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VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES PHUNG THI YEN CURRENT REGULATIONS ON SOCIAL ENTERPRISES IN VIETNAM Specialization: Economic Law Code: 38 01 07 SUMMARY OF THE LAW PHD DISSERTATION Hanoi – 2022 DISSERTATION HAS BEEN COMPLETED AT: VIETNAM ACADEMY OF SOCIAL SCIENCE GRADUATE ACADEMY OF SOCIAL SCIENCES Science instructor: Assoc.Prof.Dr Bui Nguyen Khanh Reviewer 1: Assoc.Prof.Dr Tang Van Nghia Reviewer 2: Assoc.Prof.Dr Nguyen Duc Minh Reviewer 3: Assoc.Prof.Dr Vu Thi Lan Anh The dissertation will be defended before the Academy-level Dissertation Review Board meeting at …………………………………………………… at……, ……./……… (hour/month/year) The Dissertation can be examined at: LIST OF RESEARCH PAPERS RELATING TO THE PHD DISSERTATION WHICH HAS BEEN PUBLISHED Phung Thi Yen (2016), “Social enterprise – Commercial legal entity or non-commercial legal entity”, Journal of International Economic, No 86 (10/2016) Phung Thi Yen (2019), “Law on Social Enterprises in Thailand – Lessons for Vietnam”, Journal of Law and Development, No 1.2/2019 Phung Thi Yen (2019), “Stipulations on corporate social responsibility in Vietnam's new-generation free trade agreements and related issues”, Journal of Legal Science, No 3/2019 Dao Kim Anh, Phung Thi Yen (2020), “Study on several social enterprise models in the United States and lessons learned”, America Today Magazine, No 5/2019 Phung Thi Yen (2020), “Comparing the law on social enterprises of China and Vietnam – Several recommendations for improvement”, Journal of Political Theory, No 8/2019 INTRODUCTION The importance of the Dissertation Social enterprises are a new phenomenon in the business environment in Vietnam In the pre-renovation period, Vietnam also had a number of models that could be regarded as social enterprises, that is, cooperatives that create jobs for the disabled After 1986, the State's reform and opening-up policy has facilitated the strong development of businesses from various economic sectors, charity organizations, and community development in Vietnam and abroad Since the mid-1990s, a number of real social enterprises have appeared such as Hoa Sua School, KOTO Restaurant in Hanoi, Mai Handicrafts in Ho Chi Minh City However, social awareness still emphasizes the separation between the two types of for-profit enterprises and not-for-profit organizations; therefore, social enterprises have only developed on a small scale Since 2010, Vietnam has become a low-middle-income country, meaning that funding flows tend to decrease; thus, many non-profit organizations have converted into social enterprises to find new directions Although at the time after the new Vietnam Enterprise Law was promulgated, officially passed on November 26, 2014, there were at least 200 organizations in the country [55] believed to be operating in accordance with the model of social enterprises and one of the typical and pioneering social enterprises widely known as KOTO Restaurant has been established in Hanoi since 1999 Obviously, many organizations were established and operated, unaware of themselves as a social enterprise; therefore, the actual number of social enterprises in our country may be much larger than the above figure In addition, before the Enterprise Law 2014 was officially passed, Vietnam did not have a legal document regulating the activities of social enterprises and there is no type of business or legal status exclusively for social enterprises Currently, types of social enterprises are divided into two main groups: Enterprises operating under the Enterprise Law; and Social Organizations (NGOs) operating under a number of sub-law documents governing types of voluntary organizations of people, associations, charity funds, social funds, scientific and technological organizations [21] Therefore, choosing to follow a certain legal framework as an Enterprise or an NGO for an organizational entity with mixed characteristics of Social Enterprises causes many obstacles in the process of establishment, operation and development of social enterprises In fact, in Vietnam, the State still does not have enough resources to solve all social problems The World Bank report in 2012 shows that Vietnam has made remarkable progress in the field of poverty reduction The poverty rate decreased from 60% to 20.7% within 20 years [42] However, with a rate of 20.7% of the population in poverty is still a high number After Vietnam becomes a middleincome country, many non-governmental organizations and ODA sources will gradually withdraw from Vietnam Therefore, the development of social enterprises is necessary to increase resources for solving social problems The development of social enterprises will promote social-economic development in the direction of civilization and progress, in line with the socialist orientation of our country so this is not only the general trend of the world but also the need in Vietnam World experience shows that the role of the state with the legal system and policies are essential conditions for social enterprises to develop With the above reasons, I have chosen the topic “Current regulations on social enterprises in Vietnam” to be implemented within the framework of my PhD dissertation in jurisprudence Research objectives and tasks Research objectives The objective of the dissertation is to research and clarify theoretical issues on social enterprises and the law on social enterprises, to analyze and to evaluate the current state of law and practice of law enforcement on social enterprises in Vietnam as well as to propose solutions to improve the law on social enterprises in Vietnam in the upcoming time Research tasks of the dissertation To achieve the above research purpose, the author will perform the following basic research tasks: - Research and clarify theoretical issues on social enterprises and the law on social enterprises; - Compare, analyze and evaluate the experience of legal regulation of some countries: the United States, the United Kingdom, Thailand, China and Korea on social enterprises; - Analyze and evaluate the current legal status of social enterprises in Vietnam; - Analyze and evaluate the current practice of law enforcement on social enterprises in Vietnam; - Propose solutions to improve the law on social enterprises in Vietnam in the coming time Objects and scope of research The research object of the dissertation is social enterprises, the law on social enterprises; experience in legal regulation and application of the law on social enterprises in some countries around the world; Legal practice and application of the law on social enterprises in Vietnam today Research scope - Regarding the content, within the research scope of the dissertation, the author focuses on the general issues of social enterprises and the law on social enterprises from the general point of view in the world and in Vietnam; research on the practical application of the law on social enterprises in terms of the legal status (rights and obligations) of social enterprises in our country; Researching the law and practical application of the law on the rights and obligations of social enterprises in some countries around the world to propose adjustments to the current legal regulations and solutions to improve the effectiveness of the application of the law on social enterprises in Vietnam - Regarding territorial scope: The dissertation is limited to researching the law and the practice of applying the law in terms of the legal status of social enterprises under the laws of the United States, the United Kingdom, Thailand, China and South Korea The United States and the United Kingdom are the developed countries with the first social enterprises established in the world, and at the same time, they are also countries with a suitable legal system for developing social enterprises Thailand is one of the pioneering countries in the field of social enterprise development in Southeast Asia China is a country with a political and legal system similar to Vietnam, and also a country with a developed model of social enterprises Korea is one of the Asian countries that recognizes social enterprises and introduced the first legal regulations for social enterprises - Regarding the temporal scope: The first social enterprises appeared in Vietnam in the 80s, the period of the centrally planned economy Therefore, the dissertation will introduce social enterprises in Vietnam from this point of time to the present; however, it will only focus on in-depth analysis of the law and application of legal policies on the legal status of social enterprises in Vietnam Research methodologies Based on the methodological basis of dialectical materialism, historical materialism, the Dissertation also uses specific methods such as analysis, synthesis, systematization, comparative law, interdisciplinarity and prediction through secondary documents to clarify the issues studied in the dissertation The theoretical basis of the Dissertation is based on the point of view of Marxism-Leninism, the lines, policies and laws of the State of the Socialist Republic of Vietnam To achieve the research results and to clarify the research problems posed, the Dissertation focuses on using research methods: + Analytical methods are used when evaluating and commenting on the legal provisions as well as the practice of social enterprises as the basis for scientific conclusions This method was used throughout the course of the research project + Synthetic methods are used when evaluating to draw general conclusions, opinions and recommendations + The method of contrasting - comparing jurisprudence is used when analyzing and evaluating the legal provisions related to social enterprises in accordance with Vietnamese law and the laws of several countries in the world; between the practice of applying the law on social enterprises of Vietnam and other countries in the world in order to find out the similarities and differences in the provisions and application practices of Vietnamese law as well as the law of some countries around the world + The method of normative logic analysis is used when assessing the legal situation, considering the consistency, and detecting contradictions in the content of relevant legal regulations on social enterprises + Statistical methods are used to evaluate collected documents honestly and objectively in order to assess the actual application of the law on the legal status of social enterprises, on that basis, the author has recommendations on legislation regulating social enterprises In the process of writing the dissertation, these methods can be interwoven and approach both in the direction of multidisciplinary and interdisciplinary to facilitate the analysis and evaluation of all issues posed in the research scope dissertation research New scientific contributions of the Dissertation - The Dissertation has clarified the overview of the research situation and issues related to the Dissertation, clarified the researched issues, the issues that are still being researched as well as the new research gaps for the Dissertation - The Dissertation has systematized and clarified theoretical issues on social enterprises and the law on social enterprises according to such contents as Overview of Social Enterprises, Law on Social Enterprises - The Dissertation clarifies the current status of the law on social enterprises and the practice of implementing the law on social enterprises in Vietnam, from which to draw assessments and comments on the law and implementation of the law on social enterprises as a basis for optimal solutions - The Dissertation, after clarifying the orientation of perfecting the law on social enterprises in Vietnam, the author has proposed solutions which are feasible to improve the law on social enterprises in Vietnam Scientific and practical significance of the Dissertation On the basis of the research on social enterprises and the law on social enterprises, it can be affirmed that the Dissertation will contribute to enriching the theory and practice of the law on social enterprises, and at the same time contribute to the improvement of the law on social enterprises in Vietnam The proposals and recommendations raised by the Dissertation have scientific and practical bases, which are meaningful to the construction and improvement of social enterprises in Vietnam The Dissertation is a useful reference for theoretical and practical research on social enterprises and the law on social enterprises, as teaching and learning materials in the field of law, majoring in business administration and economic management The Dissertation is also a scientific evidence for the development of the law on social enterprises in the upcoming time Structure of the Dissertation In order to clarify theoretical and practical legal issues related to this issue, the Dissertation is expected to be structured into five chapters and focus on the main contents that need to be researched as follows: Chapter 1: Overview of research situation and theoretical basis Chapter 2: Theoretical issues on social enterprises and the law on social enterprises Chapter 3: Legal status of social enterprises and practical application of the law on social enterprises in Vietnam Chapter 4: Solutions to improve the law on social enterprises in Vietnam CHAPTER OVERVIEW OF RESEARCH SITUATION AND THEORETICAL BASIS 1.1 Research situation relating to the Dissertation 1.1.1 Research situation in Vietnam and overseas On the basis of the research works and documents of domestic and foreign researchers on social enterprises collected by the researcher, the researcher reviews the works and research documents by problem group, including: group of studies on theoretical issues about social enterprises such as concepts, characteristics, roles; group of legal issues on social enterprises, legal form, content of legal relations of social enterprises; and some other issues about social enterprises such as development policies for social enterprises, community development programs, etc Although the research works collected by the author are still limited in terms of quantity, the overview of research on social enterprises and legal issues related to social enterprises helps reach general conclusions about the current legal regulations on social enterprises and the current research trends on the law on social enterprises Specifically: - The research works that the author has access to, although they have different expressions, they all mention, identify and analyze theoretical issues about social enterprises such as concepts, characteristics, nature and roles, identification of social enterprises, history of formation and development of social enterprises, etc General theoretical issues about social enterprises have been raised and studied to a certain extent - Research papers have had their own concept of Social Entrepreneurship and social enterprise Social enterprises were established from the spirit of social entrepreneurship; distinguish the difference between social entrepreneurship and ordinary entrepreneurship; thereby highlighting the advantages of social entrepreneurs; and affirms that social entrepreneurs are the ones who play a great role in social innovation and social improvement before the new century, by: through a mission to create and maintain social values; perceive and constantly pursue new opportunities to serve that mission; engage in processes of continuous innovation, adaptation and learning; active and not limited to available resources; and demonstrate greater accountability to members and to outcomes - The studies also give a number of different views on the concept of social enterprises, in which researchers are also very careful when introducing the concept of social enterprises Especially, they are really valuable resources for the Dissertation author when researching and understanding the concept of social enterprises The studies have given a very careful and scientific definition for the concept of Social Enterprise, by choosing the starting concept as a commercial enterprise, thereby defining a hybrid organization and finally touching the concept of Social Enterprise Although there are many different definitions, all the points of view show that they emphasize the relationship between business strategies/solutions and social goals/solutions in the social enterprise model - The studies also show the roles/functions of social enterprises for the social economy In general, the functions that social enterprises as well as non-profit organizations can undertake in the market economy include: Firstly, minimizing operating costs incurred in case of information asymmetry There is serious communication between the supplier of goods/services and the customer, and these costs cannot be satisfactorily addressed by conventional contractual mechanisms Second, Provide goods and services that include both public and private elements, ie private goods for personal consumption by the buyer, and have side effects that affect different parties without being reflected in the cost of related goods or services - Studies have introduced how to identify Social Enterprises through the division of several types of Social Enterprises, including: Non-profit Social Enterprises, Non-profit Social Enterprises and Social-oriented, profitable enterprises - Research works have also introduced the origin, process of formation and development of social enterprises Studies show that Europe and the United States are the first places where social enterprises appear In Europe, the first recorded social enterprises appeared in 1665 in London, UK After that, social enterprises appeared in the United States and spread to other regions of the world such as Western Europe, North America, Australia to Latin America, the Middle East, Africa, South Asia, and Southeast Asia This is really a valuable resource to help the author learn more about the history of the establishment and development of social enterprises; from that, the author came up with the concept of social enterprises in the Dissertation - Research papers also point out the challenges that Social Enterprises may face in the economy such as the problem of raising capital; Challenges in the asset-freezing mechanism for the flow of social enterprises; challenges in branding; The challenge of satisfying profit-seeking shareholders; and tax rate uncertainty for hybrid organizations From there, scholars give suggestions on improving the legal framework to support social enterprises This is really a useful document to support the author when proposing solutions to improve the legality of social enterprises in Vietnam - Research papers also mention the main contents of the law on social enterprises, its current situation in Vietnam; draw out the advantages and shortcomings and limitations of the law on social enterprises, and point out the causes of those shortcomings and limitations Since then, recommendations have been made to contribute to the improvement of the legal framework for social enterprises The author of the Dissertation will rely on these studies to complete the current situation of the law on social enterprises in Vietnam, thereby making recommendations 1.1.2 Limitations of the Dissertation The overview of research documents that the author has collected shows that basically, research works have discovered and solved the basic theoretical problems of social enterprises Those are valuable studies as the main reference of the Dissertation However, there are still many issues that have been posed by the CHAPTER THEORETICAL ISSUES RELATING TO SOCIAL ENTERPRISES AND LAW ON SOCIAL ENTERPRISES 2.1 Overview of social enterprises 2.1.1 Concept of social enterprise a The formation and development of social enterprises in the world and in Vietnam - The process of formation and development of social enterprises in the world - The process of formation and development of social enterprises in Vietnam: -In the pre-renovation period 1986: -Renovation period from 1986 to 2014: -From 2014 to present: b Social enterprise concept The definition of social enterprises that Ofer gives can be presented through the following diagram: Commercial businesses Have the majority of total revenue come from the sale of goods or services Hybrid organization social enterprise To contribute a subsidy to a group of beneficiaries in society There is a significant transaction commitment with a group of beneficiaries in the society Diagram 1.1 The position of social enterprises for hybrid organizations and commercial enterprises according to Ofer Eldar’s definition [122] Accordingly, social enterprises include microfinance institutions, companies dealing in popular commercial products, companies integrating multiple jobs and suppliers of essential goods and services UK Government and OECD definition In the Social Enterprise Development Strategy 2002, the British Government defines: “Social enterprise is a business model established to realize social goals, and uses profits to reinvest for that goal or for community, instead of maximizing profits for shareholders or owners” This definition is very comprehensive, closely following the basic characteristics of social enterprises Firstly, business needs to be understood as a model or solution with and through business activities rather 10 than binding social enterprises to the form of a normal company, which is, after all, just an organizational tool Second, social goals are set as a basic and primary mission of the establishment of that organization Social enterprises must be organizations established for social goals Third, in principle (principally) profits are redistributed to organizations or communities, not to individuals The OECD defines: “Social enterprises are organizations operating under different legal forms that apply entrepreneurship to pursue both social and economic goals at the same time Social enterprises often provide social services and jobs for disadvantaged groups in both urban and rural areas In addition, social enterprises also provide community services, in the fields of education, culture, and environment.” [34, p.26] Understanding in a broad sense Among the various interpretations of Social Enterprises, the broadest concept considers "Social Enterprise is a business model, bringing profits, in appearance, like other traditional enterprises, requiring only one condition: setting a mission society is at the center, while profit goals play a supporting role.” Another definition in a broad sense also says that “Social enterprises operate like any other business, but the management and use of profits are directed towards social and environmental goals.” Looking closely, we can easily see some weaknesses in these concepts as follows: Firstly, Social Enterprises are simplified and almost equated with traditional businesses Just from the outside, it is true that social enterprises also have business activities, accounting books, stores, warehouses, and sales staff like traditional businesses But the characteristics of Social Enterprises must highlight the social goals that are the mission of the establishment and operation of Social Enterprises Secondly, according to the above interpretations, it is easy for social enterprises to be mixed with a traditional business with good corporate social responsibility activities To build a good and customer-friendly image, many companies are willing to declare their social missions In fact, there are many traditional entrepreneurs who set up businesses from good ideas for society However, the question is whether social goals are the basic reason for the existence and operation of organizations is the hallmark that distinguishes these two types Here, the concepts not refer to the content of profit distribution Thus, it is clear that there is not enough evidence and convincing capacity to clearly classify the level of commitment “for society” or “for profit” of an organization Narrow way of understanding 11 On the contrary, there are also some very “narrow” definitions of social enterprises Some opinions require social enterprises to “register as a company, to compete equally with other businesses If social enterprises are supported or favored by the State, they are only entitled to receive such policies in certain areas and on the basis of social effects in that field only.” In addition, social enterprises should have nothing special compared with other businesses, because it will lead to unfair treatment Negative problems can even arise because every business wants to receive incentives, so they will switch to social enterprises to benefit Some opinions go even further, even opposing social enterprises, saying that any business is useful to society (such as providing goods and services, creating jobs) but so far the field has shown itself Corporate social responsibility is left open, so the image of companies becomes negative “If corporate social responsibility is done well, then every business is a social enterprise.” At the other extreme, there is an opinion that requires “Social enterprises must be owned at least in part by a non-profit organization” Undeniably, the above comments all have some important meanings, especially for the policy and institutionalization of Social Enterprises, as well as for reinforcing a comprehensive understanding of Social Enterprises However, these concepts not seem to be clear in that: Firstly, according to the current popular perception, Social Enterprises are an organizational model, a specific type of business that is inclined to concept rather than the legal status If we stick to the requirement to register as a company, we will miss a lot of operating models that have long been operating as a company (equal competition) but not necessarily registered as a company Some nongovernmental organizations (NGOs) affirmed that they would like to switch to the corporate form, but could not because of the incomplete legal framework, the awareness of social enterprises in state and local agencies is almost lacking, and also their fear of losing existing incentives Some other definitions In Vietnam, according to Article 10 of the Enterprise Law 2020, a social enterprise is understood as an enterprise that meets the following criteria: - Being an enterprise registered for establishment in accordance with this Law; - Operational objectives are to solve social and environmental problems for the benefit of the community; - Use at least 51% of the total annual profit of the enterprise for reinvestment to realize the social and environmental goals as registered From the above definitions, it can be seen that in the world, a social enterprise is understood as a business model in the form of an enterprise but puts 12 the goal of serving society first instead of making profits for the owner; most of the profits arising from the business activities of the enterprise will be used to support and solve the problems of society With this understanding, the concept of “social enterprises” in the world, however, has some contradictions compared with Vietnamese law, is still identical in two points: through business solutions to achieve social goals According to the author’s own point of view, it is possible to define a social enterprise as follows: A social enterprise is an enterprise with a business model or project where most of its profits are used for social and environmental goals * Distinguish social enterprises and public enterprises; corporate social responsibility and other types of businesses - Distinguish between social enterprises and public enterprises: - Distinguish between Social Enterprises and Enterprises committed to social responsibility - Distinguish social enterprises from other types of businesses 2.1.2 Functions, characteristics and roles of social enterprises a Function First, social function Second, the business function b Features of Social Enterprises First, Social Enterprises have a mission to serve social goals: Second, social enterprises carry out their social mission through the use of typical and complex business models related to traditional business activities Third, social enterprises use diverse financial tools and means Fourth, Social Enterprises often face conflicts of interest between donors and investors in corporate governance c The role of social enterprises - Create a large number of job opportunities, increase income and improve the lives of workers - Enterprise formation and development are one of the decisive factors to the outstanding and stable growth of the economy in recent years - Enterprise development will be the driving force affecting the process of restructuring in the national economy and within the industry - Business development impacts on better solving social problems 2.1.3 Types of social enterprises a Non-profit Social Enterprises b Not-for-profit Social Enterprises c Social Business Ventures 13 2.1.4 Development needs of social enterprises in the market economy 2.2 Law on Social Enterprises 2.2.1 The need to adjust the law on social enterprises 2.2.2 Legal concept of social enterprise From the legislative practice of countries in the world and Vietnam, it can be concluded that, because the content of the concept of social enterprises is very broad and the development history of the law on social enterprises is not long, the introduction of a full definition is insufficient The law on social enterprises is very difficult, but it can be understood that: “The law on social enterprises is a specialized field of law including legal norms and legal principles governing the relationships arising between social enterprises in the process of operating, organizing and managing social enterprises on the basis of a combination of different adjustment methods in order to achieve social and economic goals.” 2.2.3 Legal contents on Social Enterprises - Regarding Subject: - Regulations on the right to establish and the order and procedures for establishing a social enterprise - Rights and obligations of social enterprises - Regarding incentives and support for Social Enterprises - Regulations on reorganization and dissolution of social enterprises CHAPTER 3: CURRENT LEGAL REGULATIONS ON SOCIAL ENTERPRISES AND PRACTICAL APPLICATION OF LAW ON SOCIAL ENTERPRISES IN VIETNAM 3.1 Current legal regulations on social enterprises in Vietnam 3.1.1 Regarding the concept of social enterprise - Regarding the concept of Social Enterprises, it can be seen that the 2014 and 2020 Law on Enterprises 2014 and 2020 not provide a definition of a Social Enterprise, but only have criteria to define a Social Enterprise According to Article 10, an enterprise is considered a social enterprise when: - Being an enterprise registered for establishment in accordance with this Law - Social enterprises must have operational goals to solve social and environmental problems for the benefit of the community with the use of at least 51% of the total annual profits for these goals Compared with the above concepts, it can be seen that the concept of social enterprises in Vietnam has the following basic similarities and differences: 14 - First, the concepts emphasize the non-profit nature of Social Enterprises: Social Enterprises can be private for-profit, non-profit and hybrid organizations with a social mission using an economic approach business to achieve their goals - Second, Vietnam’s approach when building the concept of social enterprises is not quite similar to the above countries Each definition has a different approach to social enterprises Each method presents certain advantages and disadvantages, depending on the specific circumstances of each country 3.1.2 Regarding setting up a social enterprise There are two noteworthy points when setting up a social enterprise compared to other businesses: Regarding the name, the name of the social enterprise is set according to the regulations of the Law on Enterprises and the phrase “social” can be added to the enterprise’s own name The regulation on the name of social enterprises is essentially a policy to support social enterprises to promote their image in the market, distinguishing between social enterprises and traditional enterprises Regarding the application for registration of the establishment of a social enterprise, in addition to the documents as prescribed in general, the dossier needs to be accompanied by a number of documents proving the commitment to implement the goals for the environment, society and the community to control the implementation of the social goals of the enterprise intended to be established All requirements, procedures and documents required when committing to the social and environmental section are detailed by the Government under Article of Decree No 47/2021/ND-CP Social enterprises are obliged to publicly commit to the implementation of social and environmental goals for the business registration agency Regarding the time of publication, Social Enterprises have the right to choose the time to fulfill this obligation of publication, that is, Social Enterprises can so when carrying out procedures for registration of business establishment or during operation This also means that an enterprise is not required to be a social enterprise right from the time of its establishment Conversely, after being established and operating for a while, an ordinary enterprise can become a social enterprise and vice versa In case of termination of commitments to achieve social and environmental goals, social enterprises must notify the business registration agency of the termination of commitments to achieve social and environmental goals Accompanying such termination notice, documents must include: Decision and copy of meeting minutes of the enterprise or decision of a competent state agency (if any), clearly stating the reason for termination; Agreement with 15 relevant individuals and organizations on handling of property or financial balances for aid and sponsorship that Social Enterprises have received (if any) The business registration authority shall update information in the enterprise file and publish it on the National Business Registration Portal within 03 working days from the date of receipt of the notice Regarding the establishment of social enterprises from social protection establishments, social funds and charity funds, the law is specified under Article of Decree 47/2021/ND-CP Comparing the above regulations with the laws of some countries, it can be seen that the procedures for registration of the establishment of social enterprises in Vietnam also have many differences It can be seen that the relevant legal provisions mentioned above have similarities and differences with Vietnamese law 3.1.3 Legal issues on the operation of social enterprises a) Regarding the organization of activities In Vietnam, the management and administration activities of social enterprises are based on regulations on management and administration of various types of enterprises in accordance with the provisions of Law on Enterprises 2020 Besides, the owner of a private enterprise in the case of a private enterprise, members in the case of a partnership and limited liability companies, shareholders in the case of joint-stock companies and members of the Board of Directors of joint-stock companies who have signed in the Commitment to achieve social and environmental goals must carry out management activities, operating as well as monitoring and controlling the activities of the enterprise in the spirit of fully implementing the committed objectives These commitments must not only be disclosed on the enterprise’s website, the charter, internal rules and regulations of the enterprise, but also be publicly announced by the business registration agency to the business community and the society All acts of management and administration of the enterprise’s management apparatus will be made into an annual report and monitored in compliance with commitments by the Provincial People’s Committee, the Department of Planning and Investment as well as the aid and funding management agency under the provincial People’s Committee, where the Social Enterprise’s head office is located Regarding capital mobilization, the law of Vietnam has similar regulations to that of other countries when allowing social enterprises to receive funding According to the provisions of Article of Decree No 47/2021/ND-CP, social enterprises can receive foreign non-governmental aid to achieve the goal of solving social and environmental problems as prescribed by law on receiving 16 foreign non-governmental aid In addition to the above-mentioned grants, social enterprises may receive financial, property or technical support from individuals, agencies, domestic organizations and foreign organizations registered to operate in Vietnam to realize the goal of solving social and environmental problems The above provisions of Vietnamese law also have many points that are not completely similar to the laws of some countries on social enterprises b, Preferential and supportive policies for social enterprises - Regulations on tax incentives for social enterprises ● According to the current law providing guidance on social enterprises, the Government does not have a detailed provision on tax incentives of social enterprises However, from the above analysis, we can understand that the tax incentives of social enterprises are initially similar to those of traditional enterprises because it is a type of enterprise stated under the Law on Enterprises 2020 Not all businesses are entitled to these incentives but only when it meets the statutory requirements Specìically: (i) Social enterprises operating in the field of science and technology are entitled to the following corporate income tax incentives: ● Enterprises implementing new investment projects in the field of scientific and technological research are entitled to a preferential tax rate of 10% for a period of 15 years (point b, Clause 1, Article 11 of Circular No 96/2015/TTBTC) ● The preferential tax rate may be extended for no more than 15 years for large-scale investment projects with high or new technology that need special investment attraction ● Enterprise income tax exemption for years, 50% reduction of payable tax for the next years The tax exemption and reduction period is counted from the first year the enterprise has taxable income from the new investment project that is entitled to tax incentives In case an enterprise has no taxable income for the first years from the first year of revenue from a new investment project, the tax exemption or reduction period is counted from the fourth year the new investment project making profits Enterprise income tax exemption for years, 50% reduction of payable tax for the next years The tax exemption and reduction period is counted from the first year the enterprise has taxable income from the new investment project that is entitled to tax incentives In case an enterprise has no taxable income for the first years from the first year of revenue from a new investment project, the tax exemption or reduction period is counted from the fourth year the new investment project occurred turnover 17 ● Implement new investment projects in: areas with extremely difficult socio-economic conditions specified in the Appendix issued together with Decree No 218/2013/ND-CP ● Implement new investment projects in the field of environmental protection, including: production of environmental pollution treatment equipment, environmental monitoring and analysis equipment; pollution treatment and environmental protection; collection and treatment of wastewater, exhaust gas and solid waste; recycling and reuse of waste ● Socialization activities in the fields of education - training, vocational training, health, culture, sports and environment (hereinafter collectively referred to as the field of socialization) ● Implement investment projects - social housing business for sale, lease, hire purchase for the subjects specified in Article 53 of the Law on Housing ● Planting and protecting forests; agriculture, forestry and fishery in socioeconomically difficult areas; production, multiplication and crossbreeding of plant and animal varieties; production, exploitation and refining of salt, except for salt production specified in Clause 1, Article of Decree No 218/2013/ND-CP, investment in post-harvest preservation of agricultural products, preservation of agricultural, aquatic products and food ● Cooperatives operating in the fields of agriculture, forestry, fishery and salt production are not in socio-economic difficult areas and in extremely difficult socio-economic areas ii) Preferential tax policy for institutions implementing the socialization of education and training (e.g socialization of education and training) Education and training socialization that fully satisfy the conditions specified in Decision 1466/QD-TTg dated October 10, 2008 and earn income from socialization activities are entitled to the corporate income tax rate as prescribed in Article of Decree 69/2008/ND-CP as follows: ● Socialization establishments that earn income from socialization activities are entitled to the corporate income tax rate of 10% throughout the operation period ● Newly established socialization establishments from the effective date of this Decree are exempt from corporate income tax for years from the time they have taxable income and are reduced by 50% of corporate income tax in the next years ● In case the establishment of socialization is newly established from the effective date of this Decree in areas eligible for investment incentives as 18 prescribed in Appendix B issued together with Decree 108/2006/ ND-CP dated September 22, 2006 (effective until December 26, 2015 - replaced by Decree 118/2015/ND-CP) of the Government is exempt from corporate income tax for years, since having taxable income, 50% corporate income tax reduction for the next years and the corporate income tax rate of 10% throughout the operation period ● Socialization establishments established before the effective date of this Decree are entitled to corporate income tax incentives on the principle that: When the time limit for enjoying incentives under the previous regulations has expired, tax rate of 10% from the effective date of this Decree In case the period of enjoyment of incentives as prescribed in the previous regulations remains unchanged, they will continue to enjoy incentives under the provisions of this Decree after deducting the period of enjoying incentives Assign the Ministry of Finance to provide specific guidance for these cases ● Socialization establishments with many different business types must organize separate accounting of incomes from socialization activities in order to apply the corporate income tax rate as prescribed in this Decree ● Socialization establishments earning income from activities other than those in the field of socialization specified in this Decree shall fulfill tax obligations as prescribed by law - Regulations on capital incentives for social enterprises ● Social enterprises, in addition to raising capital from methods of raising capital from owners or other capital contributors like ordinary businesses according to the provisions of LDN 2020, can also receive capital from other sources such as Article Decree No 47/2021/ND-CP, specifically: “Social enterprises receive foreign non-governmental aid to accomplish the goal of solving social and environmental problems in accordance with regulations of the Government on receiving foreign non-governmental aid; In addition to the abovementioned grants, social enterprises may receive financial or technical support from individuals, agencies, domestic organizations and foreign organizations registered to operate in Vietnam to realize the goal of solving social and environmental problems” In addition, Clause 2, Article 10 of Law on Enterprises 2020 also stipulates that social enterprises cannot use funds raised for other purposes than to cover administrative and operational costs to solve social, environmental problems in which the enterprise has registered In case of receiving incentives and support, Social Enterprises must annually report to the competent authority on the operation situation of the business 19 ● Regarding reorganization, according to the provisions of Article of Decree 47/2021/ND-CP, the issue relating to division, separation, consolidation and merger of social enterprises shall be carried out in the following cases: Social enterprises are divided or separated into social enterprises; Enterprises and social enterprises are consolidated into social enterprises; Merger of enterprises and social enterprises into social enterprises Dossier and procedures for division, separation, consolidation, merger and dissolution of social enterprises shall comply with relevant regulations of LDN 2020 ● Regarding the transformation of social enterprises, this is an issue being discussed and exchanged by many researchers It can be seen that the transformation of social enterprises is somewhat more complicated, because the term “social enterprise transformation” is being understood simultaneously in three directions: (i) Organizations that are conducting charitable activities for the community would like to transform to become a social enterprise; (ii) Social Enterprises are transformed into ordinary enterprises; (iii) Social enterprises transform their business models Thus, the view on transformation of social enterprises is being expanded more than that of enterprise transformation ● Article of Decree 47/2021/ND-CP stipulates how to convert a number of social organizations into social enterprises as follows: ● Firstly, social protection establishments, social funds and charity funds are entitled to use all their assets, rights and obligations to register social enterprises after a written decision permitting the transformation into a social enterprise is issued by the competent authority which has granted permits for the establishment of social protection establishments, social funds and charity funds ● Secondly, after being registered, social enterprises automatically inherit all legal rights and interests, and are responsible for debts, including tax debts, labor contracts and other obligations of the social sponsoring establishment, social fund, charity fund Social protection establishments, social funds and charity funds shall cease to operate from the date the social enterprises are granted business registration certificates 3.2 The current practice of law enforcement on social enterprises in Vietnam 3.2.1 Overview of social enterprises in Vietnam 3.2.2 Practice of law enforcement on social enterprises in Vietnam a) Regarding registration of establishment of social enterprises The actual application of the law on registration of establishment of social enterprises is shown in the following aspects: 20 First, regarding the number of social enterprises established and operating over the years Second, regarding the names of social enterprises Third, regarding the legal form of social enterprises Fourth, regarding the area of operation of social enterprises Fifth, regarding the business lines of social enterprises b) Regarding the activities of social enterprises Firstly, regarding capital of social enterprises Second, regarding the business performance of social enterprises Third, regarding the implementation of social goals that Social Enterprises aim at Fourth, regarding social enterprise support programs 3.2.3 Evaluate a The advantages First, because of the social purpose, the founders of Social Enterprises, leaders, managers or volunteers are all passionate people with choices Second, the advantage of social enterprises compared to other businesses is that the State creates a legal corridor for this business model to receive incentives in terms of capital and receive funding Third, new social enterprises often apply scientific and technical development effectively such as I-Nature or MTTS so their products have competitive prices compared to similar products b Problems in the implementation of the legal provisions on social enterprises in practice (i) Limitations on the model and scope of activities of Social Enterprises (ii) Restrictions on profit distribution regulations (iii) Restriction on tax incentives (iv) Restrictions on implementing agency CHAPTER 4: SOLUTIONS TO IMPROVE LEGAL REGULATIONS ON SOCIAL ENTERPRISES IN VIETNAM 4.1 The solutions to perfecting the law on social enterprises in Vietnam Firstly, perfecting the law on social enterprises in Vietnam from the point of view and the State’s trade liberalization policy in the context of global economic integration, stemming from the characteristics of the Vietnamese economy 21 Second, perfecting the law on social enterprises must be based on the current state of law governing social enterprises in Vietnam 4.2 Solutions to improve the law on social enterprises in Vietnam today 4.2.1 Group of solutions on perfecting the law on social enterprises a) Modify the concept of social enterprises in the Enterprise Law 2020 By learning from legislative experience in the world, Law on Enterprises 2014 and Law on Enterprises 2020 have identified criteria for identifying Social Enterprises, but have not yet given an exact concept of what a Social Enterprise is Although the prescribed criteria can be regarded as a way to define, these criteria have not clearly described the nature and emphasized the business element but only focused on the social objectives of the enterprise The business element of Social Enterprises is creative and sustainable solutions implemented in the form of business, which is the skeleton that gives Social Enterprises advantages over other NGOs and charity organizations, thanks to the business element so that social enterprises are more proactive in solving social problems The introduction of Decree 96/2015/ND-CP and Decree 47/2021/ND-CP also did not contribute to clarifying this concept b) Resolving conflicts between the Law on Enterprise and the Civil Code c) Develop a decree guiding the Law on Enterprise 2020 on social enterprises At the present time, when there is no specific law regulating social enterprises, the improvement of the law on social enterprises is in the direction of amending and supplementing regulations on social enterprises in specialized legal documents (namely Law on Enterprise 2020) and relevant legal documents (such as Tax Law, Customs Law, Investment Law, Bidding Law) are necessary so that social enterprises can have a suitable legal basis for their formation, operation and development Some of the contents that this decree should aim to adjust are: - Regulations on converting social protection establishments, social funds and charity funds into social enterprises - Taking measures to encourage social enterprises - The State’s development support and incentives policies for social enterprises - Regulations on the implementation of the Commitment to achieve social and environmental goals - Regulations on human resources - Developing sanctions 22 - Establishing a specialized agency for social enterprises, called Vietnam Social Enterprise Office (VSEO) - Developing a system of separate certification standards for social enterprises and conducting classification and grant of certification marks for each type of social enterprises 4.2.2 Solutions on improving execution quality a) Solutions for State agencies First, share work with social enterprises Second, promote policies to support and encourage development for social enterprises b) Solutions for businesses Before the legal policies and support policies for social enterprises, social enterprises themselves must be proactive in taking advantage of those policies to develop their businesses effectively For capital support policies, social enterprises can take advantage of nonstate budget funds to serve social and environmental goals, provided that they meet the evaluation criteria and business value, development potential and best use of budget capital for investment Even social enterprises can negotiate with commercial banks to help support easier access to capital, more preferential interest rates; or can mobilize investment from other businesses that would like to invest to contribute to society and the environment but are not social enterprises by ensuring investment value, using communication channels to promote their image In addition, human resources in social enterprises themselves should also be focused From time immemorial, people have always been the most precious capital, the key to success for all development The practice has proven great success thanks to people-centered approach with creativity and rich thinking ability, quick reaction, adaptability to situations, superior perception and emotion The effective use of human resources is a decisive factor for the development of the company Social enterprises need to have a team of human resources who are both able to manage and carry out economic activities, as well as have the knowledge and desire to contribute to society and the environment c) Solutions for other subjects First, raise the society's awareness about social enterprises Second encourage social enterprises to develop Third, strengthen international cooperation and experience in social enterprises 23 CONCLUSION Social Enterprise is a special business organization model, established for the purpose and mission of the community on the basis of doing business, making great contributions to solving social and environmental problems in Vietnam and all over the world This type of business is still quite new in Vietnam and has just been officially recognized in the Law on Enterprises 2014 Although it is highly appreciated by the human values that this enterprise can bring, the reality shows that economic business is still not very interested in this form The reason is that the legal framework on social enterprises is still quite sketchy and narrow and has not promoted the freedom of business of entrepreneurs, has not shown the diversity of owners, scale and form as well as activities of social enterprises Moreover, it is being governed by many legal regulations on enterprises in general on tax obligations, on management organization and other regulations, but there are no specific incentives and support that this type of business should be entitled to Along with learning from international experiences, specifically social enterprises from the UK, the United States, Thailand, China and Korea compared with Vietnamese legal practice on the law on social enterprises, we can have some valuable lessons from the advantages and limitations of the legal system on social enterprises of these countries, thereby improving the law on social enterprises Addressing the limitations of the law on social enterprises in Vietnam at the present time can be done according to the above recommendations, including directions and solutions related to codification, improvement of the law as well as development of more effective legal regulations The Dissertation, after giving the direction to improve the law, offers solutions to improve the law on social enterprises in Vietnam according to specific groups of solutions, namely the group of solutions to improve the law and the group of solutions to improve high-quality execution As for the solution groups, the Dissertation explains whether or not to learn about the legal model of social enterprises from countries around the world If social enterprises are properly and appropriately invested and supported, they can contribute to the national economy not only in terms of economic benefits, but also great contributions to solving social and environmental issues, support the State in sustainable development, furthermore, the stability of socio-economic situation in the region and globally 24 ... the challenges that Social Enterprises may face in the economy such as the problem of raising capital; Challenges in the asset-freezing mechanism for the flow of social enterprises; challenges in... the specific circumstances of each country 3.1.2 Regarding setting up a social enterprise There are two noteworthy points when setting up a social enterprise compared to other businesses: Regarding... the Provincial People’s Committee, the Department of Planning and Investment as well as the aid and funding management agency under the provincial People’s Committee, where the Social Enterprise’s
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