What is Legal Entity Status?

Legal Entity is the legal term for a collective entity. There are many perspectives and theories explaining the concept of a legal entity, such as: some theories consider a legal entity to be a fictitious subject, while others consider it a real subject, etc. However, according to Vietnamese law, a legal entity is an organization (different from a natural person – referring to a human being) with independent legal status to participate in other legal activities such as economic and social activities.

According to the provisions of Article 84 of the Civil Code 2005, an organization is recognized as a legal entity when it meets the following conditions:

- It is legally established, which means it must exist in a defined form and must be established, permitted to be established, registered, or recognized by a competent authority;- It has a strict organizational structure, including the leadership bodies and specialized parts of the organization, ensuring the organization has the practical capability to operate and manage consistently within the activities of the legal entity;- It has assets independent from individuals and other organizations and is responsible for those assets, meaning the legal entity is accountable for its assets within the limits of its assets;- It participates in legal relations in its own name independently.

Thus, legal entity status serves to determine the liability (unlimited or limited) of the organization or enterprise, meaning if it has legal entity status, the assets of the business owner are separate from the assets of the enterprise, which will have limited liability. Enterprises without legal entity status will not have this separation and will have unlimited liability.

For example: When an enterprise goes bankrupt, the owner is only liable to the extent of the capital they contributed to the enterprise. However, for a private enterprise, besides the investment capital, the owner must also be liable with all their assets.

According to the provisions of the Law on Enterprises 2014, a joint-stock company, a limited liability company, and a partnership are enterprises with legal entity status, while a private enterprise does not have legal entity status.

A private enterprise is an entity owned by an individual who is personally liable with all their assets for all activities of the enterprise. The sole owner of a private enterprise has full authority to decide on all business activities of the enterprise. Therefore, this is why a private enterprise does not possess legal entity status and is the most vulnerable type of enterprise.

Refer to additional regulations on legal entities (Establishment, Civil Legal Capacity, Name, etc.) in Chapter IV of the Civil Code 2005.

Related Documents:

Civil Code 2015

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