What is legal status? How does the business have legal status

What is legal status? How does the business have legal status

Legal status is a fairly common term and frequently used in business-related activities. However, not everyone understands what legal status is? Which businesses have legal status in Vietnam ? The following article of Siglaw will share issues related to this issue.

What is a judicial person/a judicial person ?

According to the provisions of Article 74 of the Vietnam Civil Code 2015, an organization is recognized as a judicial person (or a judicial person) when it is established in accordance with the provisions of law, has a strict organizational structure, has independent assets and is self-responsible with its assets and independently participates in legal relations on its behalf.

Thus, it can be seen that a judicial person/a judicial person is an organization with independent legal status to participate in activities in the economic, political and social fields… Legal entities can be Vietnamese legal entities or foreign legal entities.

What is legal status?

A legal status granted by the state to an organization, then the organization is considered a “legal person”, capable of existing, operating independently and responsible to the law for its activities. An organization with legal status is usually determined by the following factors:

  • A judicial person exists independently, independent of changing its members;
  • A judicial person has its own property and is independent of the property of its members; take independent responsibility for such property.
  • Legal entities perform legal acts on their behalf and have rights under the Civil Code over their assets: possession, use, disposition;
  • Legal entities are independent when participating in activities, and have the right to act as plaintiffs and defendants before the court.

Conditions for enterprises to have legal status

Firstly, the company is legally established in accordance with the law.

Companies and organizations established for the purpose of not violating the prohibitions of the law. Established in a certain order, recognized by state agencies through the issuance of enterprise establishment certificates, establishment decisions, operation licenses…. All issues related to the establishment of the organization such as records, order, procedures, time, etc. are prescribed by competent state agencies.

Example of a legally established organization: A limited liability company submits an incorporation dossier to the Business Registration Office where it is located, and the business registration office will consider issuing an Enterprise Registration Certificate to the company if the application is valid within 03 working days from the date of receipt of complete documents.

Secondly, enterprises have a strict organizational structure in accordance with the law

How to choose an organizational structure is entirely based on the mission and purpose of that organization. The tight organizational structure helps a unified team to be able to effectively perform the tasks of the organization set out at its establishment.

For example, the provisions of the Enterprise Law on the organizational structure of a 1-member limited liability company owned by an organization are as follows:

1-member limited liability Co., Ltd. operated by the organization owner under 1 of 2 models:

  1. Company President, Director or General Director;
  2. Members’ Council, Director or General Director

The company must have at least one legal representative who holds one of the titles of Chairman of the Members’ Council, President of the company or Director or General Director. If the company’s charter does not stipulate, the chairman of the Board of Directors or the president of the company is the PL representative of the company;

Thirdly, the organization has independent assets and is self-responsible with its own assets in all activities

Most other civil entities that want to enter into civil relations need to have their own property. Legal entities also need to have separate volumes of property, independent of the members of that judicial person. Assets of legal entities may include: capital contributed by owners, contributed capital of company members, other types of assets that legal entities establish ownership rights through transactions of law.

When it has its own assets, legal entities can use those assets to be responsible for transactions. A judicial person has all the rights to its property: the right to possession, the right to use and the right to dispose to ensure its independent status, not to be dependent on any other member or other judicial person.

Fourth, legal entities independently enter into legal relations on their behalf

The judicial person itself exercises its rights and obligations in transactions, without being dependent on any other entity. In other words, a judicial person with civil legal capacity, this arises from the time the competent state body permits its establishment or from the moment it is recorded in the register for a judicial person subject to operation registration;

The civil legal capacity of a judicial person also ends when the judicial person terminates its operation/dissolution.

What types of businesses have legal status?

According to the law on enterprises, there are 05 types of enterprises, including:

Comparing with the conditions mentioned above, there are 04 types of enterprises with legal status, including:

  • 1-member limited liability company;
  • Limited liability companies with 2 or more members;
  • Joint Stock Company;
  • Partnerships;

Because these types of enterprises fully meet the conditions to be recognized as judicial persons as prescribed in Article 74 of the Civil Code, including:

  • Established in accordance with law;
  • Have a prescribed organizational structure, in particularly:

+ The judicial person must have an executive body. The organization, tasks and powers of the executive body of a judicial person are specified in the charter of the judicial person or in the decision on the establishment of a judicial person.

+ The judicial person has other agencies under the decision of the judicial person or as prescribed by law.”

  • Having assets independent of other individuals and legal entities and being self-responsible with their own assets;
  • Engage in legal relations independently on their behalf.

Only a private enterprise does not have legal status because it “is a business owned by an individual and is solely responsible with all his assets for all activities of the enterprise”. Accordingly, it can be seen that the assets of private enterprises are not separated from the assets of owned individuals, do not fully meet the conditions to be considered legal entities and have legal status.

Legal status of a one-member limited liability company

(Article 74 of the Enterprise Law 2020)

  • A one-member limited liability company is an enterprise owned by an individual or an organization. The owner of 1 Tv Co., Ltd. is only responsible for the debts and other property obligations of the company to the extent of the charter capital (members committed to contribute) of the company.
  • 1 TV Co., Ltd. has legal status from the date of issuance of the business registration GCN.

Legal status of a limited liability company with two or more members

(Article 46 of the Enterprise Law 2020)

  • A limited liability company with two or more TVs is an enterprise with from 02 to 50 TVs as individuals or organizations. Members in 2 Tv Co., Ltd. are only responsible for debts and other property obligations of the company to the extent of the amount of capital contributed to the company.
  • A limited liability company with two or more members has legal status from the date of issuance of the business registration GCN.

Legal status of a joint stock company

(Article 111 of the Enterprise Law 2020)

JSC is an enterprise in which:

  1. The charter capital is divided into equal parts called shares;
  2. Shareholders can be organizations or individuals; a minimum of 03 shareholders and no limit on the maximum number of shareholders;
  3. Shareholders of a JSC are only liable for debts and other property obligations of the company to the extent of the amount of capital contributed to the company;
  4. Shareholders of JSC have the right to freely transfer their shares to others, unless otherwise provided for by law.

A JSC has legal status from the date of issuance of the enterprise registration GCN.

Legal Status of a Partnership

(Article 177 of the Enterprise Law 2020)

A partnership is an enterprise in which:

  1. There must be at least 02 partnership TVs that are common owners of the company, doing business together under a common name. In addition to these general partners, the company may have additional capital contributors;
  2. TV partnerships must be individuals, liable with all their assets for the obligations of the company;
  3. TV contributing capital is an organization or individual and is only responsible for the company’s debts to the extent of the amount of capital committed to contribute to the company.

A partnership has legal status from the date of issuance of the business registration GCN.

The above are the legal provisions on legal status of various types of enterprises. For a comprehensive free consultation, please contact Siglaw Law Firm:

Siglaw Law Firm

Phone: (+84) 961 366 238

Email:

  • vphn@siglaw.com.vn
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Expert advice on articles:

Lawyer Dung Le (Elena)

CEO of Siglaw Law Firm

Lawyer Le Dung has more than 10 years of experience providing legal advice to investors from more than 10 countries such as the US, Singapore, Canada, Denmark, Japan, Korea, China…