Vietnam draft company law gets rave reviews
HANOI -
Vietnam's National Assembly
debates a draft law next month which
foreign lawyers say could boost
private sector initiative, help level the
playing field with privileged state
firms and boost corporate
transparency.
Lawyers who have seen the draft
Enterprise Law, which would repeal
much existing business legislation and
create a type of head law for
domestic companies, labelled it a
``quantum leap'' in giving a fillip to
Vietnam's fledgling private sector.
But they said the draft had to pass
without major revisions and be fully
implemented to have any real impact
in a communist-ruled country
burdened by an economic slowdown
and a plunge in foreign investment
flows.
``The draft is in my view an
outstanding contribution to the
development of the law in Vietnam,''
said David Goddard, a New Zealand
lawyer specialising in company law
reform in various countries including
Vietnam.
``It will make a major contribution to
establishing a level playing field
between private enterprises and state
enterprises in Vietnam,'' he told
Reuters.
The National Assembly opens its
next session on May 4 and the draft
Enterprise Law will be one of several
up for debate.
One lawyer said the draft had been
cleared by the elite Politburo, but
party members with links to
state-owned enterprises (SOEs) had
objected to some provisions.
``The law aims to show private firms
have rights and it will hopefully
encourage people to set up
enterprises,'' he said.
The draft defines four entities
common in more developed
economies and for the first time in
Vietnam brings them under a single
legal framework. They are private
enterprise (sole trader), partnership,
a shareholding company and a
limited liability company.
It outlines the rights and obligations
of the various entities, company
management and shareholders.
Combined foreign stakes could
amount to 30 percent.
Any company or individual forming a
business under either of the four
would be required to submit details
such as the firm's objective,
ownership structure and contractual
obligations at a national Business
Registry.
Lawyers said this should help
preserve intellectual property and
boost corporate transparency
because the information would be
available to shareholders.
They added it was unclear exactly
how the draft document related to
the Law on Foreign Investment and
the Law on State Enterprises, both
of which would not be repealed.
SOEs were entitled to transform into
limited liability companies or
shareholding firms, according to the
draft.
Goddard said this would be
important to help level the playing
field for private firms, adding there
could only be parity if all preferential
treatment for SOEs was addressed.
Businessmen say the private sector is
hobbled by socialist ideology,
inflexible tax laws and bank credit
policies that favour lumbering state
firms.
Civil servants, Communist Party
members and armed forces
personnel cannot own or manage
entities under the draft Enterprise
Law, making it unlikely SOEs would
elect to convert into the four entities,
one lawyer said.
``I doubt many SOEs will elect to
come under this law because this
means greater scrutiny...,'' he said.
Directors of any entity declared
bankrupt could not hold a similar
position for at least three years, the
draft says.
Reuters - April 16, 1999.
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