Effective January 1, 2021, how are social enterprises understood?

From January 01, 2021, what is the understanding of social enterprises? - Illustration.

According to Clause 1, Article 10 of the Law on Enterprises 2020, three criteria are defined for a social enterprise:

- It is an enterprise registered for establishment in accordance with the provisions of the Law on Enterprises 2020;

- Its operational objective aims to resolve social, environmental issues for the benefit of the community;

- It uses at least 51% of the total annual after-tax profits of the enterprise for reinvestment to accomplish the registered objectives.

In addition to the rights and obligations of enterprises as prescribed by the Law on Enterprises 2020, social enterprises have the following additional rights and obligations:

- The owner and managers of social enterprises are considered for facilitation and support in granting licenses, certificates, and relevant certifications according to legal regulations;

- They are allowed to mobilize and receive donations from individuals, enterprises, non-governmental organizations, and other organizations both in Vietnam and abroad to offset the management and operational costs of the enterprise;

- They must maintain the operational objectives and comply with the conditions applicable to social enterprises aimed at resolving social, environmental issues for the community's benefit; as well as use at least 51% of their total annual after-tax profits for reinvestment in line with their registered goals throughout their operational period;

- They are prohibited from using the mobilized donations for purposes other than offsetting management and operational costs to address the social and environmental issues for which they were established;

- In cases of receiving incentives and support, social enterprises must annually report to the competent authorities on the operational status of the enterprise.

Note, social enterprises must notify the competent authorities if they cease to pursue their social and environmental objectives or fail to reinvest profits for social and environmental goals aimed at community benefits; social enterprises must use at least 51% of their total annual after-tax profits to reinvest to achieve the registered objectives.

The State has policies to encourage, support, and promote the development of social enterprises.

For detailed regulations, refer to the Law on Enterprises 2020, effective from January 01, 2021.

Le Vy

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