Establishing a Social Enterprise: Procedures and Legal Requirements

The procedure for establishing a social enterprise is the foundational step for individuals and organizations to realize business ideas intrinsically linked to community-focused objectives. Adhering to the correct dossier and registration procedures not only ensures legal recognition for the social enterprise but also facilitates access to support resources, potential tax incentives, and builds trust with partners, investors, and society.

What is a Social Enterprise?

A social enterprise represents a distinctive business model that integrates commercial activities with the aim of addressing social or environmental issues. Under current Vietnamese law, there isn’t a standalone, specific legal definition for “social enterprise” as a separate entity type.

However, based on Clause 1, Article 10 of the Enterprise Law 2020, a social enterprise is understood as an organization established to resolve social or environmental problems for the benefit of the community, which concurrently uses its annual after-tax profits for reinvestment to achieve its registered objectives.

Some examples of social enterprises in Vietnam include:

• Organizations providing vocational training for people with disabilities.
• Businesses developing products from traditional craft villages.
• Enterprises dealing in environmentally friendly products.
• Companies creating employment opportunities for disadvantaged groups.

Note: It is crucial to distinguish social enterprises from charitable organizations. While charities operate on a non-profit basis, social enterprises do generate profits but are committed to using the majority of these profits to address social issues.

This model offers greater sustainability due to its capacity for self-generated revenue, rather than complete dependence on grants and donations.

Latest Procedures for Establishing a Social Enterprise in Vietnam

The procedure for establishing a social enterprise is similar to that of establishing a standard business. However, there are specific differences in the establishment dossier due to the requirement for a commitment to fulfilling social and environmental objectives by the social enterprise.

Dossier for Establishing a Social Enterprise

Pursuant to Clause 1, Article 28 of Decree 01/2021/NĐ-CP, the dossier for establishing a social enterprise includes the following components:

1. Enterprise registration dossier according to each business type. Specifically:

   • For a Private Enterprise:
     • Application for enterprise registration.
     • Copy of the legal documents of the enterprise owner.
     • Copy of the Investment Registration Certificate (if any).
   • For a Single-Member Limited Liability Company (LLC):
     • Application for enterprise registration.
     • Company charter.
     • Copy of the legal documents of the owner and the legal representative.
     • Copy of the Investment Registration Certificate (if any).
   • For a Multi-Member Limited Liability Company (LLC with two or more members):
     • Application for enterprise registration.
     • Company charter.
     • List of members.
     • Copies of the legal documents of the members and the legal representative.
     • Copy of the Investment Registration Certificate (if any).
   • For a Joint-Stock Company (JSC):
     • Application for enterprise registration.
     • Company charter.
     • List of founding shareholders and foreign shareholders.
     • Copies of the legal documents of founding shareholders, foreign shareholders, and the legal representative.
     • Copy of the Investment Registration Certificate (if any).

2. Commitment to fulfilling social and environmental objectives, signed by the authorized person(s).

   • For a Private Enterprise: The owner of the private enterprise.
   • For a Partnership: The general partners.
   • For an LLC: Individual members; the legal representative or authorized representative for institutional members.
   • For a JSC: Individual founding shareholders, other individual shareholders (if they agree with the commitment’s content); the legal representative or authorized representative for institutional founding shareholders and other institutional shareholders (if they agree with the commitment’s content).

Registration Process for Establishing a Social Enterprise

1. Step 1: Prepare the Enterprise Registration Dossier

The enterprise prepares a complete dossier as prescribed for the chosen business type. This includes drafting the “Commitment to fulfilling social and environmental objectives.”

2. Step 2: Submit the Dossier to the Business Registration Office

The enterprise submits the dossier to the Business Registration Office where the enterprise intends to locate its head office. The dossier can be submitted via:

• Direct submission in person.
• Online submission through the National Business Registration Portal (dkkd.gov.vn).

3. Step 3: Dossier Review and Outcome Notification

Within 03 working days from the date of receiving the dossier, the Business Registration Office will review its validity and decide whether to issue or refuse the Enterprise Registration Certificate. If the dossier is incomplete or invalid, the Business Registration Office will provide a written notification specifying the content requiring amendment or supplementation.

4. Step 4: Issuance of the Enterprise Registration Certificate

The enterprise is issued an Enterprise Registration Certificate upon meeting all stipulated conditions. The information on the Certificate is legally valid from the date of issuance, and the enterprise has the right to conduct business activities from this date, except for conditional business lines requiring further approvals. The Business Registration Office will publish the “Commitment to fulfilling social and environmental objectives” on the National Business Registration Portal.

5. Step 5: Undertake Post-Registration Procedures

• Carve the company seal.
• Open a corporate bank account.
• Register for a tax identification number.
• Register labor and social insurance for employees.

Conditions for Establishing a Social Enterprise in Vietnam

According to Article 10 of the Enterprise Law 2020, the registration for establishing a social enterprise must meet the following conditions:

1. Legal Form: The social enterprise must be established under one of the business types stipulated in the Enterprise Law.
2. General Business Conditions: The enterprise must comply with all current legal provisions regarding business establishment, including:
   • Having a designated head office in Vietnam.
   • Having a legal representative who meets legally prescribed standards.
   • Possessing charter capital that meets the requirements for the chosen business type.
   • Engaging in business lines not prohibited by law.
3. Defined Social/Environmental Objectives: The social enterprise must clearly define its operational objectives aimed at addressing social or environmental issues for community benefit. These objectives must be specifically stated in the enterprise registration dossier, particularly within the “Commitment to fulfilling social and environmental objectives.”
4. Profit Reinvestment Commitment: The social enterprise must commit to using at least 51% of its total annual after-tax profit for reinvestment to achieve its registered social and environmental objectives.

Consultancy Services for Social Enterprise Establishment Procedures at Long Phan Consulting Company

Establishing a social enterprise requires a profound understanding of enterprise law and specific related regulations. Long Phan Consulting Company offers professional services to assist clients in efficiently navigating the procedures for establishing a social enterprise, including the following:

• Advising on the appropriate social enterprise model aligned with your objectives.
• Drafting a complete dossier in accordance with legal requirements.
• Assisting in drafting the “Commitment to fulfilling social and environmental objectives” to meet all stipulations.
• Acting as an authorized representative to carry out the enterprise registration procedures.
• Monitoring the processing progress, receiving the results, and delivering them to the client.

Our team of experts possesses in-depth knowledge of the regulations pertaining to social enterprises, ensuring a smooth and legally compliant establishment process.

Frequently Asked Questions (FAQ) on Dossier, Process, and Procedures for Establishing a Social Enterprise

We are pleased to provide answers to some common questions regarding the dossier, process, and procedures for establishing a social enterprise. Please refer to them!

Are there specific advantages to choosing a particular business type (e.g., private enterprise, LLC, JSC) for a social enterprise?

Each business type has distinct legal characteristics regarding liability, management, and capital mobilization capabilities. The optimal choice for a social enterprise depends on its specific operational scale, intended social impact, and long-term growth strategy. For instance, a limited liability company might offer better liability protection for owners, while a joint-stock company could facilitate easier access to larger capital for large-scale social initiatives.

What essential components should be included in the “Commitment to fulfilling social and environmental objectives”?

This commitment should clearly articulate the specific social or environmental issue the enterprise aims to address, outline measurable objectives and indicators to track progress, identify the intended beneficiaries, and detail the strategies the enterprise will employ to achieve its goals.

Beyond initial registration, what ongoing compliance obligations do social enterprises in Vietnam face?

Social enterprises are obligated to comply with standard business regulations, along with specific requirements related to their social mission. This typically includes annual reporting on the allocation of profits towards their stated social and environmental objectives and may involve periodic assessments or audits to verify their impact.

What support channels, such as funding or mentorship, are available for social enterprises in Vietnam?

The growing social enterprise sector in Vietnam is increasingly supported by various organizations, including impact investors, non-governmental organizations (NGOs), and government initiatives. These entities may offer financial assistance, business development guidance, networking opportunities, and capacity-building programs tailored for social enterprises.

Can an existing traditional business convert into a social enterprise?

Yes, an existing business can undergo a legal and operational transformation to become a social enterprise. This process typically involves amending the company charter to explicitly state its social or environmental mission and committing to reinvesting a minimum of 51% of its after-tax profits towards these objectives.

How is the commitment to reinvest profits for social impact legally enforced?

The “Commitment to fulfilling social and environmental objectives” is a legally binding document registered with the business registration authority. Non-compliance with this commitment can lead to legal consequences, although specific enforcement mechanisms are still evolving within Vietnam’s legal framework.

Can social enterprises engage in profit-generating activities?

Absolutely. Social enterprises operate on a business model that integrates revenue generation with social impact. They are encouraged to be financially self-sustaining, with the understanding that a significant portion of their profits will be directed towards advancing their social or environmental goals.

Are there any specific tax incentives or benefits for registered social enterprises in Vietnam?

Current regulations do not stipulate specific tax exemptions or reductions exclusively for social enterprises. However, they are subject to the same tax laws applicable to their chosen business type. Advocacy efforts are ongoing to potentially introduce incentives that could further support the growth of the social enterprise sector.

How do social enterprises differ from non-profit organizations (NPOs) in Vietnam?

While both social enterprises and NPOs aim to address social challenges, their operational models differ. NPOs primarily rely on donations and grants and are prohibited from distributing profits to their stakeholders. Conversely, social enterprises engage in commercial activities to generate revenue, a majority of which is then reinvested to advance their social or environmental objectives.

We hope these answers have clarified some of your queries regarding the dossier, process, and procedures for establishing a social enterprise and have helped you feel more confident in undertaking this procedure. Thank you!

Conclusion

The dossier, process, and procedures for establishing a social enterprise can be complex for those without prior experience. If you have any questions regarding this matter, please contact Long Phan Consulting Company immediately via hotline 1900.63.63.89 to receive detailed advice from our team of experts on establishing a social enterprise that aligns with your objectives.