On 26 November 2014, the National Assembly of Vietnam approved the new Enterprise Law to improve the legal framework for investment and corporate governance in Vietnam. The new Enterprise Law took effect on 1 July 2015. It introduces significant changes to the governance structure of companies, most notably changes in regards to multiple legal representatives, zero or multiple seals, and governance structure.
According to the new Enterprise Law, Limited Liability Companies (“LLCs”) and Joint Stock Companies (“JSCs”) may now have one or more legal representatives. The Charter must specify the number of legal representatives, their positions, rights, and obligations. At least one legal representative must reside in Vietnam. This new regime will facilitate business transactions of enterprises and reduce bottleneck situations where transaction execution depends on a single legal representative. However, the new regime also introduces new complications, as governance must be tightened up to avoid overlapping or confusing authority among the multiple legal representatives.
Another breakthrough of the new Enterprise Law is the Company Chop (Seal) regime. The companies may decide on the number, form, and contents of the chops, so long as the sample of the chop must be registered with the business registration authorities. As such, under the new Enterprise Law, the Chop will no longer bear the overarching authority of authenticating the validity of company documents, and more importantly, multiple Chops will speed up company business.
Under the new Enterprise Law there are notable changes in corporate governance that companies can adopt. For example, for the first meeting of the board of members of Multi-Member Limited Liability Companies, the quorum is now 65% charter capital representation, formerly it was 75%. For the Written Resolution, at least 65% of the charter capital must be held by the members, formerly it was 75%. Voting thresholds at the General Meeting of Shareholders of a Joint Stock Company are also reduced to 51% for normal resolutions and 51% for written resolutions in line with prevailing international standards.
Existing companies can modify their Charter to adopt these changes to the management of their companies.