Author: Phạm Huyền

Value-added tax reduction policy applied from 2022

Written by Phạm Huyền on 24 February, 2022. Posted in Legal newsletter.

On January 11, 2022, the National Assembly of the Socialist Republic of Vietnam issued Resolution No. 43/2022/QH15 on fiscal and monetary policies for supporting the socio-economic recovery and development program (“Resolution 43“). The objective of this policy is to restore and rapidly develop production and business activities; reduce costs, support cash flow for businesses, and help prevent COVID-19 effectively. The Value-Added Tax (“VAT“) reduction policy is one of the fiscal policies detailed in Decree No. 15/2022/ND-CP dated January 28, 2022 on tax exemption and reduction policies pursuant to Resolution 43 (“Decree 15“).

Specifically, the VAT reduction policy is shown as follows:

1. VAT reduction rates

Instead of a VAT rate of 10%, the VAT rate is reduced to 8% for businesses that calculate VAT under the credit – invoice method.

2. Subjects entitled to vat reduction

VAT reduction is applied for groups of goods and services that currently subject to 10% VAT, except for the following groups of goods and services:

– Telecommunications, financial activities, banking, securities, insurance, real estate trading, metals and products from prefabricated metals, mining products (excluding coal mining), coke, refined petroleum, chemical products.

– Products and services subject to excise tax.

– Information technology in accordance with the Law on information technology.

The above-mentioned groups of goods and services are not entitled to VAT reduction policy and are detailed in the Appendixes issued with Decree 15.

Thus, the group of goods and services that are subject to VAT reduction are the groups of goods and services that (i) currently subject to 10% VAT, and (ii) are not in the groups of goods and services that are not entitled to the above-mentioned VAT reduction policy.

3. Application period of VAT reduction policy

VAT reduction policy is applied from February 1, 2022 to December 31, 2022.

4. How to determine the rate of VAT to be entitled?

In order to determine the rate of VAT to be entitled, business establishments need to take the following steps:

Step 1: Determine goods and services provided by the business establishments and are subject to VAT;

Step 2: Compare with the list of goods and services not entitled to VAT reduction policy specified in the attached Appendixes of Decree 15;

Step 3: Determine the VAT rate to be entitled of goods and services provided by the business establishments;

If the goods and services provided by the business establishments are not in the group of goods and services listed in the Appendixes attached to Decree 15, the business establishments are entitled to the VAT rate of 8%. Conversely, if the goods and services provided by the business establishments are in the group of goods and services listed in the Appendixes attached to Decree 15, the business establishments are entitled to the VAT rate of 10% as applicable.

Step 4: Consult with Tax Authorities directly managing business establishments

In case after taking the above steps that the business establishments still does not determine the rate of VAT to be entitled, the business establishments may send a letter to the Tax Authority directly managing for supporting, avoiding embarrassing cases, wrongly or arbitrarily applying the VAT rate.

It can be seen that VAT reduction policy is one of the policies issued during the COVID-19 epidemic, which is complicated and widespread throughout the country, demonstrating the State’s support to businesses, organizations and individuals that have been under crisis pressure from the epidemic. Accordingly, the exclusion method is the method applied when determining the groups of goods and services that are entitled to VAT reduction policy. Businesses establishments and enterprises are pleased to take note of the above issues to ensure their legitimate rights and interests in the field of taxation.

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What do enterprises need to prepare for initiating a lawsuit at the court in commercial business cases?

Written by Phạm Huyền on 22 February, 2022. Posted in Giải quyết tranh chấp, Pháp luật Hợp đồng.

During the operation of enterprises, it is unavoidable that disputes arise between enterprises. When the parties are unable to settle the dispute by themselves, the parties have the right to initiate a lawsuit in the competent court. To litigate, an important step is preparing a lawsuit dossier. In this article, we will show the way to prepare for initiating a lawsuit at the court in a commercial business case.

Pursuant to Article 189 of the Civil Procedure Code 2015 (CPC 2015), an enterprise that wants to litigate must prepare: (i) Petition; and (ii) Documents and evidence can prove the enterprise’s claims in the Petition.

1. The Petition

The first thing that enterprises must prepare for initiating a lawsuit is the Petition.

Pursuant to Clause 4, Article 189 of the CPC 2015 regulating the contents of a Petition, a Petition must have the following contents: (i) Date of the petition; (ii) Name of the competent court; (iii) Name, working address, or place of residence of the petitioner, the defendant, and the person having related rights and obligations; (iv) Legal rights and interests of the petitioner are infringed; specific issues that are requested the Court to settle with respect to the defendant and the persons having related interests and obligations; (v) Name and address of the witness (if any); and (vi) Checklist of documents and evidence enclosed with the petition.

Among the above contents, the most important content of the petition is that the petitioner must clearly mention “The legal rights and interests of the petitioner have been infringed, specific issues that are requested the Court to settle with respect to the defendant and the persons having related interests and obligations” because these things are directly related to the interests of the enterprise and they are the first basis for the Court to understand the incident and have a direction to research the dossier as well as make a suitable plan to settle the case.

2. Documents, evidence attached to the Petition

To prove that the enterprise’s claims are reasonable, as well as to ensure that the Court understands the nature of the incident, besides the petition, the enterprise must submit the enclosed documents and evidence if enterprise wants to prepare for initiating a lawsuit. Depending on the complexity and nature of each case, the enclosed documents and evidence are different. However, normally, the enterprise always has to prepare several documents and evidence, including:

Evidence and documents related to the legal capacity of the petitioner: including the latest Enterprise Registration Certification (ERC); ID Card/ Citizen Identity Card/ Passport/ Other personal identification papers of the legal representative; ID Card/ Citizen Identity Card / Passport/ Other personal identification papers of the authorized representative and Power of Attorney (in case of another person submit the lawsuit petition).
Evidence and documents related to the establishment of the contract, transaction including: the Contract, agreement between the parties.

These are documents proving that the parties have agreed and established a civil transaction binding rights and obligations between the parties. Only when it is proved that a civil transaction has arisen, an enterprise can request the Court to protect its infringed rights and interests when the other party fails to perform or fulfill its obligations. However, in some cases of oral transactions and agreements, there will be no contracts or agreements, the enterprise must clearly explain in the petition and submit documents, evidence to prove that this oral transaction, the agreement is real and has been agreed to execute, and guarantee that the obligations must be performed.

Evidence and documents related to the performance of the contract and transaction: Purchase orders; Goods receipt/Delivery note; Delivery bill; Payment request; etc.

For some disputes arising from the performance of the contract such as late delivery, late payment, goods’ quality, etc., the enterprise needs to submit evidence and documents related to the performance of the contract.

Evidence and documents related to the arising of disputes: Official documents, Payment request; Notice, discussion about force majeure events; Documents on penalty for violations and compensation for damage; E-mails, Exchanging messages, Negotiations between the parties, etc.

These are documents to prove that the violation by one or several parties has caused damage to the petitioner. These documents are important bases to prove whether the enterprise’s claim in the petition is reasonable and legal.

Evidence and documents related to the participation of the authorized representative in the proceedings or the defense of the legal rights and interests of the litigant: Power of attorney and ID card/ Citizen Identity Card of the authorized representative to participate in the proceedings; or the Lawyer Appointment Letter (it must be enclosed with the lawyer’s card, law practice certificate, and operation registration certificate of a law firm if the lawyer is working for a law practicing organization). If the enterprise authorizes an authorized representative or has a lawyer to participate in the lawsuit at Court, the enterprise must submit documents proving their capacity.

After completing the preparation of the lawsuit dossier, the enterprise will submit the petition with the attached evidence and documents to the competent Court. Regarding this content, we have analyzed in the article “Guide enterprises through the initiation of lawsuit at the Court“, enterprises can read more in this article to have a basic understanding of their process.

The proceedings at the Court can go through many different stages and times. Whether the lawsuit is convenient and fast depends on the judge as well as the provided documents and files. If enterprises prepare for a lawsuit with a full petition right from the beginning, it will help enterprises save a lot of time and costs, as well as create favorable conditions for the Court to settle the Petition quickly and guarantee the maximum benefits for enterprises. We hope that our shares are useful to you.

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Guide enterprises through the initiation of lawsuit at the Court

Written by Phạm Huyền on 22 February, 2022. Posted in Dispute Settlement, Giải quyết tranh chấp.

Currently, the demand for enterprises to initiate lawsuits at Court is increasing rapidly. However, enterprises are often embarrassed when initiating lawsuits because they have no experience in proceedings at the Court. In many cases, after submitting the Petition, the enterprise must add documents several times to be accepted. In general, the enterprise initiating the lawsuit has wasted its own time and caused the court proceedings to be prolonged. Therefore, we would like to share this legal article to guide enterprises through the initiation of a lawsuit at the Court in commercial business dispute cases.

1. Draft a Petition

The first and most important thing that enterprises need to pay attention to when initiating a lawsuit is drafting the Petition. This is an indispensable step because when submitting the dossier, the Court will read the Petition first.

a) Form and content of a Petition

The form and content of the Petition must be expressed in accordance with Clause 4, Article 189 of the Civil Procedure Code 2015. Enterprises may download the form of Petition according to Form No. 23-DS (issued together with Resolution No. 01/2017/NQ-HDTP dated January 13^th, 2017 of the Judges Council of the Supreme People’s Court) and fill out the blank information to submit to the Court.

b) Note when drafting a Petition

When drafting the Petition, enterprises should note some of the following issues:

Summary of the case: Although the form of the Petition does not regulate this section, the enterprise should briefly summarize the case so that the Court can get a preliminary understanding of the dispute. Thereby, the Court may quickly arrange the data and have the original direction to settle the case when considering the documents and evidence submitted with the Petition. Typically, the summary of the case will include the date, month, year of the establishment of the transaction or the signing of the contract; the process of executing the contract, and the reason for arising dispute.
The basis of the lawsuit: This is an important content in the Petition because the petitioner will present the contents to prove that the legitimate rights and interests have been infringed and the lawsuit request is grounded. The contents in this section usually include the provisions in the contract; the regulations of the law and other relevant regulations.
Request: This is mandatory content in the Petition because the lawsuit request is the key, which is the content that the parties are currently in dispute. Therefore, enterprises should clearly state the lawsuit request.

2. Documents submitted with the Petition

Pursuant to Clause 5, Article 189 of the Civil Procedure Code 2015, enclosed with the petition, documents, and evidence proving the legitimate rights and interests of the petitioner must be infringed. In case, for objective reasons, the petitioner is unable to submit all documents and evidence attached to the petition, they must submit existing documents and evidence to prove that the legitimate rights and interests of the petitioner have been infringed. The petitioner shall supplement or hand over additional documents and other evidence at the request of the Court during the settlement of the case. As such, the enterprise must submit documents attached to the Petition to prove its claim. This is a mandatory rule of law.

Although according to the above provisions, the petitioner can submit additional documents and evidence in the process of resolving the case, in fact, there are documents and evidence if the enterprise does not submit during the stage of initiating the lawsuit, the likelihood of the court accepting the case will be quite low. Therefore, businesses should note that some documents must be obtained when submitting a petition:

Contract: In civil disputes, the contract may be in verbal or in another form, so when initiating a lawsuit, even if there is no contract, the petitioner still can be accepted and settled by the Court. However, in commercial business disputes, the contract is important evidence for the Court to consider whether the request in the petition is reasonable and grounded.
Proof of the Contract’s performance: Evidence of the performance of the contract may be different depending on the type of contract and the lawsuit request. However, the evidence that the enterprise may consider submitting to the court is value-added invoices, records of goods delivery, acceptance minutes, debt reconciliation, a written request for payment, etc. (if any)

3. Filing the lawsuit dossier

a) The submission of lawsuit dossier shall comply with Article 190 of the Civil Procedure Code 2015 as follows:

Submitted directly to the Court;
Send to the Court by postal service;
Send online electronically via the Court’s Portal (if any).

Currently, mainly enterprises still submit lawsuit dossiers directly or by postal service.

b) In addition, enterprises should note that the date of a lawsuit is calculated according to the date of filing the lawsuit as follows:

Submitting directly: The date of a lawsuit is the date of application in court;
Submitting by postal service: The date of a lawsuit is the date indicated on the mark of the postal service organization where the lawsuit dossier is sent. In case the date, month, or year of postmarking of the place of sending can not be specified, the date of litigation is the date the litigant submits the petition at the postal service organization. The litigant must prove the date of submission of the petition at the postal service organization. In case the litigant fails to prove it, the date of litigation is the date the Court receives the petition forwarded by the postal service organization.

The more carefully the initiation of lawsuit is prepared, the more the time for proceedings is shortened. Therefore, enterprises should pay attention to drafting the Petition as well as preparing attached documents before sending them to the Court, avoiding the case of adding documents many times, which wastes time and gets trouble for the enterprise itself to initiate a lawsuit.

The above is legal sharings about “Guide enterprises through the initiation of lawsuit at the court”. I hope this article is helpful to you.

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Debt collection service is prohibited – Which directions for creditors?

Written by Phạm Huyền on 8 February, 2022. Posted in Thu hồi nợ, Thu Hồi Nợ.

At the 9th Session of the XIV National Assembly of the Socialist Republic of Vietnam on June 2020, the National Assembly accepted the Investment Law No. 61/2020/QH14. In which, the Investment Law has many contents amended, supplemented and improved to the Investment Law 2014. Particularly, a content that social communities are interested in the Investment Law 2020 (is effective on January 2021) is that debt collection service is prohibited.

However, many people wonder whether the prohibition of the debt collection service will affect the debt collection service of law firms or not and in practice, after the Investment Law 2020 has the effect, how can individuals and companies recover the uncollectible accounts? To answer this question, TNTP would like to share our legal view of the prohibition of debt collection service in the Investment Law 2020.

1. What is the debt collection service?

The business line of debt collection service is regulated in Decree No. 104/2007/ND-CP dated June, 2007 “On debt collection service business”.

Accordingly, it can be understood that the debt collection service business is that enterprise represents the creditor or the debtor to perform debt collection service according to regulations includes: determine debts, urge debtors to pay debts, collect debts; measures to deal with creditors; legal advice for creditors or debtors to determine debts, measures, processes, procedures for debt settlement, …

2. Are the debt collection enterprises and the law firms representing clients to solve disputes for the debt the same?

Many people think debt collection enterprises and law firms representing clients to solve disputes for the debt are the same because debt collection services and debt dispute settlement have some the following common points:

Debts arise from civil loan contracts or from commercial business activities
Debt collection enterprises and law firms both represent the client (the Creditor or the Debtor) to perform appropriate works to recover the debt for the client (in case the client is Creditor) or have solutions against the creditor (in case the client is Debtor)

However, according to the regulations of the law, the debt collection service of the debt collection enterprises and the representation to clients to resolve the debts of law firms are not the same: Thus, the debt collection enterprises’ debt collection service and law firms’ representation of debt settlement are not the same. Debt collection service is prohibited but does not affect any legal service of the Law Firm.

3. Measures of debt collection after the Investment Law 2020 has an effect?

The Investment Law 2020 will have an effect on January 2021, and pursuant to Article 6 of the Investment Law 2020, debt collection service is prohibited. Therefore, creditors can choose two options to handle the debt:

Transferring the right to the debt (or selling the debt). By this way, creditors can recover a part of the value of the debt and do not need to worry about measures to urge debtors to repay the debt. However, creditors should be aware that for bad debts, the possibility of the transferable rights to the debt is quite low and the value of the transfer will not bring benefit to the creditors.
Use legal services of lawyers: As being analyzed above, the prohibition on debt collection services does not affect the legal services of law firms, including representing clients to negotiate with the parties and participating in proceedings at Arbitration or Court to request the debtor to pay the debt. In addition, due to the fear of lawsuits of the parties, when there is the participation of lawyers in the proceedings, the debtor often cannot defect, evade obligations anymore, therefore, the ability to recover the debt successfully will be higher.

With experience in dispute settlement and debt collection for years, TNTP has found that the plan of using legal services of lawyers is more possible. Compared with the transfer of rights to debt, creditors must accept that they can just recover a part of the debt and the loss is bigger than the interest, so hiring lawyers will be more recoverable. If the debt recovery is successful, creditors can recover not only the original debt but also the interest. Therefore, creditors should carefully consider debt recovery measures to get the best benefit.

Above are legal shares of TNTP about the issue “Debt collection service is prohibited– Which directions for creditors?”. Hope this article is useful to you.

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Investors do not implement project under contents in investment registration certificate – What should is it resolved?

Written by Phạm Huyền on 22 January, 2022. Posted in Legal newsletter.

Currently, Vietnam with open investment policies is an attractive destination for investors. However, due to the complicated situation of the Covid-19 pandemic and other objective reasons, many investors do not implement project in accordance with the content specified in the Investment Registration Certificate (IRC). Especially, investors are unable to contribute capital on schedule under the IRC. In this case, what should the investor do? What is a reasonable and legal solution for investors to extend the time of capital contribution?

TNTP’s opinion:

When investors notice that they do not implement project, namely, they can not contribute capital within the time limit specified in the IRC, investors can perform one (01) of the following two (02) procedures:

1. Procedure for extending investment progress

Pursuant to Article 46 of the Investment Law 2014, for a Project granted IRC, the investor must make a written proposal to the investment registration authority when extending the schedule of contributing investment capital, progress of construction and putting the main work into operation (if any); the progress of implementing the operational goal of the investment project. It means the Investment Law 2014 allows investors to implement the procedure of extending the investment progress by submitting one (01) application dossier for extending the investment progress to investment registration agency.

Please note that investors only implement procedure of extending the investment progress when on the due date that Department of Planning and Investment receives the proposal, the time limit of contributing capital of investors is still available. The total extension of the investment progress shall not exceed 24 months.

2. Procedure for Adjusting the IRC

Stage 1: Submit Dossier of adjusting the IRC

According to Article 40 of the Investment Law 2014, when there is a need to change the content of IRC, the investor shall implement procedure for adjusting the IRC by submitting the Dossier of adjustment of IRC to the investment registration agency – the Department of Planning and Investment (“the Adjustment Dossier”). Within 10 working days from the date of receiving the complete adjustment dossier and issuing the Receipt slip, the Department of Planning and Investment will consider the validity of the Adjustment Dossier.

In case the Department of Planning and Investment notifies the investor in writing of the transfer the Adjustment Dossier to the Inspector of the Department of Planning and Investment (“Inspector of the Department”) for detecting signs of violations that investor fails to contribute in full and on time the registered capital as prescribed, based on Clause 2 Article 26 of Decree No. 118/2015/ND-CP dated November 12^th, 2015 Detailing and guiding the implementation of a number of articles of the Investment Law; at that time, it is highly likely that the Investor will be granted an adjusted IRC after fulfilling the obligation to pay the administrative penalty.

Stage 2: Work with the Inspector of the Department and implement the Decision on sanctioning administrative violations

After the Adjusment Dossier has been transferred by the Foreign Economic Affairs Department (under the Department of Planning and Investment) to the Inspector of the Department, the Inspector of the Department will review the dossier and notify the meeting schedule on the adjustment of IRC to the investor. At the working meeting, the Inspector of the Department will consider signs of violations on the investor’s capital contribution progress.

In case the Inspector of the Department issues a Decision on sanctioning an administrative violation “Failing to implement investment activities under the contents of the Investment Registration Certificate” specified at Point a Clause 5 Article 13 of the Decree No. 50/2016/ND-CP dated June 1^st, 2016 Regulations on the sanctioning of investors for administrative violations in the field of planning and investment, investors will be responsible for implementing this Decision on sanctioning.

Stage 3: Receive the Adjusted IRC

Please note that: Investors can implement the procedure for Adjustment of IRC during or beyond the time limit for capital contribution. However, not all investors are granted an adjusted IRC. The issuance of an adjusted IRC depends on the investor’s presentation, persuasion and negotiation skills at the working meeting and on the view of each case, dossier of the competent state agencies. Therefore, investors should still consider carefully and ensure the ability to contribute capital on time according to the issued IRC.

In summary, depending on the specific case and needs, investors can choose to implement the procedure for Extending the investment progress or the procedure for Adjusting the IRC to ensure that the actual capital contribution progress is consistent with the contents of capital contribution progress shown in the IRC. Clearly identifying the situation of late capital contribution and the investor’s need to extend the time limit of capital contribution helps investors easily make the right choice, thereby saving investors’ time and costs, ensure the implementation of the project in accordance with the regulations of the law.

Above are legal views on investors do not implement project under contents in IRC and legal solutions. Hopefully, this article is useful for your work.

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Reducing personnel and salaries, bonuses during a period of Covid-19

Written by Phạm Huyền on 19 January, 2022. Posted in Legal newsletter.

Recently, the outbreak on a global scale of disease of Covid-19 due to a new strain of Coronavirus has made the economy move downwards, many enterprises suffer heavy losses, especially enterprises providing accommodation, tourism, restaurant services… Many enterprises have changed their labor policies to alleviate the economic damage caused by the Covid-19 epidemic, in which the most common is reducing personnel and salaries, bonuses of employees. So are these labor policies of the enterprises legal or not?

1. Reducing personnel

Currently, many enterprises have been conducting the reduction of personnel through those formalities (i) Employees temporarily leave work, and (ii) Employees leave work in the form of termination of a labor contract. The Labor Law 2012 also provides for these cases as follows:

(i) Employees temporarily leave work without terminating the labor contract

There are three (03) formalities specified in the Labor Law 2012 to allow employees to leave work temporarily as below:

Suspension of a labor contract (“LC”)

Pursuant to Clause 5 Article 32 of the Labor Law, employees and employers may reach an agreement on the suspension of LC due to the emergency pandemic status. However, employees and employers should deal and made in writing the due date of suspension the LC, and within 15 days from the expiry of the period of temporary suspension the LC, the employee must be present at the workplace and the employer must take back the employee to work. During the period of temporary suspension the LC, the employer does not have to pay salaries and pay insurance premiums for the employee because it does not arise to perform the work under the contract.

Work suspension

Pursuant to Article 98 of the Labor Law, if due to objective reasons such as dangerous epidemics or economic reasons leading to work suspension, the salary for work suspension shall be agreed upon by the employer and the employer but not lower than the regional minium wage set by the regulations of Government. During the time of work suspension, the employer still has to pay insurance premiums for the work suspension employee.

Unpaid leave

Pursuant to Clause 3, Article 116 of the Labor Law, the employer and the employee may agree on unpaid leave. In this case, the employee takes a temporary leave and does not receive a salary during the leave. If the employee does not work and does not receive a salary of 14 working days or more in a month, the employer does not have to pay social insurance (according to Clause 4 Article 42 of Decision No.595/QD-BHXH April 14^th, 2017 of the Social Insurance Vietnam).

(ii) Employees leave work and their LC is terminated

According to Point c, Clause 1, Article 38 of the Labor Law, when there are force majeure reasons prescribed by law (due to epidemics), if the employer has sought all remedies but still has to reduce production and reduce employment, the employer has the right to unilaterally terminate the LC with the employer. However, it should be noted that when unilaterally terminating the LC, the employer must (i) prove that he has sought all measures and remedies to overcome the economic downturn caused by the epidemic, and (ii) fulfill the advance notice obligation for employees under Clause 2 Article 38 of the Labor Law, specifically as follows:

– At least 45 days for indefinite-term LC;

– At least 30 days for definite-term LC;

– At least 3 working days, for seasonal or work-specific LC of under 12 months as stipulated at Point b, Clause 1 of this Article.

In addition, the employer should also note a few cases where the law does not allow unilaterally to terminate the contract under Article 39 of the Labor Law.

When the employer unilaterally terminates the LC with the employee, the employee is entitled to a severance allowance when he has worked regularly for full 12 months or more, and he is entitled to a half-monthly salary allowance according to Article 48 of the Labor Law.

2. Reducing salaries, bonuses

Up to the present time, the law does not stipulate that employers are entitled to cut down on salaries and bonuses of employees for any reason, including legitimate reasons for force majeure events. Force majeure events such as natural disasters, epidemics are events that employers do not anticipate, but because employers and employees have signed LC, employers are responsible for paying wages and other related payments according to the signed LC. It is illegal to cut down on salaries and bonuses of employees when an epidemic occurs, unless the employee is arranged to take alternate leave to reduce the financial burden on the employer. For example, when employees work and stop working alternately (working time and time to stop work alternately), salaries and bonuses of employees are calculated based on actual working time and agreed salary work suspension as analyzed above.

Conclusion

Thus, on the issue of personnel reduction, the employer has the right to negotiate with the employee on temporary leave or unilaterally terminate the LC. However, it should be noted that unilaterally terminating the LC with the employees is quite risky for the employer because, in fact, it is difficult for the employer to prove that he has found all measures or remedies to overcome the economic downturn caused by the disease. We also had a lot of experience in similar cases, when the employees litigate the employer for unilaterally terminating the LC because the employer could not prove that he had tried all measures and remedies to overcome the difficult situation as above. Therefore, we highly recommend that employers and employees should reach a written agreement on temporary leave or unilaterally terminate the LC with the employee. In addition, employers need to know that it is against the law for employers to arbitrarily cut down on salaries and bonuses of employees performing work under the LC.

Given the current complicated disease situation, employers should take an appropriate approach and consider cases of reducing personnel, salaries and bonuses in order to minimize conflicts with their employees which may lead to employees litigating due to their illegal acts. Hopefully, the information provided by this article is useful for your work.

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Penalty for breach of commercial business contract

Written by Phạm Huyền on 14 January, 2022. Posted in Legal newsletter.

Contract is an indispensable legal document in business activities of enterprises. In which, to ensure the performance of the Contract, enterprises often have a term on penalty for breach of the Contract. However, enterprises often do not understand the regulations of the law on penalties for breach of contract. Enterprises assume that the penalty for breach of contract can be arbitrarily agreed. Through this article, TNTP will clarify regulations of the law as well as provide advice for enterprises to consider when choosing penalty for breach of a commercial business contract.

1. Regulations of the law on penalty for breach of commercial business Contract

Pursuant to Article 301 of the Commercial Law 2005, a penalty for breach is penalty for breach of contractual obligation or the total penalty for multiple breaches as agreed by the parties in the contract, but not exceeding 8% of the value of the breached contractual obligation, except for the case of penalty for breach when the assessment result is wrong.

Pursuant to Clause 2 Article 418 of the Civil Code 2015, penalty for breach is agreed by the parties, except for the case relevant laws have other regulations.

Therefore, currently, there are two regulations on the penalty for breach of Contract. This leads to enterprises agreeing on inconsistent penalty for breach. Some enterprises choose a maximum penalty that is not more than 8% of the value of the breached contractual obligation. Some enterprises assume that the Civil Code is the “mother” law, covering the Commercial Law, so that the parties are still allowed to agree arbitrarily on the penalty for breach of contract.

For the above two views, enterprises should note that:

The regulation in Clause 2, Article 418 of the Civil Code 2015 has the content “except for the case relevant laws have other regulations”. In terms of the principle of application of the law, in case the specialized law has regulation different from the general law, the specialized law shall prevail. For the penalty for breach of a commercial business contract, the governing law is the Commercial Law 2005 because the contract arises in a commercial relationship, with the purpose of making a profit.

Therefore, enterprises must apply penalties for breach of the Commercial Law 2005. The penalty for breach of the Civil Code 2015 are only applied within the scope of civil contracts such as deposit contracts, loan contracts, property sale contracts, …

2. Advice for enterprises to choose penalty for breach

Currently, although the law does not prohibit enterprises from agreeing to a larger penalty for breach, if a dispute arises and the enterprise litigates at a competent authority, the dispute settlement agency still only allows the parties to apply a maximum penalty of 8% of the value of the breached contractual obligation, the agreed-upon portion exceeding 8% will not be accepted by the competent authority.

Therefore, enterprises need to clearly define that:

In case the penalty for breach of commercial business contract agreed by the parties is larger than 8% of the value of the breached contractual obligation, when a dispute arises, if enterprises still want to apply the agreed penalty, enterprises can only settle dispute through negotiation. If the enterprises litigate at a competent authority, enterprises can only request a maximum penalty of 8% of the value of breached contractual obligations.

Above are legal sharings of TNTP on penalty for breach of commercial business Contract. Based on these analyses and its need, enterprises can consider giving an appropriate penalty for breach of the Contract. We hope this article is useful for you.

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Cooperation agreement for setting up a company – 03 main contents

Written by Phạm Huyền on 7 January, 2022. Posted in Pháp luật Hợp đồng.

Despite the impact of the Covid-19 pandemic, at present, countries still have hope for solutions to restore the economy. Therefore, the need to set up a company has gradually increased again. Under the current law, individuals and organizations are not required to make a contract before setting up a company. The parties can directly carry out procedures for registering the establishment of an enterprise at the Business Registration Agency. However, making Agreement before setting up a company has many benefits in minimizing risks and disputes. Therefore, we would like to offer legal sharings on the 03 most important contents that a Cooperation agreement for setting up a company needs.

Pursuant to Clause 1 Article 18 of the Enterprise Law 2020, company founders may sign contracts for the establishment and operation of the company before and during the enterprise registration process. However, the Enterprise Law and Investment Law do not regulate clearly the contents that must be included in the Contract for the establishment of an enterprise. The parties may arbitrarily agree on the content of the Contract within the scope of the law.

According to TNTP’s experience, Cooperation agreement for setting up a company must include 03 following contents:

1. Capital contribution

Capital contribution is an important content that must be included in Cooperation agreement to set up a company. Whereby, the parties should clearly stipulate the total value of capital to set up company (Charter capital), the value of capital contribution of each founder equivalent to a percentage of the total capital, the time limit to contribute capital, and type of capital contribution asset.

Normally, capital contribution assets should be Vietnam Dong (VND) to facilitate enterprise registration. In addition, company founders can still contribute capital in freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical secret, and other assets that can be valued in Vietnam Dong. However, the contribution of capital in foreign currency, gold, and land use rights may contain risks because the value converted into Vietnam Dong may change over time, the market, which leads to the change in the value of the capital contribution of company founders.

2. Rights and obligations of the parties

For a partnership to set up a company, the parties have the right to become a member or a shareholder of the company after registering enterprise. In addition, the parties are obliged to contribute capital with the right type of assets, value, and time limit as committed.

However, the regulation of obligation of contributing capital does not completely avoid the risk that one party has signed a Cooperation agreement and committed to contribute capital but then fails to contribute capital or does not contribute enough capital. At that time, the parties will have to adjust the registered charter capital or find another party to contribute capital instead. Adjusting charter capital or finding another party to contribute capital can take a lot of effort and time because the parties have to adjust the charter, list of shareholders, and carry out procedures to change the content of the Enterprise Registration Certificate granted to the company.

In addition, the parties may authorize one party to carry out the procedures of enterprise registration, title and role of each party in the Company. For example: member of the Board of Directors, Manager, Legal representative, …

3. Dispute settlement

Although the risk of a dispute is an undesirable outcome, in fact, there are many disputes related to capital contribution to set up a company. Therefore, the parties should stipulate the dispute settlement sequence and the competent authority to settle the dispute. In this case, TNTP recommends that the parties should specify the competent authority to settle the dispute as “the Competent Court”.

Above are legal sharings of TNTP about content that must be included in Cooperation Agreement for setting up a company. We hope this article is useful for you.

Best regards.

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TNTP & Associates International Law Firm

Lawyer Nguyen Thanh Ha

Email: ha.nguyen@tntplaw.com

Author: Phạm Huyền