Types of enterprises according to the Enterprise Law 2020

Pursuant to the Enterprise Law 2020, the law currently defines there are 05 types of enterprises, including:

1. Single – member limited liability companies
2. Multi-member limited liability companies
3. Joint stock companies
4. Partnerships
5. Sole proprietorships

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1. Single – member limited liability companies

At Article 74 Enterprise law 2020: A single-member limited liability company is an enterprise owned by a single organization or individual (hereinafter referred to as “owner”). The owner’s liability for the company’s debts and other liabilities shall be equal to the company’s charter capital.

Basic characteristics: 

– Capital contributing members can be organizations or individuals, in special cases with state capital.

– A single-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

– For owners who are the state holding 100% of the charter capital or over 50% of the charter capital, the company is required to establish a Control Board, other cases are decided by the company.

Organizational structure:

– Board of Members, the company’s President or Director/General Director.

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2. Multi-member limited liability companies

At Aritcle 46 Enterprise law 2020: A multiple-member limited liability company means an enterprise that has 02 – 50 members that are organizations or individuals. A member’s liability for the enterprise’s debts and other liabilities shall be equal to the amount of capital that member contributed to the enterprise

Basic characteristics: 

– Capital contributing members can be organizations or individuals, in special cases with state capital.

– A multiple-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

Organizational structure:

– For state-owned enterprises, a Control Board must be established; other cases are decided by the company itself.

– Board of Members, the company’s President or Director/General Director.

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3. Joint stock companies

At Aritcle 111 Enterprise law 2020: A Joint Stock Company is an enterprise with charter capital divided into parts called shares and the company’s members are shareholders who own one or more shares. Joint stock companies can list shares on the stock market to attract capital.

Basic characteristics: 

– Shareholders: Charter capital divided into equal parts.

– Shareholders: can be organizations and individuals; the minimum number of shareholders is 03; there is no limit on the maximum number of shareholders;

– A shareholder’s liability for the company’s debts and liabilities is equal to the amount of capital contributed to the company by the shareholder;

– Shareholders may transfer their shares to other persons

– A joint stock company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.A joint stock company may issue shares, bonds and other kinds of securities.

Organizational structure:

– A joint stock company with the GMS, Board of Directors, Board of Controllers and Director/General Director.

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4. Partnerships

At Aritcle 177 Enterprise law 2020: 

+ There are least 02 partners that are joint owners of the company and do business under the same name ((hereinafter referred to as “general partner”). There can be limited partners in addition to general partners;

+ A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets. A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.

Basic characteristics: 

– A partnership has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

– A partnership must not issue any kind of securities.

Organizational structure: 

– The Board of Members shall be headed by the Chairman of the Board of Members, Director or General Director.

– The Board of members will include all members (including partnership members and capital contributing members). A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.

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5. Sole proprietorships

At Aritcle 188 Enterprise law 2020:  A sole proprietorship is an enterprise owned by a single individual whose liability for its entire operation is equal to his/her total assets.

Basic characteristics: 

– A sole proprietorship must not issue any kind of securities.

– An individual may only establish one sole proprietorship. The owner of a sole proprietorship must not concurrently own a household business or hold the position of general partner of a partnership.

– A sole proprietorship must not contribute capital upon establishment  or purchase shares or stakes of partnerships, limited liability companies or joint stock companies.

Organizational structure: 

– The sole proprietorship’s owner has total authority to decide all of its business activities. The owner may directly or hire another person to hold the position of Director/General Director. In case of a hired Director/General Director, the owner is still responsible for every business activity of the enterprise.

– The sole proprietorship’s owner is its legal representative who will represent it during civil proceedings, as the plaintiff, defendant or person with relevant interests and duties before the court and arbitral tribunals, and in performance of other rights and obligations prescribed by law.

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