Law suggests contracts for non-registered services valid

by Le Thi Hong Tham with Le Trung Nghia

Article 9.1 of the Law on Enterprises requires enterprises to operate in their line of business as registered with licensing authorities and recorded on the enterprise's business registration certificate. Many enterprises register to operate within a large scope but only undertake a small portion of their registered line of business, while others undertake operations entirely outside the scope of the licences. Whether this violates the law is an issue that has not been uniformly decided, even among Vietnamese courts.

If an enterprise operating in conditional lines of business enters into a contract to provide a service not within the licensed scope of its operations, such a contract would be considered invalid under Article 11.6 of the Law on Enterprises.

If the enterprise operates in non-conditional lines of business, however, the provision of other services are not expressly regarded as a violation of the law. Despite this, a number of courts declared such contracts invalid as a breach of Article 9.1. This is an erroneous interpretation, however, since Article 9.1 is not a prohibition. It is instead designed to enable enterprises to take advantage of business opportunities despite an incomplete business registration process.

Contracts by enterprises operating in non-conditional lines of business to provide service beyond the scope of the business registration certificate should be recognised because they comply with the civil law in form and content. However, for engaging in unregistered business activities, the enterprise should be subject to administrative sanctions.