10/24/2023

2.1 Private Enterprise

Legal Forms of Business (sole proprietorship)

Assoc. Prof. Dr. Tran Thang Long • Definition

• Characteristics
• Management

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Characteristics of a Private
Enterprise
• A private enterprise (PE) is an e
nterprise owned by a single in Articles 188 – 190 of the L
dividual whose liability for its en aw on Enterprises 2020
tire operation is equal to his/her to
tal assets.
– Art. 188 of the LOEs 2020

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Characteristics of a private enterprise (PE) Characteristics of a PE

• Assets (capital) of a PE:

• Owned by one individual (sole – Personal investment → the owner’s
proprietor) legitimate ownership
• must be an individual (Not – → no difference between invested capital
organisation) and the owner’s personal assets
• Must not be prohibited to establish
and manage enterprises in Vietnam
→ Assets of the owner =
(Article 17(2) of LOEs 2020) Assets of the PE
• Can only establish ONE PE (at a time)
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Characteristics of a PE Characteristics of a PE

• Assets (capital) of a PE: • Unlimited liability

– The owner (Art. 189 LOEs 2020) • All debts and financial obligations
• Must register the exact total amount of must be paid by all assets of the
investment capital PE => assets of the owner!
• May increase/reduce his/her capital • Personal assets may be used to
invested in the business operation cover
• The owner →liable for business

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activities by all of his/her assets 8

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Characteristics of a PE Characteristics of a PE
• No legal entity status
• The owner directly runs the business – Legal entity status of an organization? (Art.14 of
the Civil Code 2015)
• → No differences between:
• Legally established
▪ The business itself and its owner
• Sophisticated structure
▪ Ownership and management of the
business • Independent property (from other individuals
and organizations)
• The owner legal representative of the • Participates independently in legal relations in i
business.
ts own name
• Cannot issue any kind of securities (share/bond)
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Questions
• Distinguish:
– (i) the right to establish the enterprises;
– (ii) the right to manage the enterprises; and
– (iii) the right to contribute capital to the enterprises
• Why does the law only allow one qualified
individual to establish only one private enterprise?
• How is a P.E. different from a household business?
• Why does “legal entity status” matter?
• When a claim is brought against the P.E., who will be
responsible for being before Court or an Arbitration?

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• What are advantages

and disadvantages of
a private enterprise?

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Management of a The owner directly manages

PE
the business:
• Making full decision
• Acting as the legal representative of the
enterprise
• Acting as plaintiff/defendant before the
What rights does Court (Art. 190 LOEs 2020)
Employ another
individual →
an owner have Convert into a
limited liability director/manager
company while still take full
in management (conditions responsibility for the
business operation
specified in the
his/her a private LOEs 2020
(Art.205)
(Art. 190 LOEs 2020

enterprise?
Lease the whole
Sale the enterprise enterprise
→ another person (Art. 191 LOEs
(Art. 192 LOEs 2020)
2020)
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Exercising the owner’s rights in special cases (Art. 193)
• 1. In case the private enterprise ’s owner is detained, serving
an imprisonment sentence, serving an administrative penalty
in a correctional institution or rehabilitation center, he/she
shall authorize another person to perform his/her rights and
obligations.
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Exercising the owner’s rights in special cases (Art. 193)
• 3. In case of the owner dies without an heir or the heir refuses
the inheritance or is disinherited, the owner’s assets shall be
handled in accordance with civil laws.
• 4. In case owner is incapacitated, has limited legal capacity or
has difficulty controlling his/her behaviors, his/her rights and
obligations shall be performed through his/her representative.
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Further discussion
• Explain conditions that an individual must satisfy in order
to establish a private enterprise?
• Clarify types of assets that an owner of a PE can invest in
the establishment of his/her business?
• Discuss regulations concerning management of a private
enterprise specified in the LOEs
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Exercising the owner’s rights in special cases (Art. 193)
• 2. In case the owner dies, this/her heir or one of the legal heirs
or designated heirs shall be the owner under an agreement
among the heirs. In case such an agreement cannot
be reached, the private enterprise shall be converted into a
company or dissolved.
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Exercising the owner’s rights in special cases (Art. 193)
• 5. In case the private enterprise ’s owner is banned by the court
to do certain jobs in the enterprise’s business lines, the owner
shall suspend or stop doing business in the relevant business
lines shall be suspended or stopped or transfer the private
enterprise to another organization or individual.
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Questions
• Can an owner of a P.E. become a member of partnership
or a shareholding company?
• If the director of a private enterprise signs a contract
beyond his/her assigned authority, who shall be
responsible?
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Useful links

• Registering a Private Enterprise

http://www.gbs.com.vn/index.php/vi/hoidap/dangkykin
hdoanh/161-private-enterprise

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