and the capital
contribution to or purchase of shares of other enterprises;
(l) To approve the agenda and contents of documents for the General Meeting of
Shareholders; to convene the General Meeting of Shareholders or to obtain written
opinions in order for the General Meeting of Shareholders to pass resolutions;
(m) To submit annual final financial reports to the General Meeting of Shareholders;
(n) To recommend the dividend rates to be paid, to make decisions on the time-limit
and procedures for payment of dividends or for dealing with losses incurred in the
business operation;
(o) To recommend re-organization or dissolution of the company, or to request
bankruptcy of the company;
(p) Other rights and duties provided in the charter of the company of Law on
Enterprise.
The chairman of the BoM shall have the following rights and duties:
To prepare working plans and programs of the BoM;
To prepare, or organize the preparation of agenda, content and documents for
meetings of the BoM; to convene and preside over meetings of the BoM;
To organize for resolutions of the BoM to be passed;
To monitor the implementation of resolutions of the BoM;
To chair the General Meetings of Shareholders;
3.2 Meeting and resolutions
The BoM shall pass resolutions by way of voting at meetings, obtaining written opinions, or
otherwise as stipulated in the charter of the company. Each member of the BoM shall have
one vote.
When implementing its functions and performing its duties, the BoM shall strictly comply
with the provisions of law, the charter of the company and resolutions of the General
Meeting of Shareholders. If the BoM passes a resolution which is contrary to law or
contrary to provisions
of the charter of the company causing damage to the company, then the members who
agreed to pass such resolution shall be personally jointly liable for that resolution and they
must compensate the company for the damage;
In such a case, a shareholder owning shares in a company for a minimum consecutive
period of at least one year shall have the right to request the BoM to suspend
implementation of a resolution as mentioned above.
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Meetings of the BoM may be held on a regular basis, at least once every quarter or upon
call by the chairman when he deems necessary. In addition, extraordinary BoM meetings
may be held.
The chairman of the BoM must convene a BoM meeting when one of the following
circumstances occurs:
On the request of the Inspection Committee;
On th request of the director or general director or on the request of at least five
(5) other management personnel;
On the request of at least two members of the BoM;
In other circumstances stipulated in the charter of the company.
A meeting of the BoM shall be conducted where there are three quarters (3/4) or more of
the total members attending. Members not directly attending a meeting shall have the
right to vote by sending a written vote to the chairman of the BoM prior to the opening of
the meeting.
A resolution of the BoM shall only be passed when it is approved by the majority of the
attending members; in the case of a tied vote (i.e. equal members voting for and
against), the final decision shall be made in favour of the vote of the chairman of the
BoM.
IV.
GENERAL DIRECTOR
The BoM shall appoint one BoM member or employ another person as the director or
general director (hereafter referred to as General Director, or GD), who is by default
the legal representative if the charter of the company does not provide that the chairman
of the Board is the legal representative.
The GD shall manage the day-to-day business operations of the company; shall be
supervised by the BoM and shall be responsible to the BoM and before the law for the
exercise of his or her delegated powers and the performance of his or her delegated
duties.
The term of the GD shall not exceed five years; with unlimited number of re-appointments.
The GD shall not be director or general director of another enterprise at the same time.
Authority of the GD is as follows:
(a) To make decisions on all issues relating to the day-to-day business operation of the
company not requiring resolutions of the BoM;
(b) To organize the implementation of resolutions of the BoM;
(c) To organize the implementation of business plans and investment plans of the
company;
(d) To make recommendations with respect to the organizational structure and internal
management rules of the company;
(e) To appoint, remove and dismiss management personnel in the company, except for
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those under the scope of authority of the BoM;

(f) To make decisions on salary and allowances (if any) for employees of the company,
including managers who may be appointed by the director or general director;
(g) To recruit employees;
(h) To make recommendations on methods of paying dividend and of dealing with loss
in business;
(i) Others, provided in charter or authorized by the BoM. Generally the BoM decides
on the principles of important matters felt within its authority, then authorize the
GD to carry out detailed works on the BoMs behalf.
The GD must manage the day-to-day business operations of the company strictly in
accordance with provisions of the law, the charter of the company, employment contracts
signed with the company and the resolutions of the BoM, otherwise the GD shall be
responsible before the law and shall compensate the company for any damages he causes
to the company.
V.
INSPECTION COMMITTEE
Shareholding companies having more than 11 individual shareholders or having

organizations owning more 50% of the total shares of the company must have an
Inspection Committee.
The Inspection Committee shall have 3 to 5 members unless otherwise provided by the
charter of the company; the term of the Inspection Committee shall not more than five (5)
years; members of the Inspection Committee may be re-appointed with an unlimited
number of terms. The members of the committee cannot be relatives to the BoM or
general director and do not hold managerial positions in the company in order to insure
transparency and independence.
The members of the Inspection Committee shall elect one of them to be the head of the
Inspection Committee with rights and duties stipulated in the charter of the company.
More than half of the members of the Inspection Committee must permanently reside in
Vietnam and at least one member from them must be an accountant or auditor.
Rights and duties of Inspection Committee
An Inspection Committee shall supervise the BoM,
director or general director in
the management and administration of the company; shall be responsible to the
General Meeting of Shareholders for the performance of its assigned duties.
To inspect the reasonableness, legality, truthfulness and prudence in management
and administration of business activities, in organization of statistic and accounting
work and preparation of financial statements;
To evaluate reports on business, semi-annual or annual financial statements and
reports on evaluation of the management of the BoM, for submission to the AGM.
To review books of accounts and other documents of the company, the
management and administration of the activities of the company at any time
deemed necessary or pursuant to a resolution of the General Meeting of
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Shareholders or as requested by a shareholder or group of shareholders of 10%

shares or more
Upon a request by a shareholder or a group of 10% shares or more, the Inspection
Committee shall carry out an inspection and submit a report on results of the
inspection of the issues required to be inspected to the BoM and the requesting
shareholders
To recommend to the BoM or the General Meeting of Shareholders the changes
and improvements of the organizational structure, management and administration
of the business operations of the company;
Upon discovery of a member of the BoM, director or general director who is in
breach of the obligations of a manager of the company, to give immediate written
notice to the BoM and request the person in breach to cease the breach and take
measures to remedy any consequences.
In order for the Inspection Committee to work effectively, the Law on Enterprise contains
provisions requiring the supply of information to the committee such as all reports from
BoM, General Director, full access to files and documents, employees, etc.
In practice, the roles of the Inspection Committee in Vietnamese companies have not been
properly implemented in supervising the BoM or the General Director, however, this is
likely to be changed when corporate governance is becoming more important, especially in
listed shareholding companies.
VI.
6.1.
DUTIES OF MANAGERS AND RELATED PARTY TRANSACTIONS

Duties
The Law on Enterprise imposes the following duties on managers as agents of

shareholders, defined to include BoM members, General Director and other managerial
positions of the shareholding companies. The Company charter may impose additional
duties on the managers as the shareholders think fit.
(a) To exercise their delegated powers and perform their delegated duties strictly in
accordance with the Law on Enterprise, relevant legislation, the charter of the
company, resolutions of the General Meeting of Shareholders;
(b) To exercise their delegated powers and perform their delegated duties honestly,
diligently to their best ability in the best lawful interests of the company and of the
shareholders of the company;
(c) To be loyal to the interests of the company and shareholders of the company; not
to use information, secrets, business opportunities of the company, not to abuse
their position and powers and assets of the company for their own personal
benefits or for the benefit of other organizations or individuals;
(d) To timely, fullv and accurately notify the company of enterprises which they or their
related persons48 own or have contributed controlling capital or shares;
48
Refer to Article 4.17 of the Law on Enterprise for a list of related persons, which may include spouse, parent,
children, etc.
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In addition the BoM and General Director may not increase salary and pay bonus where
the company has not paid in full all the debts due and payable.
6.2.
Related party transactions
In order to protect the shareholders, the Law on Enterprise requires that the contracts and
transactions between the company and the following parties must be approved by the
General Meeting of Shareholders or the BoM:
(a) Shareholders, authorised representative of shareholders holding more than 35% of
the ordinary shares of the company and their related persons;
(b) Members of the Board of Management; director or general director;
(c) Enterprises which the BoM members, General Director have contributed share
capital or their related persons own or have contributed of more than 35% of the
charter capital;
(d) Related persons of members of the BoM or General Director
If the value of the contracts and transactions above is lower than 50% total assets of the
company recorded in the latest financial statements, the BoM shall be entitled to approve,
otherwise resolution of General Meeting of Shareholders is required, for which the related
shareholders are not allowed to vote.
Any contracts, transactions which have been signed or performed without the above
approval shall be invalid and dealt with in accordance with law. The legal representative of
the company, shareholders, members of the BoM or General Director concerned must be
liable to compensate for the damage caused and must return to the company any benefits
gained from the performance of such contract and transaction.
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CHAPTER 6: CORPORATE LAW - LIMITED LIABILITY COMPANIES49

I.
1.1.
GENERAL
Definition
A limited liability company (LLC) is an enterprise with maximum 50 members being

organizations or individuals, who shall be liable for the debts and other property
obligations of the enterprise within the amount of capital that it has undertaken to
contribute to the enterprise.
LLCs are classified into either one-member LLCs (i.e. it has only one owner, being individual
or organization) or LLCs with two or more members. The below sections will examine LLCs
with two or more members, except otherwise stated.
Compared to a shareholding company, an LLC is limited with the number of maximum
members and is not allowed to offer shares.
1.2.
Rights and obligations of members
Rights
1. A member of a limited liability company with two or more members shall have the
following rights:
(a) To attend meetings of the Members Council, to discuss, make recommendations
and vote on the matters within the authority of the Members Council;
(b) To have the number of votes in proportion to its share of capital contribution;
(c) To examine, sight, look up, copy or make an extract of the register of members,
transaction monitoring records, books of account, annual financial statements,
minutes of meetings of the Members Council, other papers and documents of
the company;
(d) To be distributed with profits in proportion to its share of capital contribution
after the company has paid taxes in full and discharged all other financial
obligations in accordance with law;
(e) To be distributed with the remainder of the value of assets of the company in
proportion to its share of capital contribution in the company upon dissolution or
bankruptcy of the company;
(f) To be given priority in making additional capital contributions to the company
upon any increase of charter capital of the company; to be entitled to assign a
part or all of its share of capital contribution in accordance with this Law;
(g) To make a complaint or commence a court action against the director or general
director in the event that the director or general director fails to perform fully his
or her obligations and causes damage to the interests-of such member or of the
company in accordance with law;
(h) To dispose of its share of capital contribution by way of assignment, inheritance,
donation or other methods in accordance with law and the charter of the
company;
(i) Other rights stipulated in this Law on Enterprise and the charter of the company.
49
Chapter III, Law of Enterprise.
CHAPTER 6: CORPORATE LAW - LIMITED LIABILITY COMPANIES
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2. A member or a group of members holding more than twenty five (25) per cent of
the charter capital, or a smaller percentage as stipulated in the charter of the
company, shall have the right to request that a meeting of the Members Council be
convened to deal with issues within its authority.
3. Where a member of the company holds more than 75% of the charter capital
and the charter of the company does not stipulate a smaller percentage as provided
in above paragragh, the minority members joining together shall automatically have
the right as stipulated in the above paragraph.
Obligations
-To contribute in full and on time the amount of capital as undertaken and to be liable for
the debts and other property obligations of the company within the amount of capital it
undertakes to contribute to the company; not to withdraw the contributed capital from
the company in any form, except in the cases provided in articles 43, 44, 45 and 60 of the
Law on enterprise.
- To comply with the charter of the company.
- To observe decisions of the Members Council.
- To perform other obligations stipulated in this Law.
- To bear personal responsibility when performing the following acts in the name of the
company:
(a)
(b)
(c)
1.3.
To breach the law;

To conduct business or other transactions not for the interest of the company
and [thereby] causing damage to other persons;
To pay premature debts where the company is likely to be in financial danger.
Capital contribution
The members of a company must make full contribution of capital, on time and in the form
undertaken (monetary or in specie). If the member wishes to alter the undertaken types of
assets in which capital is to be contributed, this requires the approval of other members,
and any such change must be notified to the registration body within seven working days.
The companys legal representative must inform the registration body of progress with
capital contribution within 15 days of the due date. He bears personal responsibility for
any damage inflicted on the company due to late notification or inaccurate, untruthful or
incomplete notification.
Where a member fails to contribute in full or on time any unpaid sum becomes a debt and
the member becomes an account payable. The member risks having to pay compensation
should damage arise directly from this shortfall.
Article 39(3) enables unpaid capital contribution to be dealt with in three ways. One or
more members may make up the shortfall, the capital may be raised from other persons or
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all the remaining members contribute pro rata their respective shareholdings in the
company.
Each member who contributes in full must be issued with a certificate by the company,
indicating certain particulars such as details about the company, the concerned member,
amount of capital of the member, etc.
1.4.
Capital redemption, transfer and changes
Capital redemption
A member may demand the company to redeem its share of capital contribution if such
member votes against a decision of the Members Council on the following issues:
Amendment of or addition to the provisions of the charter of the company relating
to the rights and obligations of members and of the Members Council;
Re-organization of the company;
Other cases stipulated in the charter of the company.
The redemption price shall be agreed by the concerned member and the company, if not,
the company must redeem the share of capital contribution of such member at the market
price or at the price calculated in accordance with the provisions of the charter of the
company within fifteen (15) days from the date of receipt of such demand. Payment may
only be made if, after the full payment for such redeemed share of capital contribution,
the company is still able to meet all debts and other property obligations.
Where the company does not redeem the share of capital contribution as requested by a
member, such member shall have the right to assign its share of capital contribution to
another member or a non-member.
Transfer of capital
A member shall have the right to assign a part or its entire share of capital contribution to
other persons, but he must first offer to sell such share of capital contribution to all other
members in proportion to their shares of capital contribution in the company on the same
terms. If other members do not purchase within 30 days from offering, the member shall
be able to sell the capital contribution to a third party. It may be possible that some of
other members exercise the pre-emption rights while other do not. In this case, the seller
must still honor the acceptance to buy part of the share.
Increases and reductions of charter capital
The company may increase its charter capital by way of:
Increasing the contributed capital of members proportionately to all members, who
may accept or reject their respective additional contributions (if some members
reject, their respective additional contributions shall be divided amongst other
members or to new members);
Increasing the charter capital relative to the increased value of assets of the
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company. For example, a company may convert premium from capital contribution
higher than face value from certain members into charter capital.
Raising contributed capital from new members.
Reduction of charter capital is also possible in the following cases:
Returning part of the contributed capital to members in proportion to their
respective shares of contributed capital in the charter capital of the company if
business operation has been carried out continuously for more than two years from
the date of business registration; and at the same time ensuring that debts
and other property obligations may be paid in full after returning part of the
contributed capital to members. This provision aims at protecting third parties who
have been transacting with the company.
Redeeming shares of capital contribution as mentioned above;
Reducing the charter capital corresponding to the reduced value of assets of the
company.
Increase or reduction of charter capital must be approved by the Members Council and
within seven working days from the date of the resolution to increase or decrease the
charter capital, the company must notify the business registration body in writing.
1.5.
Management Structure
A limited liability company of two or more members shall have a Members Council, a
chairman of the Members Council and a director or general director. A limited liability
company of 11 members or more must have an Inspection Committee.
The chairman of the Members Council or director or general director shall be the legal
representative of the company in accordance with the charter of the company. The legal
representative of the company must have permanent residence in Vietnam; where he or
she is away from Vietnam for over 30 days, he or she must authorize another person in
writing in accordance with the charter of the company to perform the rights and
obligations of the legal representative of the company.
II.
2.1.
MEMBERS COUNCIL
Authority
The Members Council shall comprise all members and shall be the highest decision
making authority of the company. The members shall meet per schedule provided in the
charter, at least once a year.
Where a member is an organization, such member shall appoint one or more authorized
representative(s) (with allocated number of votes for each representative) to be on the
Members Council. The appointment of an authorized representative must be in writing
and notified to the company and the business registration authorities within seven
working days from the date of appointment.
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An authorized representative must have full capacity for civil acts, not prohibited from
establishment and management of enterprises and have professional qualifications and
experience in business management or in the main lines of business of the company.
The Members Council shall have the authority to decide on the following matters:
Annual business plans and development strategies of the company;
Increase or reduction of the charter capital and on the timing and method of raising
additional capital;
Form of investment and investment projects valued at more than fifty (50) per cent
of the total value of assets recorded in the most recently publicized financial
statements of the company, or a smaller percentage as stipulated in the charter of
the company;
Solutions for market development, marketing and technology transfer; to approve
loan agreements and contracts for sale of assets valued at fifty (50) or more per
cent of the value of assets recorded in the most recently publicized financial
statements of the company, or a smaller percentage as stipulated in the charter of
the company;
Elect, remove or discharge the chairman of the Members Council; to make
decisions on the appointment, removal, dismissal, signing and termination of
contracts of the director or general director, chief accountant and other managers
stipulated in the charter of the company;
Salary, bonus and other benefits for the chairman of the Members Council, the
director or general director, chief accountant and other managers stipulated in the
charter of the company;
Approve annual financial statements, plans for use and distribution of profits or
plans for dealing with losses of the company;
Organizational and management structure of the company;
Establishment of subsidiary companies, branches and representative offices;
Amendments of or additions to the charter, re-organization, dissolution or to
request bankruptcy of the company;
The Members Council shall elect a member to be its chairman with a term of maximum 5
years (but unlimited re-election). The chairman of the Members Council may concurrently
work as the director or general director of the company. The major rights and duties of the
Chairman are as follows:
Prepare or to organize the preparation of working programs and plans of the
Members Council;
Prepare or to organize the preparation of programs, agenda and documents for
meetings of the Members Council or for collecting opinions of members;
Convene and preside over meetings of the Members Council or to organize the
collection of opinions of members;
Supervise or to organize the supervision of the implementation of decisions of the
Members Council;
Sign decisions of the Members Council on behalf of the Members Council;
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2.2.
Members meetings
A meeting of the Members Council may be convened at any time upon request by the
chairman of the Members Council or request by a member or a group of members as
holding more than 25% capital contribution Where the chairman of the Members Council
does not convene a meeting of the Members Council upon the request of such member or
group of members within 15 days from the date of request, such member or group of
members shall convene a meeting of the Members Council by themselves and the
chairman shall bear personal responsibility before the law for any damage arising to the
company and the relevant members of the company.
A meeting of the Members Council shall be conducted where the attending members
represent at least 75% of the charter capital (or a higher percentage stipulated in the
charter of the company). When a meeting cannot proceed because of this condition, the
meeting may be convened for a second time within 15 days from the intended date of the
first meeting, this time only representation of 50% charter capital is required. If the
meeting fails again, the third convention may be made within 10 days and the meeting
shall take place regardless of the number of attending members and of the amount of
charter capital represented by attending members.
The Members Council shall pass resolutions within its authority by way of voting at
meetings, collecting written opinions or other forms as stipulated in the charter of the
company. The following quorums are required for resolution to be passed:
65% of total capital of the attending members (or higher as stated in the charter)
for ordinary resolutions;
75% of total capital of the attending members (or higher as stated in the charter)
for sale of assets valued at 50% or more of the total value of assets recorded in the
most recent financial statement of the company (or a smaller percentage as stated
in the charter); amendment of and addition to the charter of the company, reorganization or dissolution of the company.
75% of total charter capital, if a resolution of the Members Council is to be passed
by way of collection of written opinions
III.
GENERAL DIRECTOR
The director or general director of the company is the person who manages the day-to-day
business operation of the company and is responsible to the Members Council for the
exercise of his or her rights and the performance of his or her duties.
The director or general director shall have the following rights and duties:
Organize the implementation of resolutions of the Members Council;
Make decisions on all matters relating to the day-to-day business operation of the
company;
Organize the implementation of the business plan and investment plan of the
company;
Issue the regulations on internal management of the company;
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Appoint, remove or dismiss management personnel in the company, except for

those within the authority of the Members Council;
Sign contracts in the name of the company, except for those within the authority of
the chairman;
Make recommendations with respect to the organizational structure of the
company;
Submit the final annual financial statements to the Members Council;
Recommend the plan for use of profits or for dealing with losses in business;
Recruit employees.
IV.
RELATED PARTY TRANSACTIONS
Similar to shareholding companies, the Law on Enterprise provides that contract or
transaction between the company and the following persons must be approved by the
Members Council:
(a) Member, the authorized representative of a member, the director or general
director or the legal representative of the company;
(b) A related person of the persons mentioned above;
(c) A manager of the parent company, the person authorized to appoint managers of
the parent company;
(d) A related person of the mentioned in (c) above.
75% quorum is required to approve the above transactions, for which the related
members are not allowed to vote.
A contract or transaction shall be void and be dealt with in accordance with law where it is
not executed with proper approval. The legal representative of the company, the member
concerned and the related persons of such member must compensate for any damage
arising and return to the company any benefits gained from the performance of such
contract or transaction.
V.
ONE-MEMBER LLC50
A one member limited liability company is an enterprise owned by one organization or

individual51 (i.e. company owner), who shall be liable for all debts and other property
obligations of the company within the amount of the charter capital of the company.
The Law on Enterprise imposes certain restrictions on the right of the owner, for example
the company owner may only withdraw capital by way of assignment of a part or all of the
charter capital to other organizations and individuals52, in case the owner withdraw capital
under other forms he must be jointly liable for debts and other property obligations of the
company. If a partial transfer is made, the company must register for conversion into a
limited liability company with two or more members. In addition, the company owner may
50
Chapter III, Section II, Law of Enterprise.

Under the 1999 Law on Enterprise, individuals are not allowed to set up one-member LLC.
52
i.e. reduction of the charter capital is not allowed.
51
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not withdraw profits of the company in cases where the company has not paid in full all
debts and other property obligations which become due.
Depending on whether the owner is an organization or individual, the organizational
structure of the one-member LLC may have the following forms:
Owner is an organization who appoints two or more authorized representatives:
Members Council
General Director; and
Inspector
Owner is an organization who appoints only one authorized representative:
Company Chairman who shall be the authorized representative of owner;
General Director; and
Inspector
Owner is an individual:
Chairman
General Director
The rights, obligations of the above management bodies are quite similar to those of multimember LLCs.
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CHAPTER 7: THE LAW ON BANKRUPTCY

I.
GENERAL
1.1 Insolvency definition

Article 3 of the Law on Bankruptcy states that Any enterprise or co-operative which is
unable to pay its due debts on demand by a creditor shall be deemed to have become
insolvent. Accordingly there must be two conditions to determine that an enterprise has
become insolvent:
(i). There are debts which have become due, including secured or unsecured debts,
which must be clearly evidenced and not in dispute;
(ii) Creditors have demanded for payments for which the enterprise fails to make.
Again this should be evidenced by appropriate documents such as written payment
request from creditors, payment deferral request from the enterprise, etc.
It should be noted that not all insolvent enterprises shall be automatically declared
bankruptcy. First of all there must be a person or entity who requests the court to
commence bankruptcy procedures, based on which the court may commence or not
commence such procedures. After commencement of bankruptcy procedures, the court
will either (i) allow the enterprise to recover its business operations, or (ii) dispose the
assets and debts of the enterprise and declare bankruptcy.
1.2.
Petition for commencement of bankruptcy procedures
Under the Law on Bankruptcy, the following persons/entities shall be allowed to file a
petition to the court to commence bankruptcy procedures
(a) Any unsecured or partly secured creditor which observes that an enterprise has
become insolvent
(b) An elected representative or a union representative of the employees in cases
where an enterprise fails to pay wages or other debts owing to its employees and it
is observed that the enterprise has become insolvent.
A representative of employees shall be deemed to be lawfully elected when elected by a
majority of more than half the number of employees in the enterprise by secret ballot or
by collection of signatures; with respect to a large-scale enterprise with many subsidiary
entities, a representative of employees shall be deemed to be lawfully elected when
agreed by a majority of more than half the elected representatives of all subsidiary
entities.
(c) The owner or the legal representative of the enterprise, when it is observed that an
enterprise has become insolvent, shall have the obligation to file a petition to
commence bankruptcy procedures against such enterprise
If the owner or legal representative of an enterprise fails to file a petition to commence
bankruptcy procedures within a period of three months from the date when it is observed
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that the enterprise or co-operative has become insolvent, such owner or legal
representative shall be liable in accordance with law.
(d) The representative of the owner of a State-owned enterprise when it is observed
that the enterprise has become insolvent and it fails to discharge its obligation to
file a petition to commence bankruptcy procedures,
(e) Shareholders of shareholding company, by a resolution of a General Meeting
of
Shareholders, or a shareholder or a group of shareholders owning more than 20% of
the number of ordinary shares for a continuous period of at least six months
(f) A partner of a partnership
A petitioner for the commencement of bankruptcy procedures shall be obliged to provide
complete data in a timely manner as required by law or as requested by the court during
the process of conducting the bankruptcy procedures. If they make the petition which
causes harm to the honour, reputation or business operations of an enterprise for nonobjective reasons or which is guilty of dishonesty in making the request to commence
bankruptcy procedures shall, depending on the nature and seriousness of such conduct, be
disciplined, be subject to an administrative penalty or be subject to criminal prosecution;
and if loss and damage is caused, compensation must be paid in accordance with law.
1.3.
Decision on commencement of bankruptcy procedures
Jurisdiction
People's courts of provinces and cities under central authority shall have jurisdiction to
conduct bankruptcy procedures in respect of enterprises and co-operatives registered for
business at the business registration office of the respective province.
District court is only able to handle bankruptcy cases for co-operatives.
A single judge shall be responsible for the conduct of bankruptcy procedures in a district
people's court; a single judge or a council of three judges shall be responsible for the
conduct of bankruptcy procedures in a provincial people's court, subject to the decision of
Chief Justice the Economic Court.
Commencement of bankruptcy procedures
Within 30 days from the date of acceptance of jurisdiction over a petition to commence
bankruptcy procedures, the court must issue a decision to commence or not to commence
bankruptcy procedures.
The court shall issue a decision to commence bankruptcy procedures when there are
grounds proving that the enterprise has become insolvent. In necessary cases, prior to
issuing a decision
to commence bankruptcy procedures, the court may convene a session with participation
of the petitioner for the commencement of bankruptcy procedures, the owner or legal
representative of the enterprise against which the application to commence bankruptcy
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procedures has been made, and any individuals or organizations concerned, in order to
consider and check the grounds proving that the enterprise has become insolvent.
The decision of the court to commence bankruptcy procedures shall be served on the
enterprise which has become insolvent and on the people's procuracy at the same level,
and shall be published in three consecutive editions of a local newspaper of the locality of
the main address of the enterprise or co-operative which has become insolvent and of a
central daily newspaper.
The decision of the court to commence bankruptcy procedures must be notified to
creditors and debtors of the enterprise which has become insolvent.
II.
2.1.
BANKRUPTCY PROCEDURES
Committee for management and liquidation of assets
Upon issuance of a decision to commence bankruptcy procedures, the judge shall issue a
decision to establish a committee for management and liquidation of assets to carry out
the task of management and liquidation of the assets of the insolvent enterprise. The
committee shall comprise:
(a) An enforcement officer of the judgment enforcement office at the same level, who
shall act as head of the committee;
(b) An officer of the court;
(c) A representative of the creditors;
(d) A legal representative of the enterprise against which bankruptcy procedures have
been commenced;
(e) A union representative, a representative of employees, and representatives of
professional institutions, if the presiding judge considers necessary.
The committee shall have the following duties and powers:
(a) To
prepare a list of all current assets of the enterprise, to supervise and inspect
the use of such assets;
(b) To propose that the judge make a decision applying temporary emergency
measures to preserve the assets of the enterprise where necessary;
(c) To prepare a list of creditors and the amount payable to each creditor; and a list of
debtors and the amounts due to the enterprise from its debtors;
(d) To recover and manage the assets, data, accounting books and seal of the
enterprise;
(e) To implement the plan for distribution of assets in accordance with the decision of
the judge;
(f) To propose the judge make a decision on recovery of assets, the value of assets, or
the difference in value of assets of the enterprise that were illegally sold or
transferred
(g) To implement the decision of the judge on auction of the assets of the enterprise in
accordance with the law on auctions;
(h) To deposit all receipts from debtors and from auction of the assets of the
enterprise into a bank account;
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(i) To enforce other decisions of the judge during the process of the conduct of
bankruptcy procedures.
Duties, powers and responsibilities of head of committee for management and
liquidation of assets
The head of a committee for management and liquidation of assets shall have the
following duties and powers:
(a) To manage the committee for management and liquidation of assets in the exercise
of its duties and powers as stipulated in article 10 of the Law on Bankruptcy;
(b) To open a bank account to deposit all receipts from debtors and from auction of the
assets of the enterprise or co-operative which is the subject of liquidation
procedures in necessary cases;
(c) To arrange enforcement of decisions of the judge.
The head of a committee for management and liquidation of assets shall be responsible
before the law for the exercise of his or her duties and powers.
2.2.
Business activities after commencement of bankruptcy procedures
After there is a decision to commence bankruptcy procedures, every business activity of an

enterprise or co-operative shall continue to be conducted as usual, but shall be subject to
the supervision and inspection of the judge and the committee for management and
liquidation of assets.
In the case where it is considered that the manager of the enterprise or cooperative lacks
the ability to operate it or that, if he or she continues to operate the enterprise or cooperative, the business activities will not be advantageous for preservation of the assets of
the enterprise or cooperative, on the proposal of the meeting of creditors, the judge may
issue a decision to appoint a person as manager and operator of the business activities of
the enterprise or cooperative.
As from the date on which the enterprise receives the decision to commence bankruptcy
procedures, it shall be prohibited from carrying out the following acts:
(a) To conceal or dispose of any asset;
(b) To pay any unsecured debt;
(c) To abandon or reduce any right to claim a debt;
(d) To convert unsecured debts into debts secured by assets of the enterprise.
In addition, the following activities of the enterprise or co-operative may be undertaken
only with the prior written consent of the judge:
(a) Pledge, mortgage, assignment, sale, donation or lease of any asset;
(b) Receipt of assets from a contract assigning them;
(c) Termination of performance of an effective contract;
(d) Borrowing a loan;
(e) Sale or conversion of shares or transfer of ownership rights in any assets;
(f) Payment of any new debt arising from the business activities of the enterprise and
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payment of wages of the employees.

2.3.
Meetings of creditors
Within 30 days from the date of receipt of the decision of the court to commence
bankruptcy procedures, the enterprise must conduct an inventory count of all assets in
accordance with the detailed list already submitted to the court and must determine the
value of such assets. The list shall then be filed immediately at the court.
Within 60 days from the last date of the notice published in newspapers of the decision of
the court to commence bankruptcy procedures, creditors must file at the court notices
requesting payment of debts, itemizing clearly the debts, the amount of due debts and of
undue debts, and the amount of secured and unsecured debts payable by the enterprise. A
notice requesting payment of debts must be accompanied by data proving such debts. If a
creditor has not filed at the court a notice requesting payment of debt prior to expiry of
this time-limit, such creditor shall be deemed to have relinquished his or her right to claim
the debt.
Within 15 days from the date of expiry for filing of notices requesting payment of debts,
the committee for management and liquidation of assets must finalize a list of creditors
and the amount of debts. The list of creditors must be publicly posted at the head office of
the court conducting the bankruptcy procedures and at the main headquarters of the
enterprise for a period of 10 days from the date of posting. Within this period, creditors
and the enterprise shall have the right to lodge a complaint in respect of the list of
creditors with the court.
Within 30 days from the completion of the inventory count of assets or finalization of the
list of creditors (whichever later), the judge must convene the first meeting of creditors.
Subsequent meetings may be called during the process of conducting bankruptcy
procedures, on the proposal of the committee for management and liquidation of assets
or of creditors representing at least one thirds of the total value of unsecured debts.
Meetings of creditors can only proceed if more than half of the unsecured creditors
representing at least two thirds of the total value of unsecured debts and the bankruptcy
petitioner are present. At the meetings, creditors shall consider all matters related to the
enterprise as presented by the committee for management and liquidation of assets
and/or legal representative of the enterprise and pass resolutions if more than half of the
unsecured creditors present at the meetings representing at least two thirds of the total
value of unsecured debts. The conduct of meetings of creditors and their resolutions are
crucial in determining whether an enterprise shall be declared bankruptcy or granted with
a chance for business recovery, which are discussed in turns below.
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III.
RECOVERY OF BUSINESS OPERATIONS
If the first meeting of creditors has passed a resolution agreeing with the solutions for
restructuring business operations and the plan for payment of debts to creditors, the judge
shall issue a decision applying such resolution and requiring the enterprise to formulate a
plan for recovery of business operations. Such plan must be submitted within 30 days
from the resolution of the creditors so that the judge can consider whether he should pass
on to the creditors for approval. If he decides to do so, the judge shall convene a meeting
of creditors to consider and approve the plan.
A resolution on the plan for recovery of business operations of the enterprise or cooperative shall be deemed passed when more than half of the number of unsecured
creditors present at the meeting and representing at least two thirds in value of the
unsecured debts vote in approval of the resolution.
The judge shall issue a decision recognizing the resolution on the plan for recovery of
business operations of the enterprise or co-operative which has become insolvent. This
resolution shall be binding on all relevant parties.
Once every six months, the enterprise or co-operative must send the court a report on the
status of implementation of the plan for recovery of business operations at the enterprise
or cooperative. Creditors shall have the obligation to supervise implementation of the
plan for recovery of business operations of the enterprise or co-operative.
The maximum period for implementation of the plan for recovery of business operations
of the insolvent enterprise shall be 3 years from the last date of the notice published in
newspapers of the decision of the court recognizing the resolution on the recovery plan.
The judge shall issue a decision suspending the procedures on recovery of business
operations in any one of the following circumstances:
(a) The enterprise has completed implementation of the plan for recovery of business
operations;
(b) More than half of the number of unsecured creditors representing at least two
thirds in value of the unsecured debts which remain unpaid agree to such
suspension.
Upon issuance of such decision, the concerned enterprise shall be deemed to be no longer
insolvent.
IV.
4.1.
LIQUIDATION
Liquidation cases
The judge shall issue a decision to commence procedures for liquidation of assets when
one of the following occurs:
The first meeting of creditors is unsuccessful (e.g. the owner or legal representative
of the enterprise fails to attend the meeting of creditors, there was not a required
quorum of creditors for the meeting to proceeds, etc.);
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The enterprise fails to submit a business recovery plan on time after the first
meeting of creditors approving for preparation of such plan;
The meeting of creditors does not approve this business recovery plan submitted by
the enterprise; or
The enterprise does not implement or implement improperly the recovery plan.
4.2.
Asset distribution
Dealing with debts secured by mortgaged or pledged assets

Where the judge issues a decision to commence liquidation procedures against an
enterprise, or co-operative, debts which were secured by assets mortgaged or pledged
prior to the court accepting jurisdiction over a petition to commence bankruptcy
procedures shall have the right to priority payment by such assets; if the value of the
mortgaged or pledged property is insufficient to pay the amount of the debt, the
outstanding part of the debt shall be paid during the process of liquidation of assets of the
enterprise or co-operative; and if the value of the mortgaged or pledged property is
greater than the amount of debt, the difference shall be included in the value of the
remaining assets of the enterprise or co- operative.
Order for distribution of assets
Upon liquidation, the distribution of the remaining assets of the enterprise shall be made
in the following order:
(a) Bankruptcy fees;
(b) Unpaid wages, severance allowances and social insurance in accordance with the
laws and other rights pursuant to the signed collective labour agreement and labour
contracts;
(c) Unsecured debts payable to creditors named in the list of creditors on the principle
that, if the value of the assets is sufficient to pay all debts of all creditors, each
creditor shall be paid the full amount of his of her debt; and, if the value of the
assets is insufficient to pay all debts, each creditor shall only be paid the
corresponding proportion of his or her debt.
(d) Owner, partners, members or shareholders of the enterprise.
4.3. Bankruptcy declaration
After the distribution of assets has been completed, the judge shall declare that the
enterprise is bankrupt, based on which the business registration of the enterprise shall be
removed.
If the enterprise is a limited liability company (including LLCs and shareholding companies),
there are no liabilities to the members or shareholders after the enterprise has been
declared bankrupt. For general partners of partnerships and owners of private enterprises,
the bankruptcy declaration does not exempt them from liabilities toward creditors of the
enterprises.
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V.
5.1.
ASSET PROTECTION MEASURES

Invalid transactions
The following transactions shall be deemed invalid if they were conducted by the insolvent
enterprise within a period of 3 months prior to the date on which the court accepted
jurisdiction over the petition to commence bankruptcy procedures:
(a) Donation of moveable or immoveable property to another person;
(b) Settlement of a bilateral contract in which the obligation of the enterprise is clearly
greater than that of the other party;
(c) Payment of an undue debt;
(d) Conducting the mortgage or pledge of assets in respect of debts;
(e) Other transactions for the purpose of disposing of assets of the enterprise. This
provision is a catch-all measure which potentially affects any of the transactions
carried out during this period, unless it can be proved that the transactions are
made in good faith.
Upon request by any unsecured creditor or the committee for management and
liquidation of assets, the court shall declare the above transactions invalid. The head of the
committee for management and liquidation of assets shall be responsible to organize
enforcement of any decision of the court declaring any transactions conducted by the
enterprise or co-operative invalid in order to recover assets for the enterprise or cooperative. Any recovered assets must be brought into the parcel of assets of the enterprise
or co-operative.
5.2.
Suspension of contract
If, during the process of conduct of bankruptcy procedures, it is considered that the
suspension of performance of a contract which is currently effective and is currently being
performed or has not yet been performed would be more advantageous for the
enterprise53, the performance of such contract may be suspended by the court upon
request of creditors, the enterprise itself or the head of the committee for management
and liquidation of assets.
The other contracting party shall have the right to demand return of any assets which still
exist in the parcel of assets of the insolvent enterprise received from the contract; if such
assets no longer exist, the other contracting party shall have the same rights as an
unsecured creditor.
In the case where performance of a contract is suspended, the other contracting party
shall have the same rights as an unsecured creditor in respect of any loss caused by
suspension of performance of the contract.
53
Even though the contracts are not invalid under the above provisions.
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5.3.
Temporary emergency measures
In necessary cases, on the proposal of the committee for management and liquidation of
assets, the responsible judge may issue a decision imposing one or more of the following
temporary emergency measures in order to preserve the assets of the enterprise which
has become insolvent:
(a) Permitting the sale of perishable goods, of goods nearing the end of their use-bydate, or of goods which may be difficult to sell unless sold at the appropriate time;
(b) Sealing up of assets of the enterprise;
(c) Freezing bank accounts of the enterprise;
(d) Sealing up of stores and funds, seizure and administration of accounting books and
relating data of the enterprise;
(e) Prohibiting performance or ordering compulsory performance of a number of
specified acts by the enterprise or by other related individuals or organizations.
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CHAPTER 8: CORPORATE GOVERNANCE

The separation of ownership and control under modem company laws has resulted in
many governance problems, such as conflict of interests between the management and
shareholders, issues in relationship between majority and minority shareholders, etc.
Therefore corporate governance is required to address these problems.
Corporate governance can be defined as a set of processes, customs, policies, laws, and
institutions affecting the way a corporation is directed, administered or controlled.
Corporate governance involves a set of relationships between a companys management,
its board, its shareholders and other stakeholders, including employees, customers,
creditors, suppliers, regulators, and the community at large.
Best practices in corporate governance are rooted in compliance with the law, however, it
is generally accepted that companies should adhere to a broader set of values and
principles that extend beyond the scope of legislation.
Corporate governance is one key element in improving economic efficiency and growth as
well as enhancing investor confidence. Good corporate governance should provide proper
incentives for the board and management to pursue objectives that are in the interests of
the company and its shareholders and should facilitate effective monitoring. The presence
of an effective corporate governance system, within an individual company and across an
economy as a whole, helps to provide a degree of confidence that is necessary for the
proper functioning of a market economy. As a result, the cost of capital is lower and firms
are encouraged to use resources more efficiently, thereby underpinning growth.
The Organization for Economic Co-operation and Development has developed a set of
principles for good corporate governance, which, even though non-binding, provides a
framework for legislators and shareholders to build their own corporate governance rules.
The Principles focus on publicly traded companies, both financial and non-financial.
However, to the extent they are deemed applicable, they might also be a useful tool to
improve corporate governance in nontraded companies, for example, privately held and
state-owned enterprises. The below section shall examine these principles briefly and
how they have been applied to the Law on Enterprise of Vietnam.
1.
Ensuring the basis for an effective corporate governance framework:
The corporate governance framework should promote transparent and efficient markets,
be consistent with the rule of law and clearly articulate the division of responsibilities
among different supervisory, regulatory and enforcement authorities.
This is a general principle which should be taken into account by legislators and
shareholders in making corporate legislation.
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2.
The rights of shareholders and key ownership functions;
The corporate governance framework should protect and facilitate the exercise of
shareholders rights.
Under OECD principles, basic shareholder rights should include the right to:
1) secure methods of ownership registration;
2) convey or transfer shares;
3) obtain relevant and material information on the corporation on a timely and
regular basis;
4) participate and vote in general shareholder meetings;
5) elect and remove mersu ers of the board; and
6) share in the profits of the corporation.
The Law on Enterprise has adopted all of the above rights by clearly stating basic rights of
shareholders as statutory rights, for example shareholders are free to transfer their
shares, subject only to certain restrictions to some particular shareholders (e.g. founding
shareholders, holders of voting-preference shares, etc.), or the right of shareholders to
participate, express their views and vote on all matters in general meetings of
shareholders, etc.
3.
The equitable treatment of shareholders;
The corporate governance framework should ensure the equitable treatment of all
shareholders, including minority and foreign shareholders. All shareholders should have
the opportunity to obtain effective redress for violation of their rights.
The Law on Enterprise has been designed to protect minority shareholders, for example a
general meeting of shareholders can only proceed upon fist call if shareholders
representing at least 65% total voting shares are present. The Law also provides very high
quorums in passing resolutions, e.g. 65% for ordinary resolutions and 75% for special
resolutions on important matters.
If a shareholder or group of shareholders feels that their rights have been infringed, they
may request the inspection committee to investigate, convene general meeting of
shareholders under circumstances, or demand the redemption of shares, etc.
There is no differentiation between foreign and domestic shareholders under Vietnams
company laws.
4.
The role of stakeholders
The corporate governance framework should recognise the rights of stakeholders

established by law or through mutual agreements and encourage active co-operation
between corporations and stakeholders in creating wealth, jobs, and the sustainability of
financially sound enterprises.
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The laws only provide minimum regulations on relationship between company and other
stakeholders (other than the shareholders, the board) such as rights of the employees
(under company laws, labour laws), creditors and suppliers (e.g. requiring disclosure of
certain information to the public, etc.). In most of the cases the companies themselves
should have their own measures to promote cooperation with other stakeholders in order
to create wealth, employment and sustainable development.
5.
Disclosure and transparency
The corporate governance framework should ensure that timely and accurate disclosure
is made on all material matters regarding the corporation, including the financial
situation, performance, ownership, and governance of the company.
Vietnams company law recognizes this principle by requiring the disclosure of
information under certain circumstances, for example shareholding companies are
required to file annual financial statements with the authorities and make them available
for any organization or individuals to examine. Other laws and regulations also impose
disclosure information, for instance the stock exchange has its own detailed set of rules of
disclosure for listed companies, in order to ensure that the more public or important a
company is, the more transparent it should be.
6.
The responsibilities of the board
The corporate governance framework should ensure the strategic guidance of the
company, the effective monitoring of management by the board, and the boards
accountability to the company and the shareholders.
The Law on Enterprise addresses this issue by providing a detailed list of authority as well
as duty of the board in particular and all managers of the company in general. For
instance the board is authorized to formulate and implement the business plans of the
company but it is obliged to carry out its duty in the best interest of the company and
must not take advantage of the companys assets for personal gain.
This principle is designed to ensure that ownership and control are separated, but at the
same time to prevent abuse of power by the board. For example transactions between
the company and related persons such as one of the board members must be approved
by the board or by a resolution of general shareholder meeting.
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Vietnamese Business Law

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Vietnamese Business Law

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INTRODUCTION TO

VIETNAMESE BUSINESS LAW

TRAN, VIET DUNG (Dr. J)

HO CHI MINH CITY 2014

OVERVIEW OF VIETNAMESE LEGAL SYSTEM ..................................................................... 6

Common law vs. Civil law .................................................................................................. 6

Vietnam as a civil law country........................................................................................... 8

Public law versus Private law ............................................................................................ 9

CONSTITUTION OF VIETNAM ......................................................................................... 10

Constitution of Vietnam .................................................................................................. 11

III. ORGANIZATION OF THE STATE IN THE LEGAL SYSTEM .................................................... 11

Legislative Branch: the National Assembly ................................................................... 12

The President of the State ............................................................................................. 13

Executive Branch: the Government ............................................................................... 14

Judicial Branch: the Courts ............................................................................................. 15

The Peoples Procuracy .................................................................................................. 16

CHAPTER 2: THE LAW OF OBLIGATIONS ............................................................................................ 18

A civil transaction is only valid if it meets the following requirements: ...................... 18

Civil obligations .............................................................................................................. 21

Definition of contract ..................................................................................................... 21

Offer and acceptance ..................................................................................................... 22

Types and contents of contracts .................................................................................... 24

Interpretation of contracts ............................................................................................ 25

Principles for performance of civil contracts................................................................. 26

III. SECURING OBLIGATIONS ............................................................................................... 27

Means of security ........................................................................................................... 28

IV. BREACH OF CONTRACT.................................................................................................. 33

Exempted from liability .................................................................................................. 35

Tran Viet Dung 2014

CHAPTER 3: OVERVIEW OF CORPORATE LAW................................................................................... 39

BASIC CONCEPTS ........................................................................................................... 39

Separate Personality & Limited Liability ....................................................................... 39

Corporate representation Legal Representative ........................................................... 40

Rights & obligations of enterprises related to doing business ..................................... 41

III. COMPANY FORMATION ................................................................................................ 43

Right to establish enterprises ........................................................................................ 43

Business lines of enterprises .......................................................................................... 43

Dossiers for registration of enterprises ......................................................................... 44

Issuance of business registration certificate ................................................................. 44

Pre-incorporation contracts ........................................................................................... 45

IV. CAPITAL CONTRIBUTION ............................................................................................... 46

Loan capital vs. share capital ......................................................................................... 46

Valuation of assets contributed as capital .................................................................... 46

VI. FOREIGN INVESTMENT UNDER INVESTMENT LAW ......................................................... 48

Types of Partnership ...................................................................................................... 49

MANAGEMENT OF PARTNERSHIP .................................................................................. 50

Partners Council ............................................................................................................ 50

Chairman, General Director (or Director) of Partnership ............................................. 52

III. AUTHORITY AND LIABILITY OF PARTNERS ...................................................................... 52

Rights and obligations of general partners ................................................................... 52

Rights and obligations of limited liability partners....................................................... 53

CHAPTER 5: CORPORATE LAW - SHAREHOLDING COMPANIES ........................................................ 55

Classes of shares Ordinary shares.................................................................................. 55

Offer for sale of shares ................................................................................................... 56

Share-related documents Share certificates ................................................................. 56

Redemption of shares .................................................................................................... 57

Payment of dividents ..................................................................................................... 58

Tran Viet Dung 2014

Recovery of payments for redeemed shares or dividends ........................................... 58

Rights of ordinary shareholders..................................................................................... 59

General Meeting of Shareholders ................................................................................... 59

III. BOARD OF MANAGEMENT ............................................................................................ 65

Authority & composition ............................................................................................... 65

Meeting and resolutions ................................................................................................. 67