The 2020 Enterprise Law, effective from January 1, 2021, marked a major turning point in Vietnam's administrative reform and business environment transparency. With 10 chapters and 218 articles, this law is not merely a legal framework but also a guiding principle for investors to optimize their management systems. However, as of 2026, many business owners are still struggling with its implementation, leading to unnecessary legal risks due to stricter management by tax authorities and business registration agencies. This article will analyze in detail the most crucial aspects of the 2020 Enterprise Law to provide you with a comprehensive understanding and accurate application to your business practices.
Overview of the 2020 Enterprise Law in the current economic context.
Law No. 59/2020/QH14 on Enterprises was enacted to replace the 2014 Enterprise Law, marking the government's efforts to improve its ranking in the ease of doing business index. The law's scope covers everything from the establishment, management, and restructuring of enterprises and related organizations to their dissolution.
In the context of a digital economy and strong data interconnection by 2026, mastering the law is not only for compliance but also for leveraging flexible mechanisms in fundraising. However, a worrying reality is the lack of interconnectedness in legal knowledge. Businesses often focus only on the Enterprise Law, forgetting that operational activities are also closely coordinated by the Investment Law, the Tax Management Law, and the Bankruptcy Law. This lack of synchronization is the core reason why many startups encounter problems with authorities in their first year of operation, even when electronic identification systems have been widely adopted.
Key new features of the 2020 Enterprise Law and their practical impact on operations.
The most significant reform is the abolition of the procedure for notifying the business registration authority of the seal design. This gives businesses complete autonomy in deciding the type, quantity, and form of their seals, thereby significantly reducing post-establishment time.
Furthermore, the concept of state-owned enterprises has been redefined to tightly control units with capital contributions exceeding 50% of the total. This change creates a more level playing field for the private sector. For joint-stock companies, the law has lowered the ownership ratio required to exercise shareholder rights from 10% to 5%, effectively protecting the rights of minority shareholders and preventing nepotism or abuse of power by large shareholder groups.
Below is a summary table comparing some key changes that directly impact business costs and time.
| Content changed | Enterprise Law 2014 | Enterprise Law 2020 | Actual impact in 2026 |
|---|---|---|---|
| Business seal | The seal design must be submitted to the national portal. | Businesses make their own decisions and are not required to notify authorities. | Reducing administrative procedures is necessary, but strict regulations are needed in the charter. |
| The concept of state-owned enterprises | Maintain 100% charter capital | Holding more than 50% of the charter capital or the total number of voting shares. | Increase transparency in capital management and promote healthy competition. |
| Minority shareholder rights | Own at least 10% shares for 06 consecutive months. | Own at least 5% shares (excluding the 6-month time requirement) | It is easy to control and prevent misconduct by the management team. |
Note that although the seal procedure has been simplified, businesses need to clearly define in their charter the authority to manage and use the seal. In 2026, the use of digital signatures (e-signatures) will also be strongly protected by the Enterprise Law, just like physical seals, requiring business owners to tightly manage tokens and access rights.
Common types of businesses and advice on choosing one based on business goals.
Choosing the wrong business model from the outset can make it difficult to raise capital or transfer ownership later. The 2020 Enterprise Law provides flexible models to suit specific business sizes.
One-member limited liability company
This is the optimal choice for individuals who want full decision-making power while still enjoying limited liability. The owner's assets and the company's assets are clearly separated, helping to limit personal risk when the business encounters unforeseen circumstances. This is a "classic" model for sole proprietorships wishing to become a company.
Limited liability company with two or more members
This model is suitable for teams of 2 to 50 members. The power control mechanism is quite strict, especially regarding the preferential right of existing members to repurchase their equity stakes. This is a sustainable option for family businesses or groups of close friends starting a business together.
Joint Stock Company
With its multi-tiered governance structure comprising a general shareholders' meeting, a board of directors, and a supervisory board, this is the only model that allows for the issuance of shares to raise public capital. This is a mandatory option for businesses aiming to list on the stock exchange or startups planning to raise capital through multiple rounds (Series A, B, C).
Private enterprises and partnerships
Although less common due to the nature of unlimited liability, these types of licenses still hold particular value in professions requiring high personal prestige and expertise, such as lawyers, auditors, or private healthcare.
Business registration procedures and common document errors.
The current business registration process has been fully digitized through the national business registration system. However, as of 2026, the rate of rejected applications remains high because businesses have not yet adapted to the new identification standards.
The correct procedure includes the following steps.
- Step 1: Prepare the necessary documents, including the company's charter, a list of members/shareholders, and standardized copies of identification documents based on the national population database.
- Step 2: Register an account and submit your application online. Digital signatures are required for authentication instead of paper documents.
- Step 3: After 3 working days, if the application is valid, the business receives the certificate and proceeds with tax, invoicing, and social insurance procedures.
Common errors that cause applications to be suspended include duplicate names, addresses not suitable for commercial purposes, or declared charter capital that does not match the actual scale of operations, leading to difficulties in explaining the source of funds later.
Corporate governance and the responsibilities of the legal representative.
The 2020 Enterprise Law allows a company to have multiple legal representatives. This mechanism helps prevent business disruptions when one representative is absent. However, if the authority is not clearly defined in the articles of incorporation, the risk of overlapping responsibilities and jurisdictional disputes is very high.
Managers need to understand the tightening of accountability in 2026 through three levels of risk.
- Civil liability: Compensation for damages incurred when signing contracts exceeding authority or engaging in self-serving transactions that cause losses to the company.
- Administrative responsibilities: Penalties for late submission of reports and violations in declaring business information.
- Criminal liability: This can arise from acts of tax evasion, violations of social insurance regulations, or abuse of trust to misappropriate property.
The events of 2026 demonstrate close coordination between the General Department of Taxation and the Ministry of Public Security in temporarily suspending the exit of representatives of businesses with overdue tax debts. This confirms that the responsibility of managers is no longer limited to paperwork but is intrinsically linked to personal freedom and commercial reputation.
Shareholder rights and obligations and internal dispute resolution
Disputes between shareholder groups are a common "disease" that causes many businesses to collapse as soon as they start making profits. The 2020 law added provisions to increase transparency in access to information in order to minimize conflicts.
Shareholders or groups of shareholders owning 5% shares have the right to review and extract minutes and resolutions. Regarding obligations, the most important point is the 90-day deadline for capital contribution from the date of issuance of the certificate. If the shareholder fails to contribute the full amount within this period, the enterprise must carry out the capital reduction procedure within the next 30 days. According to actual data, intentionally withholding capital is the leading cause of lawsuits invalidating shareholder status when disputes arise within the enterprise.
Legally sound business restructuring, dissolution, and bankruptcy procedures.
When a business wants to downsize or cease operations, mastering a safe "exit" process is essential to protect the owner's assets and reputation.
- Reorganization: Includes splitting, separating, merging, and consolidating to restructure capital or prepare for M&A transactions.
- Voluntary dissolution: This can only be carried out after all tax debts, salaries, and obligations to partners have been settled.
- Bankruptcy: The last resort when a person is unable to pay their debts, allowing for fair debt settlement under the supervision of the court.
Many businesses often confuse dissolution with bankruptcy, leading to companies neglecting their tax debts, resulting in the suspension of their personal identification numbers and the inability to establish new businesses later.
Common violations and long-term risk prevention solutions.
According to Decree 122/2021/ND-CP, the penalties for violations related to business registration have increased significantly, with some offenses carrying fines of up to hundreds of millions of VND.
Below are the most common business practices.
- Failure to notify the authorities of changes to business registration details when there are changes in capital or legal representatives.
- Failure to display a sign at the head office or business location resulted in the tax authorities suspending the tax identification number due to "not operating at the registered address".
- Violation of regulations regarding the deadline for contributing charter capital, but failure to make adjustments based on actual circumstances.
To prevent this, businesses should conduct a regular legal health check at least once a year to ensure that their records at the Department of Planning and Investment always match their actual operations.
Frequently Asked Questions about the Implementation of the 2020 Enterprise Law in 2026
Below is a summary of high-risk issues that investors need to pay special attention to.
- Question: Is a representative still liable after leaving the company? Answer: According to the 2020 Enterprise Law, you are still personally liable for decisions or contracts signed during your tenure if those decisions cause damage to the company or violate the law.
- Question: How long does a business have to cease operations before its license is revoked? Answer: If a business ceases operations for one year without notifying the authorities or is confirmed by the tax authorities as not operating at its registered address, the business registration authority will proceed with the revocation of the certificate as stipulated in Article 212.
- Question: Is it permissible to use insufficient registered capital to sign contracts? Answer: Legally, the business still has legal personality from the date of issuance of the certificate. However, if a contract is signed that exceeds the actual financial capacity without contributing the full amount of capital as committed, the owner will be liable without limit to the amount of personal assets for any obligations arising from that contract.
Summary and roadmap for sustainable corporate legal compliance.
The 2020 Enterprise Law has truly opened up many opportunities but also comes with stringent requirements regarding the self-discipline and responsibility of managers. In the digital economy era of 2026, the interconnectedness of data between ministries and agencies makes any legal violations easily detectable. Operating in accordance with the law is not only a responsibility but also a strategy to protect the assets and long-term reputation of the business. Proactively review and correctly implement regulations to turn the law into a solid springboard for your development.
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Content production is overseen by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.
