What are rights and obligations of members of The Board of members of the multiple-member LLC under Viet Nam law?

Many individuals and organiations want to invest in Viet Nam business market by acceding a multiple-member LLC. Viet Nam Law on Enterprises has regulations on members of The Board of Members of multiple-member LLC. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer X! I want to ask about what is the board of members of a multiple-member LLC? How are rights and obligtions of members of the board of members of a multiple-member LLC regulated under Viet Nam law? Thanks for answering me!”

Legal grounds

2020 Viet Nam Law on Enterprises

What is a multiple-limited liability company?

According to the Enterprise Law 2020, inheriting the previous legal regulations, currently enterprises include the following four types: private enterprises, partnerships, limited liability companies, joint-stock companies. Thus we can answer the question if  enterprise and company are the same? Enterprise has broader connotations than company. Company refers to types of enterprises  that are: Partnerships, Limited Liability Companies, Joint-Stock Companies. All types of companies are considered as enterprises. But not every type of enterprises is considered as a corporation, in particular private enterprise is not considered a company.

Limited liablity company comprises 2 types which are single-member limited liability company and Multiple-member limited liability company.

A multiple-member limited liability company is an enterprise which has characteristics as follows:

– A multiple-member limited liability company means an enterprise that has 02 – 50 members that are organizations or individuals. A member’s liability for the enterprise’s debts and other liabilities shall be equal to the amount of capital that member contributed to the enterprise, except for the cases specified in Clause 4 Article 47 of Law on Enterprises. The member’s stake (contributed capital) may only be transferred in accordance with Articles 51, 52 and 53 of Law on Enterprises.

– A multiple-member limited liability company has the status of a juridical person from the day on which the Enterprise Registration Certificateis issued.

– Multiple-member limited liability companies must not issue shares except for equitization.

– Multiple-member limited liability companies may issue bonds in accordance with Law on Enterprises and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of Law on Enterprises.

What is the Board of Members of a multiple-limited liability company?

The Board of Members is the supreme governing body of the company, consists of all members that are individuals and authorized representatives of members that are organizations. The company’s charter shall specify the frequency of meetings of the Board of Members but at least one meeting shall be held per year.

The Board of Members has the following rights and obligations:

– Decide the company’s annual business plan and development strategy;

– Decide increase or decrease in charter capital, time and method for raising more capital; issuance of bonds;

– Decide investments in the company’s development projects; solutions for market development, marketing and technology transfer;

– Approve contracts for borrowing, lending, sale of assets and other contracts prescribed by the company’s charter  whose value are at least 50% of the total assets written in the latest financial statement (or a smaller ratio or value specified in the company’s charter);

– Elect, dismiss the President of the Board of Members; designate, dismiss, sign and terminate contracts with the Director/General Director, chief accountant, controllers and other executives specified in the company’s charter;

– Decide the salaries, remunerations, bonuses and other benefits of the President of the Board of Members, Director/General Director, chief accountant, controllers and other executives specified in the company’s charter;

– Ratify annual financial statements, plans for use and distribution of profits or settlement of losses;

– Decide the company’s organizational structure;

– Decide establishment of subsidiary companies, branches and representative offices;

– Revise the company’s charter;

– Decide reorganization of the company;

– Decide dissolution or file bankruptcy of the company;

– Other rights and obligations prescribed by Law and the company’s charter.

Rights and obligations of members of the Board of Members

Rights of members of the Board of Members

A member of the Board of Members has the rights to:

– Participate in meetings of the Board of Members; discuss, propose, vote on the issues within the jurisdiction of the Board of Members;

– Have a number of votes that are proportional to the member’s holding, except for the cases specified in Clause 2 Article 47 of Law on Enterprises;

– Receive profit in proportion to the member’s holding after the company has fully paid taxes and fulfilled other financial obligations prescribed by law;

– Receive part of the remaining assets in proportion to the member’s holding when the company is dissolved or goes bankrupt;

– Be given priority to contribute more capital when the company increases its charter capital;

– Transfer, give away or otherwise dispose of the member’s own stake in accordance with regulations of law and the company’s charter;

– File lawsuits in their own name of in the company’s name against the President of the Board of Members, the Director/General Director, other executives, legal representatives in accordance with Article 72 of Law on Enterprises;

– Other rights prescribed by Law on Enterprises and the company’s charter.

In addition to the rights above, a group of members that hold at least 10% of the charter capital (or a smaller ratio prescribed by the company’s charter or in the cases specified in Clause 3 of Article 49 of Law on Enterprises) also has the rights to:

– Demand meetings of the Board of Members be convened to resolve issues within its jurisdiction;

– Inspect, access logbooks and monitor transactions, accounting books and annual financial statements;

– Inspect, access, make photocopies of the member register, meeting minutes, resolutions Decree decisions of the Board of Members and other documents of the company;

– Request the Court to invalidate the resolution or decision of the Board of Members within 90 days from the end of its meeting if the meeting procedures or contents of the resolution or decision are not fully followed or contradict regulations of Law on Enterprises and the company’s charter.

In case a member holds more than 90% of the charter capital and the company’s charter does not provide for any smaller ratio as prescribed in Clause 2 of Article 49 of Law on Enterprises, the group of remaining members obviously have the rights specified in Clause 2 of Article 49 of Law on Enterprises.

Obligations of members of the Board of Members

Members of the Board of Members have the obligations to:

– Fully and punctually contribute capital as promised; take on a liability for the company’s debts and liabilities which is equal to the contributed capital, except for the cases specified in Clause 2 and Clause 4 Article 47 of Law on Enterprises.

– Do not withdraw capital from the company in any shape or form; except for the cases specified in Articles 51, 52, 53 and 68 of Law on Enterprises.

– Comply with the company’s charter.

– Implement the resolutions and decisions of the Board of Members.

– Take personal responsibility when performing the following actions in the name of the company:

+ Violations of law;

+ Business operations or transactions that do not serve the company’s interests and cause damage to others;

+ Pay debts before they are due while the company is facing financial risks.

– Other obligations prescribed by law.

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