Mission of Upgrading Vietnamese Businesses

9:08:28 AM | 10/8/2020

New contents in Law on Enterprises 2020 will help improve business quality through a good governance framework; vigorously reform market entry, completely abolish administrative procedures related to corporate seals, and allow businesses to use digital seals. The following interview with Mr. Phan Duc Hieu, Vice Chairman of the Central Institute for Economic Management (CIEM), will make clear these contents. Thu Ha reports.

Could you tell us some new points in the new edition of Law on Enterprises 2020 recently adopted by the National Assembly?

The Law on Enterprises 2020 has 10 chapters and 218 articles with many breakthrough contents aiming to create favorable conditions for business growth. There are five important changes:

One, reducing administrative procedures and facilitating business registration and market entry.

Two, improving the legal framework on corporate governance and investor and shareholder protection in line with good international standards and practices.

Three, improving the governance and performance of State-owned enterprises.

Four, developing the capital market to diversify capital sources for production and business investment.

Five, facilitating mergers and acquisitions, ensuring compatibility with the Law on Competition 2018 in corporate mergers and consolidations; adding regulations on transformation of private enterprises into joint stock companies (instead of only being converted into limited liability companies as under current regulations).

By continuing and promoting good results and impacts of reforms in the Laws on Enterprises of 2000, 2005 and 2014, the 2020 edition will greatly improve governance quality in particular and enterprises in general, helping improve corporate competitiveness and national competitiveness

What does this edition focus on?

The mission of the Law on Enterprises 2020 is very different from the previous editions, especially the editions in 2000 and 2005 where reforms and impacts focused on market entry and business establishment facilitation to increase the number of businesses. This edition, in addition to further facilitating market entry and making business establishment easier than other countries in the region, strongly focuses on improving the legal framework on corporate governance towards best governance principles in the region and the world.

Regarding market entry, this law completely reforms the seal: allowing companies to make seals and manage their seals. They can make physical seals, make electronic seals or use the methods they want to ease business operations and reduce internal disputes. Catching the digitalization trend, administrative procedures are fully conducted in an electronic environment. The Law on Enterprises 2020 establishes the fastest and most convenient mechanism to carry out administrative procedures in the electronic environment.

The focused change in the Law on Enterprises 2020 is to enhance corporate governance, an important underlying factor for long-term sustainable business and operational expansion, which is still weak in awareness and enforcement in our country. Only good governance will promote sustainable business development. It is not only financial indicators, but also aims for much higher values: Employee value, customer value, consumer value and sustainability value. This law upgrades the governance framework rather than wait for inadequacies that will be fixed in later revisions as previously. This is also a change in lawmaker mindset, expected to have an important impact on improving business quality and boosting investment attraction. The principles of good corporate governance in this law are based on the 2015 OECD good governance principles, including preventing majority shareholders from pressing minority shareholders, appropriating interests of minority shareholders, promoting governance models in accordance with good international practices, controlling insider trading, and improving responsibilities of the Board of Directors.

In your opinion, how will these changes affect business?

Similar to the previous versions, the Law on Enterprises 2020, which will come into effect on January 1, 2021, is expected to positively impact the business community, reduce barriers to market entry, and help quickly improve Vietnam's business environment. New changes are expected to strongly improve the quality of the business environment by raising business startup index and investor protection.

Moreover, applying good and high governance standards in the region and in the world will improve business quality and competitiveness in Vietnam. The mission of this law has shifted from market opening and freedom of business to upgrading corporate governance and company quality. When companies are well aware of corporate governance, they will solve inherent difficulties: Hard to grow up and easy to slow down.

Source: Vietnam Business Forum

Forthcoming Events