Author: Phạm Huyền

A legal entity is an organization with independent legal status, which can participate in economic, political, social activities, etc. in accordance with the law. Legal entities have two forms: commercial legal entities and non-commercial legal entities. So what is the difference between a commercial legal entity and a non-commercial legal entity? In this article, we will analyze the difference between them.

1. Concept of legal entity

According to Article 74 of Civil Code 2015, an organization is recognized as a legal entity when it satisfies the following 04 conditions:

First, being established in accordance with the law

Depending on the type of legal entity being a partnership, limited liability company or joint-stock company, state agency, socio-political organization, etc., the subject shall carry out the procedures for registration of establishment of a legal entity in accordance with the provisions of the law. The organization has legal status from the date of issuance of the Certificate of Establishment.

Second, having an organizational structure as prescribed in Article 83 of Civil Code 2015

An organization that would like to become a legal entity must have a charter or a decision to establish a legal entity. In the charter and establishment decision, there must be specific provisions on the organization, tasks and powers of the executive body of the legal entity.

Third, having assets independent of other individuals or legal entities and taking responsibility for their own property

Legal entities are required to have independent assets to establish rights and obligations in their operations. Only when having independent assets can the legal entity be responsible with its own property for the transactions, rights and obligations established by it.

Fourthly, independently participating in legal relations in its own name

A legal entity is established to perform transactions and establish rights and obligations on behalf of one or a group of subjects. When entering into legal relations, the legal entity will act on its own behalf and not on behalf of any other individual or organization. The legal representative of the legal entity shall represent it in legal relations. This person can participate on his/her own or authorize someone else to do it for him/her.

2. The difference between a commercial legal entity and a non-commercial legal entity

Above is the article “The difference between a commercial legal entity and a non-commercial legal entity”. We hope this article is useful to you.

Best regards,

The right to establish and manage enterprises is a legalized right from the human right to freedom of enterprise which is noted in the Constitution 2013. In this post, we will analyze the regulations related to the entities that have the right to establish and manage enterprises.

Pursuant to the provisions of Clauses 1 and 2, Article 17 of the Law on Enterprises 2020, organizations and individuals have the right to establish and manage enterprises in Vietnam, except for the hereinafter entities:

1. State agencies, and people’s armed forces units using state assets to establish and manage enterprises of enterprises to make profits for their own agencies or units

Pursuant to Clause 4, Article 17 of the Law on Enterprises 2020, making profits for their own agencies or units is understood as using income from business activities, capital contribution, shares purchase, or purchase of capital contribution to one of the following purposes:

• Dividing in any kind to some or all of the following individuals:

1. i) Cadres, civil servants and public employees; ii) Officers, non-commissioned officers, career army men, and national defense workers and public employees in agencies and units of the Vietnam People’s Army; iii) Officers, career non-commissioned officers and public security workers in agencies and units of the Vietnam People’s Public Security Forces, except persons who are appointed as authorized representatives to manage the State’s contributed capital amounts in enterprises or to act as managers in state enterprises;

• Adding to the operational budgets of the agencies or units in contravention of the law on the state budget;
• Setting up a fund or adding to an existing fund to serve the own interests of the agencies or units.

The law’s stipulating that these entities are not allowed to establish and manage enterprises to ensure publicity and transparency in the mobilization and use of the state budget, and in the prevention of illegal acts, corruption causes damage to the state budget.

2. Entities does not have the right to establish and manage enterprises are the persons holding positions and authority in state agencies and state enterprises

The entities holding positions and authorities in state agencies and state enterprises who are not allowed to establish and manage enterprises include:

• Cadres, civil servants and public employees;
• Officers, non-commissioned officers, career army men, and national defense workers and public employees in agencies and units of the Vietnam People’s Army; and officers, career non-commissioned officers and public security workers in agencies and units of the Vietnam People’s Public Security Forces, except persons who are appointed as authorized representatives to manage the State’s contributed capital amounts in enterprises or to act as managers in state enterprises;
• Leaders and professional managers in enterprises in which the State holds 100% of charter capital, except persons appointed as authorized representatives to manage the State’s contributed capital amounts in other enterprises.

The law stipulates these entities are the persons who are in charge of public mission, performing the tasks assigned by the state and the people, and are obliged to wholeheartedly serve the society and serve the people. The restriction of the above rights is to avoid embezzlement, corruption and taking advantage of one’s position for unjust gain.

3. Minors; persons who have their civil act capacity restricted; persons who have lost their civil act capacity; persons who have difficulty in perceiving or controlling their acts; and organizations without legal person status

Regarding the individual, the above cases all belong to those who do not have or have inadequate civil act capacity. These subjects will be limited in their ability to perform their obligations, therefore, the law restricts their right to establish and manage businesses.

Regarding the organization, according to the Civil Code 2015, an organization without legal person status does not fully meet the following conditions: Legally established, inextricably organizational structure, possessing property independent and bearing its liability with its own property, independently entering into legal relations in its own name.

4. Entities are suffering adverse legal consequences due to their illegal acts

These entities are specified at Points e, g, Clause 2, Article 17 of the Law on Enterprise 2020, including:

• Persons being examined for penal liability, put in temporary detention, serving imprisonment sentences or executing administrative sanctions at compulsory drug rehabilitation establishments or compulsory education institutions, or being banned by the court from holding certain positions, practicing certain professions, or performing certain jobs; and other cases specified by the Law on Bankruptcy and the Anti-Corruption Law.
• Juridical persons that are banned from the business operation or banned from certain fields as prescribed by the Criminal Code.

5. Cases in which the establishment and management of enterprises are not specified in in the Law on Bankruptcy 2014

Except in case the enterprise goes bankrupt due to force majeure, then:

• Holders of the posts of president, director, general director and member of the Board of Directors in enterprises with 100% state capital that are declared bankrupt shall be prohibited from holding such posts in any state enterprises from the date their enterprises are declared bankrupt.
• Those who act as representatives of state capital at state-invested enterprises which are declared bankrupt shall be prohibited from holding managerial posts in any state-invested enterprises.
• If holders of managerial posts in enterprises or cooperatives which are declared bankrupt intentionally violate the provisions of Clause 1, Article 18; Clause 5, Article 28; and Clause 1, Article 48 of this Law, judges shall consider and decide to deprive them of the right to establish, or act as managers of, enterprises and cooperatives within 3 years from the date bankruptcy declaration decisions are issued.

This is the post “Entities have the right to establish and manage enterprises”. We hope this post was useful to you.

Best regards,

With the trend of integration and opening the economy, Vietnam has continuously signed new-generation free trade agreements. Since then, Vietnamese businesses have many opportunities to make transactions with foreign traders. However, many domestic enterprises are still at risk when entering contracts for sale and purchase of goods with foreign traders. So, what risk management measures for businesses when signing purchase and sale contracts with foreign traders?  In part 1 of this topic, TNTP will analyze the notes on subjects and forms when signing the Contract.

I. Overview of commercial contracts with foreign elements

According to Article 1 of the 1980 Vienna Convention on the International Sale of Goods, an international contract for the sale of goods is a contract entered between parties having commercial offices in different countries. According to Clause 1, Article 27 of the 2005 Commercial Law (“Law on Trade”), “International purchase and sale of goods shall be conducted in form of export, import, temporary import for re-export, temporary export for re-import and transfer through border-gates”. In particular, the most variable is the import-export relationship, whereby a party called the Exporting Party is obliged to deliver goods and transfer ownership of goods to another party called the Importing Party and receive payment; and the Importing Party is obliged to pay the Exporting Party, receipt of goods and ownership of goods as agreed upon.

II. Notes when drafting the International Trading Contract

1. Risk management when determining the authority of the subject to sign the Contract

Currently, many Vietnamese enterprises have contract disputes with foreign traders stemming from the reason of carefully checking their legal status and signing contracts with the wrong authority.

According to Vietnamese law, only the legal representative or the person legally authorized by the legal representative has the authority to sign the Contract. If the company has more than one legal representative, the company’s charter usually specifies the rights and obligations of each legal representative, including the authority to sign the Contract. In contrast, for example, UK law does not have specific provisions for authorization. UK case law recognizes implicit authorization, meaning that an executive, when performing the duties of running a company, has the right to perform the work of the chief executive who normally does so a power of attorney may not be required.

Thus, when entering into contracts with foreign traders, Vietnamese enterprises need to learn the regulations on the competence and authorization of the partner country, and at the same time request the partner to provide documents to prove or commit that the partner has the authority to sign the Contract. Some types of documents that Vietnamese enterprises should require partners to provide include but are not limited to  documents proving operation history, business licenses and legal documents related to legal entities.

2. Risk management of contract form

Currently, many states that are parties to the 1980 Convention stipulate that the form of contract is not necessarily a written document, the parties can use the non-written form.The1980 Convention provides: “A contract of sale must not be entered into in writing or confirmed in writing or subject to any other requirement in the form of the Contract, the Contract may be substantiated in any way, including witness testimony.”

Vietnam acceded to the Vienna Convention 1980 in 2015 but reserved provisions on the form of contracts. Therefore, in Clause 2, Article 27 of the Commercial Law: “International purchase and sale of goods shall be conducted on the basis of written contracts or other forms of equal legal validity”. As such, internationally recognized contracts for sale and purchase of goods are effective when expressed in writing, as well as any additional changes that must be made in writing.

In Vietnamese laws as well as international practices, international trade contracts are often prescribed to be established in written form. Forms of equivalent legal validity include email, telegraphy, telex, fax, data messages and others as prescribed by law. At the present time, Vietnamese law has recognized contracts signed in the form of digitalization, online purchase, fax, email, etc. have legal validity as written form.

In the contract, Vietnamese enterprises need to learn the laws of the family that will govern the implementation and settlement of disputes related to the Contract to choose the legal form of contract.  Because, if the parties enter the Contract in a non-written form such as words and acts, … but if the governing law of the Contract is Vietnamese law, the Contract is considered a violation of the provisions on form.

If the Contract is breached in form, the Court of Vietnam or arbitration in Vietnam may declare the Contract invalid. If the parties enter an international contract, the parties should draft a written contract because the contents will be clearly expressed, convenient for the parties to perform the Contract and an important basis for dispute settlement (if any).

Above is part 1 of the article “Risk management for enterprises when entering into contracts with foreign traders”. Hope this article will help readers. Other important notes TNTP will cover in the next sections.

Sincerely,

Civil transactions are considered as one of common transactions, which can be established by an agreement between the parties in a specific form. However, when performing such transactions, the parties do not always express their agreement clearly and understandably, leading to many possible disputes. Accordingly, in case the civil transactions content have unclear content and rather unintelligible, what we should do? Readers can refer to the following contents to get a solution when encountering the above situation.

1. Interpretation of civil transactions have unclear content

In cases where a civil transaction is unintelligible and may be understood in different ways, the such transaction must be interpreted in the following order:

• In accordance with the real intention of the parties at the time when the transaction was entered into;
• In a manner consistent with the objective of the transaction;
• In accordance with the customary practice of the place where the transaction was entered into. Practices mean rules of conduct obvious to define the rights and obligations of persons in specific civil relations, forming and repeating over a long time, recognized and applying generally in a region, race, or a community or field of civil.

2. Interpretation of civil transactions for specific cases

Interpretation of contracts

Where a contract contains unclear terms and conditions, the interpretation of such terms and conditions shall be based on the following factors: (i) the wording of the contract; (ii) the mutual intentions of the parties during the process prior to and at the time of establishment and performance of the contract.

• Where the wording of a contract may be interpreted in different ways, such wording shall be interpreted in the way most appropriate to the nature of the contract.
• Where a contract contains a term or wording which is difficult to understand, such term or wording shall be interpreted in accordance with the customary practice of the place where the contract was entered into.
• The terms of the contract must be interpreted in relation to each other so that the meaning of the terms is consistent with the whole content of the contract.
• Where there is a conflict between the mutual intentions of the parties and the wording used in the contract, the mutual intentions of the parties shall be used to interpret the contract.
• Where the party in a powerful position inserts into the contract contents which are disadvantageous to the party in a weak position, the contract shall be interpreted in a manner favoring the party in a weak position.

Interpretation of contents of wills

• Where the contents of a will are unclear and may be interpreted in different ways, the person announcing the will and the heirs must interpret jointly the contents of the will based on the true wishes of the deceased, taking into consideration the relationship of the deceased with the heirs under the will. If such persons fail to agree on the interpretation of the contents of the will, they have the right to request a court for settlement.
• Where part of the contents of a will is not able to be interpreted but the remainder of the will is not affected, only that part which is not able to be interpreted shall not be legally effective.

3. Solutions for the parties to avoid the content of civil transactions have unclear content and may be interpreted in different ways

• It is necessary to determine each party’s intention before establishing a transaction;
• The parties should reach an agreement on the common language;
• The contents should be specific and detailed;
• It is necessary to develop a provision on the interpretation of the transaction when a dispute arises.

Above is the article “Solution in case a civil transaction has unclear or confusing contents”. We hope this article is useful to you.

Sincerely,

Civil transactions – are considered one of the common activities, taking place on a daily and hourly basis, at many different locations. Civil transactions are often expressed in many different forms such as verbally, via acts, in writing, etc. However, some specific types of transactions require certain forms of expression. Through the following article, we hope that readers will have a thorough view of the legal provisions on form of civil transactions.

1. Forms of civil transactions

The law stipulates that there are 03 main forms of civil transactions:

Verbal form

This is the most popular form in the case of small transactions. As long as both parties reach an agreement, the transaction will take effect. Therefore, the parties usually do not keep the detailed content of the transaction (unless the parties record the sound or images of the transaction content). When a dispute occurs, one of the parties initiates a lawsuit to the Court, this party will encounter some difficulties in proving the content of the transaction as well as the rights and obligations to be performed when the transaction has been in effect if the other party denies the transaction.

Writing form

When the transaction’s subject is of high value, it is usually expressed in writing. This is the prioritized form when the parties participate in civil transactions, thanks to its advantages, such as it is the basis for the parties to review the transaction performance and for competent state agencies to settle disputes (if any).

The writing expresses the parties’ mutual agreement and usually takes effect immediately after the parties sign the document (unless otherwise agreed). On the other hand, the law stipulates specific cases in which a transaction must be made in writing, and this form is considered a valid condition of the transaction. In some cases, transactions must also be made in writing, notarized, certified or registered, if requested by law. For example: For transactions such as gifting, trading, exchanging, transferring, etc., related to real estate, movables, it is required to register for ownership rights.

In addition, civil transactions performed through electronic means in the form of data messages in accordance with the law on electronic transactions are considered transactions in writing. For example, two parties express the transaction in the form of email, SMS, message in messenger, etc.

Specific acts

An act is a person’s way of dealing with specific situations, expressed in the form of action or inaction. These acts are often used to establish common civil transactions, performed immediately and becoming common habits in related activities and fields. For example: A is the buyer and B is the seller, the two parties agree that until the 25th of every month, if A does not call to change the quantity of goods, B will deliver the goods with the equal number to last month’s for A at the end of the month.

2. What should the parties do when the forms of civil transactions that establishing a transaction is not in accordance with law?

For some certain civil transactions, the law will require that such transactions be made in writing, notarized, certified, and registered, however, the parties may not perform as requested for various reasons. This is considered a violation in terms of the civil transaction’s form and the transaction may not be valid. In this case, the parties can apply a number of solutions as follows:

• Discuss to re-establish civil transactions in writing, notarized, certified, and registered (if it is prescribed by the law).
• Contact individuals/organizations providing legal services to seek support and advice on the form of civil transactions in order to best secure their rights and interests.

Above is the article “Forms of expression of civil transactions”. We hope this article is useful to you.

Sincerely,