Decree reforms business registration

Laws - Countless regulations have been introduced since the passage of the Law on Enterprises in 2005, but these instruments have promulgated a number of contradictions and caused widespread confusion, particularly in the key area of business registration.

To try and clarify things, the Government issued Decree No 43/2010/ND-CP on April 15 (Decree No 43) to replace Decree No 88/2006/ND-CP. Taking effect on June 1, the new decree will overrule all previous, contrary provisions.

Under Decree No 43, each enterprise shall be issued with a unique Enterprise Code Number (ECN). The ECN will replace and consolidate the old Business Registration Code and Tax Code Number issued pursuant to Joint Circular No 05. Branches, representative offices and business locations will be issued a Code Number of Subsidiary Units. It is hoped that this single code system will reduce bureaucracy and make it easier for third parties to track the movements of a given enterprise.

Decree No. 43 has introduced significant changes to the business registration process as follows (i) an online system of registration will be launched entitled the National Enterprise Registration Information Portal (NERIP) (ii) the Business Registration Body (BRB) having received the application file will now upload the information contained therein onto the National Information System on Enterprise Registration1 (NISER); (iii) NISER will send the information to the General Department of Tax's database which will create the ECN; (iv) the BRB then issues the ERC to the applicant.

Decree No 43 makes a significant contribution to transparency empowering any organisation or individual with the right to ask the Business Registration Body for a copy of the Enterprise Registration Certificate of any enterprise stored on NISER.

The decree further expands upon provisions within Decree No 88 regarding enterprise names. First, an enterprise's name can now include letters of the Vietnamese alphabet (as under Decree 88), plus the letters F, J, Z and W. This provision also applies to branch, representative office and business location names. Second, names which are identical to or which may cause confusion with an enterprise which is already registered anywhere in the country are prohibited. Decree No 88 only addressed such confusion within a single province or centrally-administered city.

Enterprises are also forbidden under the new decree to use a name that contains the trademark, trade name or geographical indicator of another organisation or individual which is already stored in the National Database on Enterprise Registration. In contrast Decree No 88 only applied the prohibition to trade names and was difficult to enforce since, under Clause 6.3 (b) of the Law on Intellectual Property, rights to a trade name are established only upon the basis of their lawful use.

Decree No 43 also consolidates detailed guidelines regarding enterprise restructuring found in Decree No 139/2007/ND-CP. Decree No 43 provides guidelines for when (i) a single-member limited liability company is converted into a multiple-member limited liability company, and vice versa; (ii) a private enterprise is converted into a limited liability company; and (iii) a limited liability company is converted into a joint stock company, and vice versa. Decree 43's detailed and comprehensive guidelines are a significant improvement upon Decree No 88 which only addressed conversions between limited liability companies and joint stock companies.

Lastly, Decree No 43 clarifies existing regulations on the amendment of business registration following changes in capital contribution or shareholders, or a change of ownership in a one-member limited liability company, or in a private enterprise upon the sale, disposal, disappearance or death of its owner. It also includes a provision on the Business Registration Body's obligations to rectify errors in a Business Registration Certificate.

Decree No 43 represents encouraging progress, but, given the shear number of business registrations, the effectiveness of these provisions will depend on the State's willingness to invest in the software, workforce and agencies necessary to operate NISER and implement the other provisions in the decree.