Criteria of social enterprises in Vietnam

Criteria of social enterprises in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Criteria of social enterprises in Vietnam

Specifically, Clause 1, Article 10 of the Law on Enterprises 2020 stipulates that a social enterprise shall:

- Be registered in accordance with the Law on Enterprises 2020;

- Operate for the purposes of resolving social and environmental issues for public interests;

- Use at least 51% of the annual post-tax profit for re-investment to achieved registered targets.

2. Rights and obligations of social enterprises in Vietnam

Pursuant to Clauses 2, 3 and 4, Article 10 of the Law on Enterprises 2020, in addition to the rights and obligations of an enterprise prescribed in this Law, a social enterprise also has the following rights and obligations:

- The owner or executive of a social enterprise shall be enabled to obtain relevant licenses and certificates prescribed by law;

- A social enterprise may raise and receive donations from individuals, enterprises, non-governmental organizations and other Vietnamese and foreign organizations to cover its administrative expenses and operating costs;

- Adhere to the objectives and fulfill the conditions specified in Point b and Point c Clause 1 of Article 10 of the Law on Enterprises 2020 throughout its course of operation;

- Do not use donations for purposes other than covering administrative expenses and operating costs and resolving the social and environmental issues registered by the enterprise;

- When receiving donations and aids, submit annual reports on the enterprise’s operation to a competent authority;

Inform the competent authority when an social or environmental objective is terminated or profit is not used for re-investment in accordance with Point b and Point c Clause 1 of Article 10 of the Law on Enterprises 2020.

The State shall adopt policies to encourage and assist in development of social enterprises.

3. Responsibility of social enterprises in Vietnam

According to Article 3 of Decree 47/2021/ND-CP, responsibility of social enterprises and owners of sole proprietorships, members, shareholders of social enterprises are as follows:

- Social enterprises shall maintain pursue of social and environmental objectives, retained earnings for re-investment and other contents in the commitment to pursue social and environmental objectives throughout their operation.

Unless the social and environmental objectives are terminated ahead of schedule, the social enterprise shall return all incentives, aids and sponsorships it received to pursue social and environmental objectives if it fails to fulfill the commitment to pursue social and environmental objectives and maintain retained earnings for re-investment.

- Owners of sole proprietorships, general partners of partnerships, members of limited liability companies and related entities that are shareholders of joint stock companies, members of the Board of Directors, the Director/General Director holding office or within a specific period of time shall be jointly responsible for the damage caused by the social enterprise’s violations as prescribed in Clause 1 of Article 3 of Decree 47/2021/ND-CP.

4. Regulations on receipt of aids and sponsorships in Vietnam

Pursuant to Article 4 of Decree 47/2021/ND-CP, receipt of aids and sponsorships is as follows:

- Social enterprises may receive foreign non-governmental aids to pursue their social and environmental objectives in accordance with regulations of law on receiving foreign non-governmental aids.

- Social enterprises may receive sponsorships in the form of property, finance or technical assistance to pursue their social and environmental objectives from domestic organizations and individuals and foreign organizations that have registered their operation in Vietnam as follows:

= The enterprise shall prepare a document about receipt of sponsorship which specifies: information about the sponsors, types of property, value of property or money, time of sponsorship; requirements to be satisfied by the recipient; full name and signature of the sponsor’s representative (if any).

= Within 10 working days from the receipt of the sponsorship, the enterprise shall send a notification to the authority in charge of management of aids and sponsorships affiliated to the People’s Committee of the province where the enterprise is headquartered. The notification shall be enclosed with a copy of the document about receipt of sponsorship.

Ho Quoc Tuan

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