New laws promote social enterprises in Viet Nam

Indochine Counsel – Pham Van Loi, Junior Associate

Before Doi Moi, the programme of political and economic reforms that started in the eighties in Viet Nam, there were several models that could be considered as social enterprise co-operatives providing jobs for the disabled. By the end of 2014, the National Assembly of Viet Nam began enshrining this model of enterprise into law with the new Law on Enterprises No68/2014/QH13 (the "Law on Enterprise").

Under article 10 of the Law on Enterprise, there are three main characteristics distinguishing a social enterprise from a company of other types. These are: (i) being established under the Law on Enterprise, (ii) its objective is to resolve social or environmental issues for the interests of the community, and (iii) at least 51 per cent of its profits must be re-invested to accomplish its social and environmental objectives as registered.

Vietnamese lawmakers – through the Law on Enterprise – have laid the foundation stone to form a legal framework for various types of social enterprises. This new law, however, either remains silent or lacks regulations on many important issues in connection with such new models of business. For instance, the Law on Enterprise has not stipulated the details as to the procedures for the establishment of social enterprises, whether a social enterprise must follow the same procedures applicable to different types of enterprises as specified in the Law on Enterprises, and how a social enterprise can register or deregister. All these have actually brought numerous difficulties for the development of social enterprises in Viet Nam. In a move by the Vietnamese government to resolve obstacles facing the proliferation of social enterprises in Viet Nam, Decree No 96/2015/ND-CP, guiding several articles of the Law on Enterprise, was born on October 19, 2015, and came into effect on December 8, 2015 ("Decree 96").

First, unlike the Law on Enterprise, Decree 96 expressly stipulates that the establishment of social enterprises shall be conducted in accordance with procedures, sequences and dossiers as specified in the Law on Enterprise.

Second, Decree 96 requires that a social enterprise has to notify its social or environmental aims to the business registration body in order to be published on the National Business Registration Portal (the "NBRP"). The decree also provides that the notification of commitments of social enterprises towards resolving social or environmental problems, which shall be published on the NBRP, must contain some key contents such as social or environmental issues that a social enterprise will resolve, a time period for implementing its objectives and the percentage of its profits that shall be reinvested to accomplish its earlier objectives as well.

Furthermore, under Decree 96, a social enterprise, during its operation, is permitted to receive foreign non-governmental aid in order to implement its objective of resolving social or environmental issues, but it must notify its receipt of aid to the department of planning and investment or other competent authorities.

Last but not least, under Decree 96, a social sponsorship establishment, social fund or charitable fund is permitted to convert itself into a social enterprise upon a written decision of the competent authority allowing such conversion. And in this case, new social enterprises shall, after conversion, automatically succeed to the entire lawful rights and interests, and shall be liable for all the obligations such as debts, taxes or the like of the former ones.

In conclusion, the Law on Enterprise and Decree 96 attempt to address all essential aspects closely pertaining to the establishment and operation of social enterprises. And with this new step in Vietnamese regulations, social organisations as a whole, and social activists in particular hope that it brings positive changes to the development of this kind of enterprise – still a new concept in Viet Nam – in the future.