Business naming to be stringently addressed

What’s in a name? A lot, it seems, for businesses in Vietnam trying to win group and corporation status. Business naming is set to be knocked into shape if a new investment authority proposal gets prime ministerial thumbs-up.

Under the new proposal drafted by the Ministry of Planning and Investment’s (MPI) Business Registration Management Agency, companies having at least VND1 trillion ($48 million) chartered capital and holding more than a 50 per cent stake in at least five other firms could be named as groups.

These are two among a set of criteria on enterprise naming which would pave the way for larger business entities with links to diverse firms under the parent-subsidiary model to set up groups of companies.

Firms that want to take on group status will also have to be joint stock or limited liability companies and get the green light from the prime minister. If the proposal gets the go-ahead, some current groups will come in under the bar. Minh Phu Seafood Group Joint Stock Company, for instance, holds more than 90 per cent of nine member firms, but has total chartered capital of only VND700 billion ($33.65 million).

But, Minh Phu Group chairman Le Van Quang applauded the proposal saying that it was essential to have a unified definition of what a group was. “We are in the process of scaling up our chartered capital to VND1 trillion to make us up to par which is also one of our earlier set targets,” said Quang.

The VND1 trillion benchmark proposed in the draft is reportedly not a problem for well-known groups currently in existence. Multi-field Hoang Anh Gia Lai Group for example, reported VND4,672 billion ($225 million) in chartered capital, while the figure for steel-maker Hoa Phat Group is VND1,963 billion ($94.4 million).

However, deputy head of the Central Institute for Economic Management’s Enterprise Reform Committee Pham Duc Trung said newly established firms would struggle to meet the requirements.

“Setting naming criteria for business groups is important as the Law on Enterprises mandates that the government introduces detailed guidance on this issue. However, the capital criterion set in the draft better suits firms which are engaged in name or business registration changes rather than new ones,” said Trung.

Also under the draft, businesses wanting to win corporation status must have at least VND500 billion ($24 million) in chartered capital and hold over a 50 per cent stake in at least three other firms.