Regulations on Company Groups according to the Enterprise Law 2020

Regulations on Corporate Group under the Enterprise Law 2020 - Illustrative Image

To be specific: Article 194 of the Enterprise Law 2020 stipulates that economic groups and general companies of different economic sectors are corporate groups that are connected through shareholding, capital contribution, or other affiliations. Economic groups and general companies are not a type of enterprise, do not have legal entity status, and are not required to register for establishment as per regulations.

Economic groups and general companies consist of parent companies, subsidiary companies, and other member companies. Each parent company, subsidiary, and member company within an economic group or general company has the rights and obligations of an independent enterprise as stipulated by law.

Additionally, Article 195 of the Enterprise Law 2020 also specifies cases where a company is considered to be a parent company of another company, as follows:

- Owning more than 50% of the charter capital or total common shares of that company;- Having the right to directly or indirectly decide the appointment of the majority or all members of the Board of Directors, Director or General Director of that company;- Having the right to decide the amendment and supplementation of the charter of that company.

Note that a subsidiary is not allowed to invest in purchasing shares or contributing capital to its parent company. Subsidiaries of the same parent company are not allowed to concurrently contribute capital, purchase shares to own cross-shareholdings. Subsidiaries with the same parent company that is an enterprise with at least 65% state ownership are not allowed to collectively contribute capital, purchase shares of another enterprise, or establish a new enterprise according to this Law.

For more details, see Enterprise Law 2020, promulgated on June 17, 2020.

Le Vy

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