~ Le Viêt Nam, aujourd'hui. ~
The Vietnam News

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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.