Organizational structure of a multiple-member limited liability company in Viet Nam

Multiple-member limited liability company is a common types of enterprises in Viet Nam. Organizational structure of this types of company is specified in Viet Nam Law on Enterprises. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I would like to ask about how a multiple-member limited liability company is organized according to Viet Nam law? Legal status of main positions in a multi-member limited liability company? Thanks for answering me!”

Legal grounds

Viet Nam Law on Enterprises

What is a multiple-member limited liability company?

The definition of an enterprise is specified in Clause 10, Article 4 of Law on Enterprise 2020, whereby: “Enterprise means an organization that has a proper name, assets, premises, is established or registered in accordance with law for business purposes.”

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 contributed capital (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 Certificate is 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.

Organizational structure of a multiple-member limited liability company

– A multiple-member limited liability company shall have a Board of Members, President of the Board of Members, Director/General Director.

– A state-owned multiple-member limited liability company prescribed in Point b Clause 1 Article 88 of Law on Enterprises and each subsidiary company of a state-owned enterprise prescribed in Clause 1 Article 88 of Law on Enterprises shall have a Board of Controllers. The establishment of the Board of Controllers in other companies shall be decided by themselves.

– A company shall have at least one legal representative who holds the title of President of the Board of Members, Director/General Director. Unless otherwise prescribed by the company’s charter, the President of the Board of Members shall be the company’s legal representative.

The Board of Members

– 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.

President of the Board of Members

– The Board of Members shall elect a member as the President, who may concurrently hold the position of Director/General Director of the company.

– The President of the Board of Members has the following rights and obligations:

+ Plan the activities of the Board of Members;

+ Draw up agenda and prepare documents for meetings or surveys of the Board of Members;

+ Convene and chair meetings of the Board of Members or organize surveys of the Board of Members;

+ Supervise or organize supervision of the implementation of resolutions and decisions of the Board of Members;

+ Sign resolutions and decisions of the Board of Members on its behalf;

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

– The term of office of the President of the Board of Members shall be specified in the company’s charter bust must not exceed 05 years and has no term limit.

– In case the President of the Board of Members is not present or not able to perform his tasks, he/she shall authorize another member in writing to perform the rights and obligations of the President of the Board of Members in accordance with the company’s charter. In case no member is authorized or the President is dead, missing, detained, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, making a getaway; has limited legal capacity or is incapacitated, has difficulty controlling his/her behavior, is prohibited by the court from holding certain positions or doing certain works, one of the Board of Members shall convene a meeting with the remaining members to elect one of them as the interim President under the majority rule until a new decision is issued by the Board of Members.

The Director/General Director

– The Director/General Director is the person who manages the company’s everyday busines operation and is responsible to the Board of Members for his/her performance.

– The Director/General Director has the following rights and obligations:

+ Organize the implementation of resolutions and decisions of the Board of Members;

+ Decide everyday operating issues of the company;

+ Organize implementation of the company’s busines plans and investment plans;

+ Issue the company’s rules and regulations unless otherwise prescribed by the company’s charter;

+ Designate, dismiss the company’s executives, except those within jurisdiction of the Board of Members;

+ Enter into contracts on behalf of the company, except those within jurisdiction of the President of the Board of Members;

+ Propose the company’s organizational structure;

+ Submit annual financial statements to the Board of Members;

+ Propose plans for use and distribution of profits or settlement of business losses;

+ Recruit employees;

+ Other rights and obligations specified in the company’s charter, resolution and decisions of the Board of Members, and his/her employment contract.

Controllers and the Board of Controllers

– The Board of Controllers shall have 1 – 5 Controllers. The term of office of a controller shall not exceed 05 years and without term limit. In case the Board of Controllers only has 01 controller, he/she shall be the Chief Controller and shall satisfy corresponding conditions.

– The Chief Controller and Controllers shall satisfy the requirements specified in Clause 2 Article 168 and Article 169 of Law on Enterprises.

– Rights, obligations, responsibilities, dismissal and works of Controllers and the Board of Controllers are specified in Articles 106, 170, 171, 172, 173 and 174 of Law on Enterprises.

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Conclusion: So the above is Organizational structure of a multiple-member limited liability company in Viet Nam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com