Pham Diem
State and Law Institute of Vietnam
In Vietnam’s commercial law, traders constitute the central institution. According to Article 5 of the 1997 Commercial Law and Article 6 of the 2005 Commercial Law, traders are subjects that conduct commercial activities in an independent and regular manner with business registration. In that spirit, to become traders, subjects must satisfy all the following conditions:
1. The subjects must exist in certain forms.
According to the 1997 Commercial Law, the to be- trader subjects exist in four forms, or in other words, there are four types of traders:
a/ Traders being individuals: Individuals here must be understood as Vietnamese citizens being full 18 years of age or older, having full capacity for civil acts and being not banned by law from commercial business.
In the practical situation of Vietnam’s market economy, people directly engaged in goods trading are largely individuals who have shops or goods stalls in marketplaces or who conduct itinerant trading. As the capital, forms of business organization and turnovers of these individuals fail to reach certain levels, the Vietnamese law does not label these subjects as “enterprises” but only as “traders.” Besides, there also exist peddlers who have no business places, have small business capital, low revenues and incomes, to whom such legal provisions on traders as signboards, accounting books, invoice and voucher keeping, can not be applied in reality. In a number of countries, these people are called by law as “incomplete traders” who are given a legal regulation not as strict as that applicable to traders. In Vietnam, the Government is empowered to promulgate a separate regulation applicable to peddlers who have no fixed business locations, under which they need only a practice permit granted by local administration to conduct business activities.
In a nutshell, under the Vietnamese law, individuals wishing to become traders must fully satisfy the following conditions:
-Being full 18 years of age or older, having full capacity for civil acts.
-Having full conditions to conduct commercial business as provided for by law.
On the contrary, individuals shall not be recognized as traders if:
-They lack full capacity for civil acts (suffering from mental diseases), or have restricted capacity for civil acts (being addicted to drug, stimulants).
-They are being examined for penal liability or are serving prison sentences.
-They are being deprived of the profession-practicing rights by the court for having committed offences of smuggling, speculation, trading in banned goods, manufacturing and trading in fake goods, conducting illegal business activities, evading taxes, deceiving customers or other offences as provided for by law.
b/ Traders being legal persons:
The commercial law does not mention specific conditions on legal persons, such as conditions to form a legal person and matters related to organization, operation and dissolution of legal persons as provided for in the Civil Code and some other laws (the Enterprise Law, the Investment Law). Therefore, the legal persons engaged in commercial activities and fully satisfying the law-prescribed conditions may request competent state bodies to register their business and become traders. In other words, an organization can become a trader only when it has full capacity for being a legal person, participates in commercial activities and has commercial business registration.
In Vietnam, legal persons being traders include state enterprises, cooperatives, enterprises of socio-political-professional organizations, limited liability companies, and joint-stock companies. Meanwhile, legal persons being state bodies, political, social or professional organizations that are also engaged in commercial activities but not for commercial purposes and do not register their commercial business are not traders.
c/ Traders being households:
In Vietnam, family households and household economy have always played a particular role. In Vietnam’s civil law, family households have been identified as a legal subject comprising many members who jointly conduct common economic activities based on civil liability guaranteed with the whole family’s common property. If satisfying all conditions provided for by law, households may request state bodies to register their business and will have the capacity as traders in commercial relations after they are granted business licenses. However, in commercial relations, the whole families, not family members, will act as traders. Persons representing the trader-households are household masters or their authorized persons.
d/ Traders being cooperative groups:
In Vietnam, cooperative groups are smaller than cooperatives. Cooperative groups are formed on the basis of contracts with the contribution of capital and labor by at least three members.
Contracts on founding of cooperative groups must be authenticated by the People’s Committees of communes, wards or district townships. To become traders, cooperative groups must carry out procedures for business registration according to the provisions of the Commercial Law. In commercial activities, only cooperative groups, not their members, can have the capacity as traders. All commercial transactions of cooperative groups will be conducted through their representatives (group leaders) elected by their members. Cooperative groups will bear responsibility with common properties of the whole groups. If their common properties are not enough for the fulfillment of their obligations, group members shall bear joint responsibility with their own properties.
While the 1997 Commercial Law provided for four types of traders (individuals, legal persons, households and cooperative groups), the 2005 Commercial Law defines them in a more general sense: “Traders include lawfully-established economic organizations and individuals that conduct commercial activities in an independent and regular manner and have business registration.” (Clause 1, Article 6). Such general provision aims to satisfy the requirements of market economy in Vietnam, which has increasingly developed and diversified.
2. The subjects must conduct commercial activities in an independent and regular manner.
Commercial activities imply, first of all, “goods” which, according to the 1997 Commercial Law, “shall include machinery, equipment, raw materials, fuels, materials, consumer goods and other movables circulated on market, and residential houses for business purposes in the forms of lease, purchase and sale.” (Clause 3 of Article 5).
So, goods were defined in a narrow sense and listed specifically, thus limiting the regulation scope of the commercial law. Accordingly, many relations of commercial nature were not recognized and governed by law, which, instead, governed some non-commercial relations. This has caused difficulties and puzzlements for state management bodies, especially judicial agencies.
This shortcoming has been redressed by the 2005 Commercial Law which defines in Clause 2 of Article 3: “Goods include all types of movables, including those to be formed in the future; and things attached to land.” Yet, the 2005 Commercial Law still fails to provide that land use rights are commodities in order to create conditions for the real estate market to thrive.
On commercial activities, the 1997 Commercial Law listed 14 commercial acts. In fact, the law could not govern all commercial activities arising in the process of forming a market economy in Vietnam. Meanwhile, the 2005 Commercial Law gives a more general definition of commercial activities which mean “activities for the purpose of generating profits, including sale and purchase of goods, provision of services, investment, commercial promotion and other activities for the profit purpose.” (Clause 1, Article 3).
Though subjects will be considered traders only if they conduct commercial activities in an independent and regular manner, both the 1997 Commercial Law and the 2005 Commercial Law have failed to set criteria for determining the “independence” and “regularity” of commercial activities. However, according to the Government decrees guiding the implementation of the Commercial Law, a subject conducting independent commercial activities is the one that bears direct liability for his/her/its acts in commercial relations. Meanwhile, commercial activities of regular nature are those carried out under long-term plans and considered a profession generating regular income.
3. The subjects are obliged to make business registration.
Business registration means the procedures for performing the state management of commercial activities. In many countries, business registration procedures are carried out at courts. In Vietnam, these procedures are carried out at competent administrative agencies, specifically, the provincial/municipal Services of Planning and Investment.
Under the 1997 Commercial Law, only subjects that fully meet the conditions for commercial business and are granted business registration certificates by competent state bodies can have the full capacity as traders. This means that business registration is a compulsory procedure and an indispensable legal condition for establishing the trader capacity.
This issue is defined more flexibly in the 2005 Commercial Law. Accordingly, traders are obliged to make business registration according to law; where they have not yet made business registration, they shall still have to bear responsibility for all their activities according to the provisions of law.
Under the commercial law of Vietnam, traders include Vietnamese traders and foreign traders. In the course of international integration, Vietnamese lawmakers have attached more and more importance to the question of foreign traders. The 2005 Commercial Law has defined the forms of and the rights to conduct commercial activities of foreign traders in Vietnam. In addition to the forms of representative offices and branches of foreign traders in Vietnam, which were provided for in the 1997 Commercial Law, the 2005 Commercial Law has added two new forms, namely joint-venture commercial enterprises and commercial enterprises with 100% foreign capital in Vietnam. With such new provisions, Vietnamese lawmakers have created an equal environment for Vietnamese traders and foreign traders in commercial activities.-