Which entities are eligible to be an owner of sole proprietorship in Vietnam?

Which entities are eligible to be an owner of sole proprietorship in Vietnam? (Internet image) 

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

1. Which entities are eligible to be an owner of sole proprietorship in Vietnam?

According to Article 27 of the Law on Enterprise Law 2020, regulations on Issuance of the Certificate of Enterprise Registration are as follows:

 An enterprise will be granted the Certificate of Enterprise Registration when the following conditions are fully satisfied:

- The registered business lines are not banned;

- The enterprise’s name is conformable with regulations of Articles 37, 38, 39 and 41 of the Law on Enterprise Law 2020;

- The enterprise registration application is valid;

- The enterprise registration fees are fully paid in accordance with regulations of law on fees and charges.

At the same time, according to Clause 1, Article 188, Clause 1, Article 189 of the Law on Enterprise Law 2020, there are regulations on sole proprietorship as follows:

- A sole proprietorship is an enterprise owned by a single individual whose liability for its entire operation is equal to his/her total assets.

- 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.

- The capital of a sole proprietorship shall be registered by its owner. The sole proprietorship’s owner shall register the accurate amounts of capital in VND, convertible currencies, gold and other assets, types and quantities of assets.

Thus, individuals who meet the above conditions and do not fall into cases prohibiting the establishment and management of enterprises have the right to establish sole proprietorship.

2. Are owners of sole proprietorship required to directly manage the business?

Pursuant to Article 190 of the Law on Enterprise Law 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, owners of sole proprietorship can directly or hire others to act as Director or General Director to manage and operate business activities;

However, the owners of sole proprietorship are still responsible for all of the business activities

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

Article 193 of the Law on Enterprise Law 2020 stipulates the exercise of rights of private enterprises in a number of 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

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