Issue 250925 – Regulations on Capital, Management, Lease, and Transfer of Private Enterprises

Dear Valued Clients,

Private enterprises are defined under Vietnamese law as a simple and small-scale business model. With extensive experience in handling various cases for clients who are private business owners, ENT Law LLC understands the legal challenges related to capital ownership, management rights, and transactions such as leasing or selling a business. This article aims to clarify those legal issues for our clients.

I.  Investment Capital of Private Enterprises

1.1. Definition of Investment Capital of Private Business Owners

According to Article 188 and Clause 1 of Article 189 of the Law on Enterprises 2020 (“Enterprise Law”), a private enterprise is owned by a single individual who is personally liable with all of their assets for all activities of the business. A private enterprise does not have asset independence, as its assets are entirely dependent on the owner’s personal assets. It also lacks legal entity status due to this lack of asset independence, unlike typical legal entities.

1.2. Regulations on Capital of Private Enterprises

– The investment capital of a private enterprise includes: Vietnamese Dong, freely convertible foreign currencies, gold, and other assets. For capital in the form of other assets, the type of asset, quantity, and remaining value of each asset must be clearly recorded (based on Clause 1, Article 189 of the Enterprise Law).

– All capital and assets, including borrowed capital and leased assets used in business operations, must be fully recorded in the enterprise’s accounting books and financial statements in accordance with legal regulations (based on Clause 2, Article 189 of the Enterprise Law).

– Adjustment of Investment Capital (based on Clause 3, Article 189 of the Enterprise Law):

+ During operations, the owner of a private enterprise has the right to increase or decrease their investment capital in the business. Any changes must be fully recorded in the accounting books.

+ If the capital is reduced below the initially registered amount, the owner may only do so after registering the change with the Business Registration Authority.

Among current types of enterprises, private enterprises are not allowed to issue any type of securities (based on Clause 2, Article 188 of the Enterprise Law). Additionally, the owner cannot simultaneously be the owner of a household business or a member of a partnership company (based on Clause 3, Article 188 of the Enterprise Law). Therefore, private enterprises face limitations in capital mobilization.

II. Management of Private Enterprises

2.1. Authority Over Business Operations, Organizational Structure, Labor, and Profits

– A private enterprise has only one owner (based on Clause 1, Article 188 of the Law on Enterprises), meaning the individual owner has full authority over all matters related to the organization and operation of the business. One of the advantages of the private enterprise model is that the owner does not have to share management rights with any other party.

– According to Clause 1, Article 190 of the Law on Enterprises, the owner has the right to dispose of the enterprise’s assets and full authority to organize and manage the enterprise for optimal efficiency.

2.2. The Owner May Manage Directly or Hire a Manager

Based on Clause 2, Article 190 of the Law on Enterprises, the owner of a private enterprise may either manage the business directly or hire another person to manage it. In the case of hiring a manager, the owner remains legally responsible for all business activities. The scope of liability between the owner and the hired manager can be defined in a contract. The hired manager is not entitled to a fixed percentage of the profits unless otherwise agreed upon by both parties.

2.3. The Owner as Legal Representative of the Private Enterprise

The owner of a private enterprise is the legal representative of the business, acting as the petitioner in civil matters, plaintiff, defendant, or interested party before arbitration or court, and representing the enterprise in exercising other rights and obligations as prescribed by law (based on Clause 3, Article 190 of the Law on Enterprises).

III. Leasing a Private Enterprise

3.1. Legal Basis and Conditions for Leasing a Private Enterprise

According to Article 191 of the Law on Enterprises, the owner of a private enterprise has the right to lease the business to another party.

3.2. Procedures for Leasing a Private Enterprise

– As stipulated in Article 191 of the Law on Enterprises, the owner must fulfill notification obligations to state authorities and follow these procedures:

+ Negotiate and sign a notarized lease contract for the private enterprise.

+ After signing the lease contract, the owner must notify the Business Registration Authority and the Tax Authority in writing and provide a notarized copy of the lease contract. The notification must be made within 3 working days from the effective date of the lease contract.

– According to Clauses 2 and 4, Article 54 of Decree 168/2025/NĐ-CP regarding notification of leasing a private enterprise and changes in authorized representatives of owners, members of limited liability companies that are organizations, and shareholders that are foreign organizations:

+ Within 3 working days from the effective date of the lease contract, the owner must send a notification along with a notarized copy of the lease contract to the provincial Business Registration Authority where the enterprise is headquartered, as prescribed in Article 191 of the Law on Enterprises.

+ Upon receiving the registration documents, the provincial Business Registration Authority will issue a receipt and schedule a date for returning the results to the applicant. If requested, the authority may issue a certificate confirming the change in business registration details.

3.3. Rights and Obligations of Parties in the Lease Contract

According to Article 191 of the Law on Enterprises, the rights, obligations, and responsibilities of the owner and the lessee regarding the business operations of the private enterprise are detailed in the lease contract. Although the law does not specify exact terms, the following key points can be noted:

+ Owner (Lessor): Right to receive rental payments, demand compliance with the contract; obligation to hand over assets, notify the Business Registration and Tax Authorities; responsible for debts and asset obligations arising during the lease period (unless otherwise agreed).

+ Lessee: Right to manage and operate the enterprise, earn profits; obligation to use assets appropriately, pay rent, and be responsible for business operations during the lease period; legal liability for business activities.

3.4. Legal Consequences of Leasing a Private Enterprise

– The owner transfers the right to use and operate the entire enterprise to another party for a specified period in exchange for rental income.

– Leasing does not transfer ownership of the private enterprise, so the owner’s unlimited liability remains in effect.

IV. Sale of a Private Enterprise

4.1. Legal Basis for Selling a Private Enterprise

According to Clause 1, Article 192 of the Law on Enterprises, the owner of a private enterprise has the right to sell their business to another individual or organization. Compared to other types of enterprises, this is a special right granted to private enterprise owners under the law.

4.2. Procedures for Selling or Gifting a Private Enterprise

According to Clause 4, Article 192 of the Law on Enterprises, the buyer of a private enterprise must register the change of ownership in accordance with legal regulations. Based on Article 47 of Decree 168/2025/NĐ-CP, the procedures for selling or gifting a private enterprise are as follows:

– The buyer or recipient must submit an application to register the change of ownership to the provincial Business Registration Authority where the enterprise is headquartered. The application must include the following documents:

+ Request form for registration of change of ownership;

+ Sales contract or liquidation minutes of the sales contract (in case of sale); gift contract (in case of gifting); certified copy of legal inheritance documentation (in case of inheritance).

– Upon receiving the registration documents, the provincial Business Registration Authority will issue a receipt and schedule a date for returning the results to the applicant. If the application is incomplete or invalid, the authority will issue a written notice specifying the required amendments or additions.

4.3. Rights and Obligations of the Parties After the Sale

– Rights and obligations of the seller (former owner):

+ Right to receive payment for the sale;

+ Obligation to transfer assets, documents, and related records;

+ Must comply with labor laws;

+ According to Clause 2, Article 192 of the Law on Enterprises, the former owner remains liable for debts and other asset obligations incurred before the date of transfer, unless otherwise agreed between the seller, buyer, and creditors.

– Rights and obligations of the buyer (new owner):

+ Right to own and manage the private enterprise;

+ Obligation to pay, receive assets, and assume the enterprise’s obligations;

+ Must comply with labor laws;

+ Responsible for debts and asset obligations arising after the transfer date. According to Clause 2, Article 192 of the Law on Insurance Business 2020, the buyer may also assume liability for obligations arising after the transfer if agreed upon with the seller.

4.4. Legal Consequences of Selling a Private Enterprise

– Based on Article 192 of the Law on Enterprises, selling a private enterprise means transferring all rights of possession, use, and disposition of the business to another party.

– After the sale, the former owner remains liable for the enterprise’s prior asset obligations, unless there is an agreement between the former owner, the new owner, and the creditors to the contrary.

We hope this article serves as a valuable reference for our clients.

Sincerely,
ENT Law LLC