ARE EMPLOYEES OF STATE AGENCIES UNDER CONTRACT REGIME ALLOWED TO CONTRIBUTE CAPITAL TO ESTABLISH A COMPANY?

Posted 23:24 Date 23/08/2023

My name is Nguyen Van Minh – a staff working at the Department of Planning and Investment of X province under contract regime. I and 03 of my friends contributed capital to establish Anh Hao limited liability company. After a period of operation, there have been many conflicts within the company. Mr. Tran Ngoc Nguyen – Manager of the company, who contributed capital to establish the company made an unfair profit on behalf of the company, making a huge negative impact on the company. Thus, Mr. Tran Ngoc Nguyen was dismissed from his position as director in the meeting of the board members. After that, he filed a lawsuit in court stating that I am the Department of Planning and Investment’s staff who is not eligible to contribute capital to establish the company. Then, am I allowed to contribute capital to establish the company?

Dear Lawyers!

Answer:

Thank you for sending question to Phong & Partners Law Firm!

According to your question, Phong & Partners Law Firm would like to clarify establishing, contributing capital, and managing enterprises right following Article 17 of The enterprise law 2014 - The rights to establish, contribute capital, buy shares/stakes and manage enterprises:

“1. Organizations and individuals have the right to establish and manage enterprises in Vietnam in accordance with this Law, except for the cases specified in Clause 2 of this Article.

2. The following organizations and individuals do not have the right to establish and manage enterprises in Vietnam:

a) State authorities, People’s armed forces using state-owned assets to establish enterprises to serve their own interests;

b) Officials and public employees defined by the Law on Officials and the Law on Public Employees;

c) Commissioned officers, non-commissioned officers, career military personnel, military workers and public employees in agencies and units of Vietnam People’s Army; commissioned officers, non-commissioned officers and police workers in police authorities and units, except for those designated and authorized representatives to manage state-owned stakes in enterprises or to manage state-owned enterprises;

d) Executive officers and managers of state-owned enterprises prescribed in Point a Clause 1 Article 88 of this Law, except those who are designated as authorized representatives to manage state-owned stakes in other enterprises;

dd) Minors; people with limited legal capacity; incapacitated people; people having difficulties controlling their behaviors; organizations that are not juridical persons;

e) People who are facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated, is not able to control his/her own behaviors, is banned by the court from holding certain positions or doing certain works; other cases prescribed by the Law on Bankruptcy and the Anti-corruption Law. If requested by the business registration authority, the applicant shall submit the judicial records;

g) Juridical persons that are banned from business operation or banned from certain fields as prescribed by the Criminal Code.

3. Organizations and individuals have the right to contribute capital, buy shares and stakes of joint stock companies, limited liability companies and partnerships in accordance with this Law, except:

a) State authorities, People’s armed forces contributing state-owned assets to enterprises to serve their own interests;

b) The entities that are not allowed to contribute capital to enterprises prescribed by the Law on Officials, the Law on Public Employees, and Anti-corruption Law.

4. The act of serving one’s own interests mentioned in Point a Clause 2 and Point a Clause 3 of this Article means the use of incomes from business operation, capital contribution, acquisition of shares/stakes for any of the following purposes:

a) Any kind of distribution to some or all of the persons specified in Point b and Point c Clause 2 of this Article;

b) Inclusion in the operating budget of the organization/unit against state budget laws;

c) Establishment or contribution to an internal fund of the organization/unit.”

Therefore, according to the above article, Mr. Minh is not one of the cases specified in Clause 2 Article 17 of The Enterprise Law 2020.

In addition, in order to clearly determine whether Mr. Minh is one of the exclusions according to the provisions of Clause 3, Article 17 above, it is necessary to base on Point b, Clause 1, Article 6 of the Decree 06/2010/NĐ-CP of the Government defining civil servants in provincial- and district-level administrative agencies:

Article 6. Civil servants in provincial- and district-level administrative agencies:

1. At the provincial level

(...)

b/ Heads and deputy heads of specialized agencies under People's Committees; holders of head and deputy posts of and persons working in organizations other than public non-business units within the organizational structure of specialized agencies of People's Committees;

In this case, Mr. Minh is a staff under a contract regime, not a civil servant according to the above provision.

Additionally, according to Article 2 of Law on Public Employees 2010: “Public employees are Vietnamese citizens recruited according to working positions, working in public non-business units under working contracts and salaried from salary funds of public non-business units in accordance with law”.

In conclusion, It is clear that Mr. Minh has the right to contribute capital to establish the company.

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