Hanoi, 3 December 2004 — The Enterprise Law to be amended next year needs to explicitly regulate corporate groups which have emerged as an increasingly important feature of Vietnam’s business landscape, a seminar heard today in the capital.
The workshop “Corporate Groups and Related Issues” was held by the Central Institute for Economic Management (CIEM) with support from the Mekong Private Sector Development Facility (MPDF), a multi-donor funded initiative of the International Finance Corporation, the private sector arm of the World Bank Group.
The workshop brought together representatives from general corporations (GCs), their line ministries, business associations and researchers to discuss the laws and rules that govern groups of companies. Based on this and other inputs, in 2005 the Law Drafting Team will amend the current Enterprise Law, known as the new Unified Enterprise Law (UEL).
While widely acclaimed as a breakthrough in economic reform thinking, the current Enterprise Law only applies to private domestic businesses. Cooperatives, foreign invested enterprises, and state owned enterprises, are each governed by separate legislation. The effect of many different legal regimes based on type of enterprise ownership has created a highly distorted and uneven playing field.
Nguyen Dinh Cung, member of the Drafting Team, said there is no coherent body of laws on corporate groups. Corporate group law is found only in specific fields—such as competition law, accounting law, corporate income tax law, and company law.
“If corporate groups don’t have a legal framework enabling them to function properly, their performance will be seriously affected, as will the national economy,” Mr. Cung said. He noted that company law should help businesses develop, expand, diversify activities and reduce risk. It also needs to protect the interests of stakeholders, especially creditors and minority shareholders who are currently vulnerable to abuses.
The workshop benefited from the international expertise of Prof. Cally Jordan who formerly served as an advisor to the Hong Kong Government on company law reform. In her paper “Legal Approaches to Corporate Groups”, Prof. Jordan presented different legislation regulating groups and conglomerates in the United States of America, Europe, Japan and Korea.
She noted that company law reform seems to be on the agenda throughout the world. The driving forces behind current company law reform are much the same: i.e., the pressure of internationalization and competition; rapid growth and changes in the shareholder population; and rapid change in financial markets and technology. Yet the recipes for how to deal with these new challenges vary considerably.
“Every country needs to determine how to treat corporate groups under its domestic law, and a major issue in this area is when to treat corporations as separate legal entities and when to treat them as one entity,” she said.
Prof. Jordan observed that there are large differences among countries in how well investors, both shareholders and creditors, are protected by law. Some experts hold these differences in law and the effectiveness of their enforcement across countries as an important factor affecting capital markets and, ultimately, the countries concerned.
