Issue 010922 – List of banned business lines and list of conditional business lines

Dear Valued Clients,

Currently, enterprises are allowed to freely operate in business lines that are not prohibited by law. In addition, enterprises must ensure that all conditions for operating business are met as prescribed by law and maintain such conditions throughout the operation process. Therefore, enterprises, domestic and foreign investors need to pay attention to which banned business lines as well as conditional business lines. In this Legal Article, we shall show you the list of banned business lines and conditional business lines specified in the Law on Investment No. 61/2020/QH14 of the National Assembly dated June 17, 2020 (the “Law on Investment 2020”) and related legal documents.

1. List of conditional business lines

Enterprises have the right to operate in business lines that are not prohibited by law[1]. However, operating some business lines must meet certain conditions.

Article 7.1 of the Law on Investment 2020 stipulates: “Conditional business lines are the business lines in which the business investment must satisfy certain conditions for reasons of national defense and security, social order and security, social ethics, or public health”. Also in Appendix IV issued together with Investment Law 2020, the Government has stipulated a list including 227 conditional business lines.

Some typical conditions of these business lines are about legal capital; individual capacity to manage, administer and directly perform business activities; licenses and certificates according to the characteristics of each business line; conditions to ensure national defense, security, social order and safety, social order, social ethics or the health of the community.

In general, enterprises should only register conditional business lines in case it is a compulsory business lines or the main business lines that the enterprises must register in their business activities. Enterprises should not register conditional business lines for business activities planned to be implemented in the future. Even though they have not started their business activities yet, they still have to meet the conditions of the business lines they have registered. In case of failure to satisfy the conditions of the registered business lines, the enterprises may be subject to sanctions depending on the regulations of law on that business lines.

2. List of banned business lines

Enterprises have the right to actively choose business lines, localities, business forms, investment… However, business rights of enterprises are limited to business lines that are not prohibited by law. The regulation of banned business lines for enterprises are aimed at protecting national defense, security, social order and safety, historical traditions, culture, ethics, pure customs of Vietnam, people’s health and minimize the factors that destroy resources, destroy the environment.

Enterprises need to understand the regulations of the law on banned business lines in order to avoid operations and business illegally harm the common interests of the community. Specifically, there are 08 banned business lines which are specified in Article 6.1 of the Law on Investment 2020 including:

a) Business in narcotic substances specified in Appendix I of the Law on Investment 2020;

b) Business in chemicals and minerals specified in Appendix II of the Law on Investment 2020;

c) Business in specimens of wild flora and fauna specified in Appendix 1 of Convention on International Trade in Endangered Species of Wild Fauna and Flora; specimens of rare and/or endangered species of wild fauna and flora in Group I of Appendix III of the Law on Investment 2020;

d) Prostitution business;

e) Human trafficking; trade in human tissues, corpses, human organs and human fetuses;

f) Business activities pertaining to asexual human reproduction;

g) Trading in firecrackers;

h) Provision of debt collection services.

In addition, enterprises operating banned business lines may also be penalized for administrative violations or liable to criminal prosecution depending on the behavior and extent of damage caused. For example, for acts of debt collection service business, the sanction is a administrative fine ranging from 60,000,000 VND to 80,000,000 VND and the additional penalty is confiscation of material evidences and means of violation and forced return of illegal profits obtained from committing violations[2]. For act of trading firecrackers, enterprises and business managers may be liable to criminal prosecution for the crime of “Manufacturing and trading of banned goods”[3], accordingly, the highest fine for the criminals for trading firecrackers is 15 years’ imprisonment, especially, violating enterprises are also liable to criminal prosecution with the highest fine of up to 9,000,000,000 VND or shall be permanently shut down.

As usual, we hope you find this Legal Article useful and look forward to working with you in the future.

Kind regards,

ENT Law LLC

The full version of this Legal Article can be found here.

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[1] Article 7.1 of the Law on  Enterprise No. 59/2020/QH14 of the National Assembly dated June 17, 2020.

[2] Article 7.1 and Article 7.2 Decree No. 98/2020/NĐ-CP date August 26,2020 of Government regulated on sanctioning of administrative violations in commercial activities, production and trading of counterfeit and banned goods and protection of consumers’ interests.

[3] Article 190.5 of the Criminal Code No. 100/2015/QH13 of the National Assembly dated November 27, 2015 (amended and supplemented in 2017).