Recording business lines on Business Registration Certificate (BRC) according to current rules on Enterprise Law 2005 is evaluated as inappropriate. Based on practical implementation, in order to step by step enhance posting business lines on BRC, Draft of Revised Enterprise Law has been edited with the purpose of creating more favorable chances for enterprises to enter the market and ensure the principle “enterprises have a right to run business in all lines that are not prohibited by law”.
Selecting among options in posting business lines on BRC in Revised Enterprise Law has important implication so as to create more favorable conditions for enterprises, also to build policy directions in the management of the State with regard to the declaration, noted the statistics of business lines. To be able to choose optimal solutions for this issue, the study of the international experience will contribute to clarifying the lessons applying in line with practices of Vietnam.
1. Regulation of Singapore
Singapore is a country that is evaluated by World Bank (WB) as the most favorable business condition in the world, in terms of “starting a business”, Singapore stands at 3/189 countries, economies (business environment report 2013)
In Singapore, State agencies are closely connected together into a system to inspect and control the operation of enterprises. The business registration is done directly at the headquarters of Accounting and Corporate Regulatory Authority (ACRA) or online via the electronic portal of ACRA.
Business lines are provided by enterprises when forming enterprises, posted on Certificate of Good standing and state on BizFile. Enterprise Law of Singapore regulates that the founder of the enterprise must be responsible for selecting business lines according to the taxonomy of the Principal Activity, Secondary Activity and Auxiliary Activities and choose the appropriate code for business lines under Singapore Standard Industrial Classification.
Every year, ACRA requires enterprises to update the information in online business profile through account provided by ACRA. The updated information at the profile includes all information registered with ACRA, such as Principal Activity, Secondary Activity, Auxiliary Activities, head office address, phone, email address and business management positions.
In addition, this information will be automatically updated in enterprise account that pays taxes in tax authorities of Singapore (IRAS) to perform the obligation of income tax as well as tax for the employees of enterprises. As a result, any change in the information of business registration is focused at ACRA and then this information will be automatically updated to the relevant regulatory agencies (such as tax, statistics, banking, etc.) through the system account have been identified for each business.
The Singapore Statistics Agency also is connected with the ACRA to update the statistical data about the enterprise's business operations every year. For those business lines that enterprises does not determine code lines, the enterprises have the right to select a similar business lines code and provide a detailed description (limited number of) on business registration documents.
2. Regulation of Hong Kong
Also under review business environment reports 2013 of the World Bank, after Singapore, Hong Kong's economy is ranked as second in the world in terms of the degree of favorable business environment and a 5th place on the criteria of "starting a business".
Basically, the laws of the Hong Kong have recognized enterprises with full of the capacity, rights, benefits and privileges of a people. Therefore, enterprises are allowed to freely perform their business activities as a people in the economy. However, the law of this country still highly emphasizes on responsibilities of business in compliance with the provisions in the legal framework as active participants in the market, or in other words is the "freelance in discipline". That can be seen through the strict and effective management of legislation for the establishment and operation of the business.
Accordingly, enterprises have to register with the business registration agency that is belonged Inland Revenue Department within 1 month from the beginning of the business operations. The business lines are described based on the reduced criterion (30 characters in Chinese and 60 characters in English) in the registration form and recorded on the certificate of BRC (Certificate of Incorporation). Certificate of Incorporation will be issued for the enterprises within period of 1 year or 3 years depending on the Subscriber's choice. After that time, enterprises or individuals who want to continue to do business registration procedures have to register again.
However, before registering business lines in order to be issued a Business Registration Certificate, enterprises must be registered with the business registration agency (The Company Registry) to confirm legal personality. Business will be issued certificates of established businesses (Certificate of Incorporation). This paper does not include the business lines of the enterprises.
Besides, the law also regulates the responsibilities of enterprises or individuals to actively consult or learn about expected business lines to register permits or certificates of practice with related State authority if required. Matching business lines code and managing the business lines are based on the system of the Hong Kong economy (Hong Kong Standard Industrial Classification), which is controlled by the statistical agency. Every year, statistical agency will send a random survey by sector business to collect information and updated business lines of businesses. Moreover, the statistical agency is also connected to the database of related state agencies to collect, matching business line codes that registered by enterprises.
3. Regulation of New Zealand
According to the business environment report 2013, New Zealand is ranked third in the world in terms of the degree of favorable business environment and to be ranked first regarding the criterion of “starting a business”.
Achieve those ranks above because the New Zealand Government has created favorable conditions for enterprises especially in forming enterprises. After registering online to keep the name with the registry agency, enterprises continue to conduct the business registration process. Company name is kept within 20 days and during this period, the founder of business must complete business registration dossier to submit via electronic networks. After receiving a valid application, the business registration agency issue Certificate of Incorporation for enterprises via email within a few minutes.
Business lines are not recorded on the Certificate of Incorporation. After register to form an enterprise, businesses must register code IRD (8 or 9 number code) with Inland Revenue Department for the purpose of income and tax management. To register this IRD number, enterprises must register business lines with the business registration agency. Although the business lines are not recorded on the Certificate of Incorporation, business must register with the business lines to the business registration agency to be issued the business Code (Business Industry Code). This code will be sent to Inland Revenue Department by the business registration agency to review and check the IRD registration of enterprises. All the procedures in registration and exchanging information between the authorities and businesses are performed online, the state agencies also connect information systems together to exchange the necessary data about the business.
4. Regulation of Australia
Australia is also a country that has high ranking (ranked number 11) on the level of favorable business environment, especially regarding to criteria on "starting a business", Australia ranked number 4 in the world, following New Zealand, Canada and Singapore.
According to regulations in Australia, the business lines are not recorded on the BRC. Procedures to joining the market are simplified. However, a modern information system and the strict legal regulations have supported for the state management on business so that this management is implemented efficiently and effectively.
At the central level, the register agency and the tax authority are closely connected with each other in order to manage enterprises. The Australian business register (The Australian Business Register-ABR) will manage the business registration of enterprises and have specific guidelines for enterprises from determining the
business to the conduct the business. In each State, territory or local governments of Australia will manage and issue licenses, registrations or certifications for the business sectors.
Prior to proceed business registration, company founders have to find out information on the type of license, registration, certificate on the web site of the Government. Business will have to clearly identify the sectors that they will run the business and business location. Since then, the Government will have specific instructions for types of certification, business licenses that are needed to ensure its business operations.
Enterprises have to register for business registration code (Australia Business Number-ABN) 11 numbers, of which include enterprise codes (Australia Company Number) 9 numbers to make sure the company name is unique. When register ABN, enterprise must provide the main business lines want to make. If a business has many business locations, the enterprise is responsible for registering the main business line for each business location. However, this business line is not recorded on the certificate of registration of the enterprise.
ABN will be the unique code of enterprise when performing tax obligations or for use in the administrative relations with the State authorities. ABN code will help the Australian Government and the communities confirm business lines and the type of business organization on each region or territory. Business will be responsible for declaring information honestly and accurately to provide business code and is responsible for updating the information in the application for issuing business code within 28 days prior to the change.
Lessons learned from the State management for business lines
Practical experience from countries with developed business environment leads to some lessons on state management for business lines in general and recording business lines on the Business Registration Certificate in particular:
Firstly, the registration of the business lines is the right and obligation of enterprises when decide to participate in the market. The laws in countries respect the right to run the business freely and allow enterprises participate on the business lines that are not prohibited by law, but at the same time, also need to clearly identify the business lines registering with register agency is to ensure effective state management. Therefore, as a rule, enterprise must register the planned business lines with business registration agency.
Secondly, recording business lines on the Business Registration Certificate or not does not affect the freedom of running the business. Depending on the system of governance and management point of view that the legislation regulates recording the business lines on Business Registration Certificate or not.
Thirdly, applying information technology on procedures and sharing the information between the state agencies is the basic condition and is the most effective tool to ensure the state management, also providing the most favorable condition for enterprises in the implementation of the procedure of joining the market.
Finally, consciousness and responsibility for compliance with the laws of the enterprise founder is emphasized and that is essential requirement for participating in the market. When deciding to invest in the market, enterprises must have the responsibility to learn and understand the legal information on the rights and obligations of the business. The law system in countries recognize the free right to run the business, but also regulate the obligations that businesses have to comply with in order to build a healthy business environment. Just when businesses strictly apply to the legal regulations on the market, the new business environment is really equal for all enterprises.
Those above are a number of the experience and lessons drawn from the rules of recording the business lines on the Business Registration Certificate in several countries that have advanced business environment (top of the world), may be used for reference during the process of consideration and modify this provision in the Draft of Revised Enterprise Law.
(Source: Agency for Business Registration, MPI)