VIETNAM ACADEMY OF SOCIAL SCIENCES
GRADUATE ACADEMY OF SOCIAL SCIENCES

PHUNG THI YEN

CURRENT REGULATIONS ON SOCIAL ENTERPRISES
IN VIETNAM

Specialization: Economic Law
Code: 9 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
1. Phung Thi Yen (2016), “Social enterprise – Commercial legal entity or
non-commercial legal entity”, Journal of International Economic, No. 86
(10/2016)
2. Phung Thi Yen (2019), “Law on Social Enterprises in Thailand – Lessons
for Vietnam”, Journal of Law and Development, No. 1.2/2019
3. 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
4. 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
5. 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

1. 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
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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.
2. 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.
3. 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

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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.
4. 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:

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+ 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.
5. 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.
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6. 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.
7. 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 1
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
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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

6


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
7


author but are still open, have not been analyzed and explained in depth, or due to
the limited time and scope of research, many research works have been published.
The problem has not been completely solved, it needs to be further researched and
clarified.
In a number of research papers, there is still no consensus on the concept of
social enterprises. However, up to now, Law on Enterprises 2020 replaces Law on
Enterprises 2014 and Decree No. 47/2021/ND-CP replaces Decree No.
96/2015/ND-CP providing detailed guidance on a number of articles of the Law
on Enterprise; However, it still only provides criteria for determining social
enterprises. Therefore, the Dissertation will clarify this issue more clearly.
- Most of the research works and articles have not mentioned and thoroughly
analyzed the current situation of the law on social enterprises in Vietnam in a
comprehensive and complete manner; if any, it only stops at studying the current
status of social enterprises in Vietnam, specifically the management of social
enterprises by state agencies in terms of capital, funding, and investment or how
to calculate the income tax of the State for social enterprises. Or even the issue of
applying the law in the State's support policy for social enterprises, including a
long-term strategic vision, policies that optimize the legal framework such as the
legal system and human resources. This is an open issue that has not been
researched and exploited by the authors so the Dissertation will continue to study
to further clarify these issues.
- In addition, the studies have not clarified the problem of social enterprise
transformation. The transformation of enterprises only changes the existence form
of enterprises and does not change the nature of enterprises (because before and

after the transformation, the converted organization is still a profit-seeking
enterprise). However, for social enterprises, business transformation is more
complicated, and it is advisable to limit the conversion of social enterprises from
one type to another but not to change its “social” nature.
The overview of the above-mentioned issues shows that research works that
the author has collected still have many open issues are still general and have not
been directly associated with social enterprises. The issues will be further studied
by the author and solutions that can be implemented in practice are proposed,
namely: official and clear regulations on the concept of social enterprises; enact
law specifically for social enterprises; codify specialized legal documents and
related documents; establish a specialized agency on social enterprises to manage
policy issues and support for social enterprises.

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1.2. Theoretical basis and research hypothesis
1.2.1. Theoretical basis
The Dissertation is carried out on the basis of applying dialectical and
historical materialism of Marxism-Leninism and Ho Chi Minh’s thought on the
state and law, the Party’s views on law and comprehensive reform of the country,
on the basis of the development of the socialist-oriented market economy and the
theory of the socialist rule-of-law state in Vietnam.
The Dissertation is researched based on research theories: Theory of Social
Enterprises; Theory of asymmetric information; Theory of corporate social
responsibility; Theory of public utility enterprises.
1.2.2. Research question and research hypothesis
Research question: What is a social enterprise? Characteristics and role of
social enterprises? What is the difference between Social Enterprises and Public
Enterprises? How is it different from businesses committed to social

responsibility? Types of Social Enterprises? What is the law on social enterprises?
Contents of legal relationships of social enterprises?
Research hypothesis: Due to historical and economic conditions, up to now,
in Vietnam, there has not been a correct and systematic approach to social
enterprises and the law on social enterprises.
- Research question: how does Vietnamese law currently regulate issues
such as concepts, legal forms, rights and obligations for social enterprises? Is the
legal framework for Social Enterprises for Social Enterprises adequate? Is it
consistent with the development goals of Social Enterprises? Legal barriers and
causes?
Research hypothesis: The legal status of social enterprises still has many
shortcomings, gaps and insufficient legal framework for social enterprises to
develop. The actual operation of social enterprises and the enforcement of the law
on social enterprises in Vietnam are not consistent with the development goals of
social enterprises.
- Research question: What is the direction to improve the law on social
enterprises in the current conditions? On that basis, the law on social enterprises
in Vietnam needs to be improved according to which groups of solutions?
Research hypothesis: The law on social enterprises needs to be perfected
according to the development goals of social enterprises, first of all on the
following criteria: legal form, incentives, support for social enterprises to develop.

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CHAPTER 2
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 do 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

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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 do 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
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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
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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 do 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 3
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 do
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
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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
5 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 4 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
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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 4 years, 50% reduction of payable
tax for the next 9 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 3 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 4 years, 50% reduction of payable tax for the
next 9 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
3 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

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● 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 4 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 8 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 4 years from the time they
have taxable income and are reduced by 50% of corporate income tax in the next
5 years.
● In case the establishment of socialization is newly established from the
effective date of this Decree in areas eligible for investment incentives as
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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 4
years, since having taxable income, 50% corporate income tax reduction for the
next 9 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 4 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.

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● Regarding reorganization, according to the provisions of Article 6 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 5 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:


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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.

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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

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