The new Law on Enterprises and Law on Investment effective from 1 January 2021 and their impacts.

From 2021, foreign investors in Vietnam will do business in a more favorable environment due to the effectiveness of the Law on Enterprise 2020 and the Law on Investment 2020. The new regulations will lead to benefits for enterprises to enter the market as well as govern corporate and protect investors.

1. Law on Enterprise No. 59/2020/QH14

• Regarding market entry procedures, the Enterprise Law 2020 will remove seal-related procedures and allow enterprise to use and manage seals, use digital seals. Additionally, business registration becomes easier due to a system of completely online application or by post to save time, costs and resources when investors set up enterprises in Viet Nam.

• Regarding corporate governance, the new Enterprise Law enhances the rights of shareholders by allowing shareholders to sue managers to protect their interests. The requirements for convening the General Meeting of Shareholders are also lowered to protect minority shareholders.

• The Enterprise Law 2020 allowing the issuance of non-voting depository receipts (NVDRs) has contributed to product diversification for the stock market and expansion of the investment environment for foreign investors when investing in enterprises, especially those in business lines that limit the foreign ownership ratio.

2. Law on Investment No. 61/2020/QH14

• Some administrative procedures are reformed and simplified. For example: abolishing regulation on the Prime Minister’s approving investment policies for projects with capital size from VND 5,000 billion, simplifying procedures for implementing investment projects, and expanding investor’s autonomy during the project implementation (rights to transfer, merge, consolidate or split the project …)

• Eliminating 22 conditional business sectors. In addition, foreign investors can easily know their market access conditions according to the list of conditional market access business sectors for foreign investors. When the enterprise is not in a case where the market conditions are required or investors have not yet been allowed to access the market, foreign investors will be able to access the market as domestic investors instead of waiting for state agencies to carry out the procedures to consult the ministries. related departments.

• Adding a number of occupations, forms and subjects of investment incentives, cases of special investment incentives. The Law on Investment 2020 also sets out the principles and conditions for investors to receive investment incentives that incentives are applied for a limited time and on the basis of project implementation results of investors. Therefore, in order to receive the incentives, investors shall meet the conditions during the incentive period.

• Concerning about national defence and security issues and environment. When businesses are established in security- sensitive areas, or border towns, coastal areas will be considered security and defence conditions. For projects using outdated technology, potentially causing environmental pollution, resource intensive and project transfer without reimbursement, investment projects will not be extended. Foreign investors, when investing in Vietnam, also need to pay attention to technological and environmental issues to avoid the case of not extending their investment project activities.

With the positive changes in Enterprise Law and the Investment Law, enterprises need to understand and know how to apply the new law effectively, in the right direction, especially in corporate governance to organize operations. effective action and protect the interests of investors. Enterprises also need to pay more attention to the environment, resources and technology when implementing their investment projects.