Why Do Private Enterprises Not Have Legal Entity Status?
Pursuant to the provisions of Clause 1, Article 74 of the Civil Code 2015, an organization is recognized as a legal person when it meets the following conditions:
- Established in accordance with the provisions of this Code and other relevant laws;
- Has an organizational structure as follows: A legal person must have a management body. The organization, tasks, and powers of the management body of the legal person are defined in the charter of the legal person or in the decision to establish the legal person. In addition, a legal person may have other bodies as decided by the legal person or as prescribed by law.
- Possesses assets independent of individuals and other legal persons and is independently responsible for its liabilities with its assets;
- In its own name, participates independently in legal relations.
Additionally, Clause 1, Article 183 of the Enterprise Law 2014 stipulates about private enterprises as follows: A private enterprise is an enterprise owned by an individual who is fully responsible with all his/her assets for all activities of the enterprise.
Moreover, the owner of a private enterprise has full authority to decide all business activities of the enterprise, the use of profits after taxation, and the fulfillment of other financial obligations as prescribed by law.
From the above provisions, two points can be noted as follows:
Firstly, a private enterprise does not possess assets independent of the enterprise owner, as the enterprise owner must be responsible for all his/her assets with respect to the enterprise's activities.
Secondly, all decisions concerning the enterprise's business activities, use of profits after tax payment, and performance of other financial obligations are made by the enterprise owner without the intervention of a management body. This indicates that a private enterprise does not have an internal organizational structure.
=> Therefore, it can be seen that a private enterprise does not fulfill the conditions to become a legal person and thus does not have legal person status.
Sincerely!
