Enterprise registration and management of enterprise information: practice and proposed solutions for improvement

The process of enterprise registration, as stipulated in Clause 1, Article 3 of the Draft Decree (Draft 1 dated June 17, 2024, issued by the Ministry of Planning and Investment[1]) replacing Decree No. 01/2021/ND-CP on enterprise registration (the “Draft”), reflects differences in scope and content of the process. The main distinction lies in the broader obligations and activities related to enterprise registration under Decree No. 01/2021/ND-CP, while the Draft specifically details the process of updating and maintaining information within the national database, which will be discussed further below. In summary, these procedures represent the actions businesses must take with the Government to establish, adjust, and modify their corporate information. Furthermore, under Decree No. 01/2021/ND-CP[2], businesses are required to officially register and manage information when they terminate their existence including dissolution or going bankrupt.

In addition, under Decree No. 01/2021/ND-CP, managing enterprise information entails maintaining and updating critical data on the legal status and operations of businesses within the national database. This ensures that all relevant information is recorded and maintained accurately, transparently, and in accordance with current legal provisions. When a business dissolves or goes bankrupt, timely and accurate updates, as well as public notifications, are essential for reflecting the true status of the enterprise in the national management system, protecting the interests of stakeholders, and maintaining transparency in enterprise management.

The Government, in its managerial role, not only strictly oversees but also imposes sanctions to ensure compliance with regulations, thereby contributing to a sustainable and transparent business environment. However, certain issues persist, causing difficulties for enterprises and raising the need for prompt adjustments by relevant authorities to improve management efficiency. This paper will address practical issues in enterprise registration and information management, followed by proposals for enhancing the quality of these activities in Vietnam.

1. Nature and Purpose of Enterprise Registration and Management

Clause 1, Article 3 of Decree No. 01/2021/ND-CP emphasizes the registration of information of enterprises wishing to be established and the modification of information after the enterprise has finished establishing, particularly focusing on business registration with authorities and the preservation of information in the National Enterprise Registration Database. Conversely, Clause 1, Article 3 of the Draft provides a comprehensive list of registration activities, including business content, tax registration, changes in enterprise information, and the registration of branches, representative offices, and business locations, as well as other obligations and notifications under the Law on Enterprises and related legal documents. While there are textual differences between Decree No. 01/2021/ND-CP and the Draft regarding the concept of enterprise registration, the essence of enterprise registration and information management is not merely an administrative procedure. It forms an integral part of the State's management system over business activities nationwide. The process arises from the State's need to monitor, oversee, and ensure that all enterprises, whether domestically or foreign-invested, comply with legal provisions. This also allows the State to implement economic and social policies effectively and fairly.

The enterprise information registration process enables the State to continuously collect and update key information, such as the enterprise's name, business sectors, address, legal representative, charter capital, and relevant changes. This serves as the legal basis for determining the existence of an enterprise and provides the State with a comprehensive "picture" of business operations across all economic sectors. Through information management, the State can swiftly identify and prevent illegal activities, fraud, and ensure transparency in business operations.

Moreover, the establishment of regulations on managing enterprise information is not only aimed at controlling and supervising business activities but also at creating a unified and comprehensive national storage system. This system allows central and local authorities to access and utilize business data accurately and promptly, serving management, statistical, and policy-making objectives. This element is particularly crucial in the context of a globalized economy, where the increasing interaction between domestic and international enterprises necessitates a robust and efficient management system to ensure fair competition and protect stakeholder interests.

Furthermore, enterprise information management plays a vital role in supporting decision-making processes for investors, financial institutions, and other stakeholders. Through a well-managed, transparent enterprise information system, investors can easily assess the credibility, financial capacity, and development prospects of the businesses they are interested in, thus promoting investment activities and fostering the sustainable development of both businesses and the national economy.

In conclusion, enterprise registration and information management are essential tools that enable the Government to fulfill its regulatory function over business activities within its territory. The issuance of relevant regulations not only helps the Government control, supervise, and regulate business operations but also creates a transparent, efficient enterprise information system that serves long-term socio-economic development objectives.

2. Practical Issues Arising from Enterprise Registration and Information Management

2.1. Achievements in Enterprise Information Verification and Management

In the course of enterprise registration and information management, the Government and regulatory authorities have achieved notable successes in facilitating business operations and development. One significant achievement is the unification of the enterprise identification number and tax code, similar with branches, and representative offices as stipulated in Clauses 1 and 5, Article 8 of Decree No. 01/2021/ND-CP.

This unification not only simplifies the registration process but also enhances transparency and efficiency in management, as information regarding both taxation and enterprise registration is now centrally managed across the national database. This centralization enables regulatory authorities to easily monitor and ensure that enterprises comply with the law, from initial registration through to operational activities, and allows for the early detection of illegal activities such as tax evasion or fraudulent behavior.

Prior to the enactment and implementation of the Law on Enterprises 2020, the interconnection system between enterprise registration and tax registration had already been applied to household businesses. The implementation of this mechanism in practice has brought about clear benefits, simplifying administrative procedures and saving time and costs for businesses. A specific example of this is that, right from the first registration, applicants are required to create an account on the website of the National Business Registration Portal and simultaneously declare their initial tax information on the enterprise registration system. At this stage, the initial tax information is already recorded with the tax authority, and the enterprise only needs to proceed with its regular business license tax declaration as a newly established business.

One notable development is the issuance of Decree No. 122/2020/ND-CP on the coordination and interconnection between the business registration authority, social insurance authority, and tax authority, which has become the official legal document facilitating the implementation of administrative procedures at the local level. The registered data of the enterprise is received by the business registration authority, acting as the focal point, through a method of digital data connection and sharing between various information technology systems. The prominent feature of this Decree is the mechanism for coordination and interconnection among State’s authorities in handling the procedures for enterprise establishment registration, reporting the use of labor, issuing social insurance participant codes, and registering for invoice usage, with the following key contents:

Firstly, regarding the correlation between the business registration agency and the social insurance agency, both parties are responsible for coordinating and sharing information related to businesses, branches, representative offices, and the expected number of employees, business sectors, and methods of paying social insurance. The interconnection not only helps the social insurance agency manage more effectively but also ensures consistency in data between the authorities. At the same time, the social insurance agency also provides information about the number of employees participating in social insurance to the business registration authority, facilitating the management after the enterprise is registered. As a result, the business, branch, or representative office number will simultaneously serve as the social insurance participation number, simplifying the management process.

Secondly, regarding the correlation between the business registration agency and the Labor management authority, information sharing plays an important role in managing local labor. The business registration authority provides detailed information about the name, registration number, address, legal representative, main business sector, and the projected number of employees of newly established enterprises to the labor management authority. This helps the labor management agency accurately grasp the labor situation, thereby effectively and promptly performing its management functions.

Thirdly, regarding the relationship between the business registration agency and the tax authority, this collaboration is equally important. When a business completes its registration, the business registration authority will transfer related information to the tax authority, including the registration for invoice usage. In return, the tax authority will share information about the business number, branch, representative office, along with the tax management authority division based on the data from the tax registration information system.

On the foundation of close coordination between agencies, information on businesses, branches, and representative offices after registration is transmitted quickly and accurately. When there are any changes related to business information, the enterprise only needs to make adjustments at the business registration agency, and the tax registration and social insurance systems will automatically update accordingly, ensuring consistency and minimizing administrative procedures for businesses.

In addition, the interconnection mechanism between business registration and investment registration for foreign investors has been established since Circular 02/2017/TT-BKHĐT, which guides the Investment Law 2014. This document allows for the application of an interconnection mechanism for foreign investors under the provisions of Article 24 of Decree 118/2015/NĐ-CP. Accordingly, foreign investors can choose to register investments and businesses under the interconnection mechanism as per the provisions of Circular 02/2017/TT-BKHĐT or follow separate procedures according to the Investment Law, the Enterprise Law, and current guiding documents. Investors self-declare their dossiers and are responsible before the law for the information declared in the investment registration dossier and business registration. The investment registration authority and the business registration authority are responsible for coordinating, exchanging information, and only requiring the investor to submit one dossier in case there is overlap in the components of the investment registration dossier and the business registration dossier when performing the procedures. Through this procedure, foreign investors can simultaneously proceed with registration for establishment or registration for changes through the interconnection mechanism at the competent authority. This is considered one of the highlights of the Investment Law 2014 compared to the Investment Law 2004, simplifying administrative procedures and significantly reducing the time and cost for businesses. The application of this interconnected registration has, in fact, continued to be maintained since the issuance and enforcement of the Investment Law 2020, supporting businesses, especially foreign-invested enterprises, when carrying out procedures related to investment registration and business registration.

The interconnection mechanism for managing business information between the business registration agency, the tax authority, the state labor management agency, and the investment registration agency is not only a significant step forward in state management but also a strong contribution to the digital transformation of administrative procedures. Thanks to the close coordination and data synchronization between agencies, the process of digitalizing business information is carried out more comprehensively and effectively. The interconnection mechanism helps reduce administrative burdens for businesses and enhances transparency and consistency in information management. When data is managed accurately and promptly, businesses no longer face barriers from complex administrative procedures, thereby fostering the development of their internal capabilities.

Moreover, this synchronization creates a solid foundation for the sustainable development of the national economy. When information is stored and shared scientifically, the state can easily monitor and support businesses, ensuring that economic policies are effectively implemented. Businesses also benefit from a transparent business environment, reducing risks and improving adaptability to market changes.

In conclusion, interconnected information management is not just a technical solution but also an important driving force to promote socio-economic development in the digital era, enabling the nation to take steady steps towards integration and development.

2.2. Remaining issues and obstacles in business registration activities and management, verification of business information   

Besides the innovations and positive aspects achieved to date, business registration and information management activities still face unresolved issues and limitations. These problems make it difficult to carry out business registration activities, affect the information of related individuals and businesses, and hinder the management activities of state agencies. Here are some reality examples of difficulties encountered by some individuals and businesses:

First, the management and security of business information on the National Business Registration Portal are not stringent enough, leading to cases of third-party exploitation, affecting business operations. New registrations, registration changes, notifications of changes to business information, or dissolution can all be conducted on the national business registration portal through individual business registration accounts. Any individual can create an account and use these accounts to access and search business data, including unpublished information or information recorded on the business registration certificate. Recently, access has been somewhat restricted by requiring additional entry of personal identification documents of the company's legal representative. However, this does not ensure that business information is not accessed or used by third parties when they know or obtain the information on the company’s business registration certificate. This information can be used for malicious purposes such as impersonation, fraud, or other illegal activities.

In worse scenarios, some individuals even take advantage of this to obstruct or sabotage the business's operations. Specifically, these individuals impersonate company members to unilaterally change business information or carry out procedures to suspend or dissolve the company. According to current law, notifications of changes do not require the company's seal. This makes it easier for them to impersonate, as they only need to forge a signature on the documents to proceed with related procedures. In cases where registration officers detect this and request corrections or supplements to the documents, these individuals often abandon the matter, causing the company’s registration information to be left pending. Businesses facing such situations must spend additional time and effort to withdraw and cancel the previously pending dossier before proceeding with their own changes. This is clearly a major shortcoming in the current business registration process.

Secondly, the issue of company seals and signatures of managers or legal representatives has not been effectively managed. It can be seen that a significant improvement of the Enterprise Law 2020 compared to the Enterprise Law 2014 is the elimination of the obligation to register the company seal with the business registration authority[3], as well as the provision that electronic signatures have the same legal value as seals. However, the actual implementation of these regulations has not achieved positive results in verifying business registration information. As mentioned earlier, now that it is no longer mandatory to use a registered seal, business registration documents can easily have their signature content modified or altered. Registration officers in the business registration office also lack a basis for verifying whether the signatures or seals are valid since there is no data platform for verification. In many cases, the signatures in documents from the same person are inconsistent, or the authorized person handling the business registration procedures replaces or manipulates signatures in the documents on behalf of the person legally responsible according to the law. This can lead to very dangerous consequences for businesses, as the contents of the documents being replaced or altered are not known or confirmed by the individuals with the authority to do so.

For company seals, the Enterprise Law 2020 allows the company to decide on the type, quantity, form, and content of the seal[4]. The management and retention of the seal are also conducted according to the company's internal rules or regulations. Furthermore, electronic signatures are recognized as equivalent to seals, but in practice, the use of electronic signatures has not been widely accepted or applied. Many businesses, especially small and medium enterprises, remain unclear about the legal value of electronic signatures. They believe that electronic signatures are not legally recognized or as convenient as the traditional seals made at engraving shops. However, these businesses do not yet realize the significant value of electronic signatures in ensuring security and limiting forgery compared to the manual seals that are still commonly used today.

Thirdly, the validity period of legally notarized and authenticated documents between legal regulations and actual application still has gaps. According to the Enterprise Law 2020, when submitting documents, for certain procedures, the submitter is required to submit notarized copies of legal documents of individuals who are owners, contributing members, or shareholders of the company, or notarized copies of legal documents of organizations. Clause 1, Article 4 of the Enterprise Law 2020 provides: "A copy is a document copied from the original or certified from the original by a competent authority or has been compared with the original." In practice, these original comparisons are typically performed by notary offices or local government agencies with the authority to carry out notarization and certification procedures.

These notarized copies, according to the law on notarization, have the same value and can be used in place of the originals, making them suitable for submitting to the competent authority. The issue arises because, at present, legal documents do not provide specific regulations on the validity period of these notarized copies. Therefore, in principle, notarized copies have indefinite validity. However, in practice, the assessment of the validity of these documents is not so straightforward. Due to habits and rigid working methods, in some government authorities, these notarized copies must have been issued no more than 6 months from the date of notarization. This arbitrary restriction has caused difficulties for businesses when preparing the necessary documents to complete business registration procedures.

The imposition of this six-month period is completely inconsistent with legal regulations. This approach can be understood as ensuring that documents are updated to reflect the circumstances at the time. However, the six-month period does not guarantee strict accuracy in verifying the validity of the documents, as in practice, individuals may lose, change, or have legal documents reissued at any time. Relying solely on notarized paper documents within a set period like this certainly cannot ensure the accuracy of the documentation. Moreover, this inadvertently creates unnecessary inconvenience and additional costs for the public, even when it is not truly needed.

In addition, there is an ongoing issue related to the legal documents of foreign individuals when applied in practice at state agencies. Specifically, the copies of foreign passports used for business registration are subject to varying requirements by the competent authorities. According to the Enterprise Law[5] and Decree No. 01/2021/ND-CP[6], when carrying out business registration procedures, the documents required to be notarized and certified upon submission include copies of the legal documents of individuals who are the legal representatives of the company, legal documents of members, or shareholders who are individuals or organizations. However, these regulations only mention that the legal documents of foreign organizations must be consularly legalized, but do not specify whether the passports of foreign individuals must be consularly legalized. For foreign passports, the notarization of copies from the original passport is not required to undergo consular legalization[7]. Thus, should this be similarly applied by not requiring the consular legalization of foreign passports when conducting business registration? In practice, the application of this rule by officials of the Department of Planning and Investment in different provinces varies. In some provinces, foreign passports are required to be consularly legalized, in others they are not, while in certain places, in addition to consular legalization, translation and notarization of the foreign passport are also required. Clearly, there is no unified application of the legal provisions by the competent authorities in this regard.

Next, another issue that can be mentioned relates to the management of business registration information concerning the registered business address. When declaring the establishment of a new business, branch, or representative office, the business registration dossier must clearly and specifically declare the address of the operation, and this address must be located within the territory of Vietnam. A note regarding the use of the business registration address is that the addresses cannot be in apartment buildings or residential spaces, except in certain cases. The declaration of this address is based on the principle of self-declaration and self-responsibility, and no related documentation is required to prove the use of the registered address. The consequence of this is that many businesses declare an address at a location where they do not operate or have any visible presence at the registered address.

According to the 2020 Law on Enterprises, at the address of the business, branch, or representative office of the company, a signboard must be displayed with the organization’s information. However, in many cases, once the business registration is completed, there is no signboard or information at the registered address. Moreover, during operations, many businesses cease or terminate their activities without completing the necessary procedures to dissolve the company. By the time they fail to complete tax declaration and reporting procedures, and the competent authorities come to verify and handle the matter, the business has left no trace whatsoever. This results in state agencies being left in a passive position and facing difficulties in dealing with these businesses because there is no information or contact point to work with them.

Furthermore, although the government’s regulations allowing businesses to carry out interconnected procedures for investment registration and business registration is a significant advantage in the administrative process, this registration procedure is currently regulated by Circular No. 02/2017/TT-BKHDT. This Circular was issued in 2017 and took effect on July 15, 2017, providing guidance on Decree No. 118/2015/ND-CP. However, with the introduction of the 2020 Law on Investment, effective January 1, 2021, the 2014 Law on Investment and its guiding documents were repealed. As a result, Circular No. 02/2017/TT-BKHDT also expired, but there is currently no replacement document. Therefore, it is clear that the application of interconnected registration procedures has not been guided or adjusted by a legally valid document at this time.

Finally, in cases of businesses being divided, separated, merged, or consolidated, information regarding the origin of businesses formed through these reorganizations is not reflected in the business registration certificate or the national business registration portal. As such, it is very difficult for third parties and competent authorities to verify the information and origin of businesses newly formed through division, separation, merger, or consolidation. In some cases, this information is crucial for verifying the rights and obligations of newly formed businesses because, according to legal regulations, businesses formed after division, separation, merger, or consolidation will inherit the rights and obligations of the preceding businesses. For example, if a party with related rights and obligations is unaware and is not informed by the divided or separated company about its division or separation, and cannot search for this information, it will be very difficult to determine and require the newly formed business to fulfill the inherited obligations.

3. Some solutions and specific directions for improving business registration and business registration management in practice

The aforementioned shortcomings and limitations are issues that businesses often encounter in business registration activities. To address these issues, There are several solutions and methods to be proposed to improve the business registration process as well as the management of information and data related to business registration. 

Firstly, to enhance the security of business information on the National Business Registration Portal, measures regarding login and account creation related to business registration need to be tightened. This limits the search and use of information without permission or control by third parties. Accordingly, the online business registration system should impose security limits, security questions, or encrypt each business's information so that only individuals authorized by the business can access, search, and modify the business registration content and any unpublished content. Additionally, there should be restrictions on business registration, allowing only individuals with authority or those who meet certain conditions to create an account and perform these activities. 

Secondly, regarding seals and signatures, there should be widespread dissemination and promotion of the application of digital signatures for businesses and citizens, effectively implementing the provisions of the Law on Electronic Transactions and its guiding documents concerning these procedures. This will help change perceptions about business registration being conducted electronically, applying technology instead of manual signatures as before. Furthermore, the construction of a national information database system integrated with the National Business Registration Portal should be accelerated. This will enable the verification of the information and signatures of individuals who are owners, members, or shareholders of companies through the national information database system more quickly and accurately. Registration officers in business registration departments would also have a foundational data system to assess the accuracy of signatures and business registration information in the submitted documents. 

Thirdly, concerning the validity period of notarized and certified documents, legislative bodies should introduce specific, detailed regulations to ensure their effective application in business registration. This aims to standardize the understanding of the document requirements for business registration for individuals and organizations when submitting dossiers. As a result, notarization and certification will no longer be rigid, mechanical procedures that are inefficient and costly in terms of time and money for the public. In addition, the information of individuals is being updated and improved in the National Population Database Center, which helps to update and evaluate the declared and provided information for accuracy. Moreover, for foreigners undertaking business registration procedures, specific regulations regarding the notarization and certification of foreign passports when registering businesses should be introduced. Accordingly, these passports should only need to be notarized and certified in Vietnam without requiring consular legalization, thus reducing the procedures involved in business registration.

Fourthly, regarding the business registration address, businesses must accurately declare and update their addresses when they change or cease operations. Regardless of the registration address, the tax authorities, business registration authorities, and local administrative authorities (People's Committees, ward, commune, or town police) must coordinate to verify and pinpoint the address accurately to assess the legitimacy of the business registration. Additionally, other mandatory contact channels and sources of information should be provided so that in case of an emergency where the address is unreachable, the authorities can still contact the managers or authorized individuals of the company to resolve any arising issues.

Fifthly, concerning the interconnection between investment registration and business registration procedures, the competent authorities should promptly issue replacement documents and provide more specific guidance on this procedure. This would give businesses and investors a precise legal basis for applying and using these processes during investment and business registration, thereby optimizing the administrative procedures.

Sixthly, the interconnection of the business registration portal for specialized management authorities in regulated industries should be reconsidered and adjusted accordingly. Special access accounts should be considered for specialized management agencies (in regulated industries such as veterinary services, pharmaceuticals, information security, etc.) to check business information that has been registered on the National Business Registration Portal. When these agencies have official access to data from the National Business Registration Portal, they no longer need to require businesses to provide registration information when carrying out administrative procedures for sub-licenses, certificates of eligibility for business, or licenses to meet the requirements of regulated industries. At that point, the effectiveness of business registration information will be maximized.

Furthermore, we observe that many specialized businesses, such as law firms, law offices, and branches of foreign traders in Vietnam, operating under Decree 07/2016/NĐ-CP, still do not have their business information available on the business registration system when registering their operations in Vietnam. These entities are also not automatically connected to the tax authority system like ordinary businesses. We propose that to enhance the effectiveness of business registration for such specialized businesses, the Government should establish uniform regulations for these businesses. Once they are registered with specialized authorities, their business registration information and branch details should automatically connect with the tax authorities and police, eliminating the need for businesses or foreign investors to manually perform these procedures. This has caused unnecessary and costly administrative procedures.

Finally, the fields of information on the National Business Registration Portal should be supplemented with additional methods for searching for information related to the origin and foundation of businesses formed through division, separation, merger, or consolidation. This helps third parties and competent authorities verify information and resolve legal issues arising from the aforementioned procedures.

Overall, business registration activities are becoming increasingly common in Vietnam, with a large number of companies, branches, and representative offices being established or updating their information daily. Therefore, improving the quality of legal procedures and protecting business information should be prioritized to create a favorable environment, promoting business and investment activities both domestically and internationally, as well as contributing to economic development. Through this discussion, the author hopes to highlight the existing shortcomings and limitations in practice, along with proposing several solutions, so that the relevant authorities, businesses, and stakeholders can review, evaluate, and quickly address the current issues. This also contributes to the development and improvement of the legal framework for business registration and business data management in Vietnam.