Do sole proprietorship’s owners have to directly manage the business in Vietnam

Do sole proprietorship’s owners have to directly manage the business in Vietnam? (Internet image) 

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

1. What is a sole proprietorship?

According to Article 188 of the Law on Enterprises 2020, a sole proprietorship is an enterprise owned by a single individual whose liability for its entire operation is equal to his/her total assets.

Besides, A sole proprietorship must not issue any kind of securities.

 An individual may only establish one sole proprietorship. The owner of a sole proprietorship must not concurrently own a household business or hold the position of general partner of a partnership.

A sole proprietorship must not contribute capital upon establishment  or purchase shares or stakes of partnerships, limited liability companies or joint stock companies.

2. Do sole proprietorship’s owners have to directly manage the business in Vietnam?

Pursuant to Article 190 of the Law on Enterprises 2020, regulations on administration of sole proprietorships are as follows:

- The sole proprietorship’s owner has total authority to decide all of its business activities, use of post-tax profit and fulfillment of other financial obligations as prescribed by law.

- The owner may directly or hire another person to hold the position of Director/General Director. In case of a hired Director/General Director, the owner is still responsible for every business activity of the enterprise.

- The sole proprietorship’s owner is its legal representative who will represent it during civil proceedings, as the plaintiff, defendant or person with relevant interests and duties before the court and arbitral tribunals, and in performance of other rights and obligations prescribed by law.

Thus, according to the above regulations, sole proprietorship’s owners can directly or hire others to act as Director or General Director to manage and operate business activities; However, the sole proprietorship’s owners is still responsible for all business activities of the private enterprise.

3. Exercising the owner’s rights in special cases in Vietnam

Article 193 of the Law on Enterprises 2020 stipulates the exercising the owner’s rights in special cases as follows:

- In case the sole proprietorship’s owner is detained, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, he/she shall authorize another person to perform his/her rights and obligations.

- In case the owner dies, this/her heir or one of the legal heirs or designated heirs shall be the owner under an agreement among the heirs. In case such an agreement cannot be reached, the sole proprietorship shall be converted into a company or dissolved.

- In case the owner dies without an heir or the heir refuses the inheritance or is disinherited, the owner’s assets shall be handled in accordance with civil laws.

- In case owner is incapacitated, has limited legal capacity or has difficulty controlling his/her behaviors, his/her rights and obligations shall be performed through his/her representative.

- In case the sole proprietorship’s owner is banned by the court to do certain jobs in the enterprise’s business lines, the owner shall suspend or stop doing business in the relevant business lines under the court's decision or transfer the sole proprietorship to another individual or organization.

Nguyen Ngoc Que Anh

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE