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

by Hà Ngọc

The single-member limited liability company is known for the uniqueness of its owner. Viet Nam law has regulations on how this type of company is organized. Let’s find out with Lawyer X through the following scenario: “Dear Lawyer! I would like to learn about the organizational structure of a single-member limited liability company owned by an organization and owned by an individual. Looking forward to your response! “

Viet Nam law on Enterprises

What is a single-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 liability company comprises 2 types which are single-member limited liability companies and multi-member limited liability companies.

Single-member limited liability is an enterprise which has characteristics as follows:

– The owner of a single-member limited liability company is a single organization or individual

– Assets liability of the owner is limited liability, which means the owner shall be liable for all business operations of the enterprise to the extent of the charter capital of the company.

– A single-member limited liability company has the status of a juridical person.

– A single-member limited liability company must not issue shares except for equitization; but may issue bonds in accordance with laws

Organizational structure of a single-member limited liability company owned by an organization

A single-member limited liability company owned by an organization shall apply one of the two models below:

– A company with a President and the Director/General Director;

– A company with a Board of Members and the Director/General Director.

In case the company’s owner is a state-owned enterprise prescribed in Clause 1 Article 88 of Law on Enterprises, a Board of Controllers shall be established. The establishment of a Board of Controllers in other cases shall be decided by the company. The organizational structure, working regulations, standards, requirements, dismissal, rights, duties and responsibilities of the Board of Controllers and Controllers are specified in Article 65 of Law on Enterprises

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

Unless otherwise prescribed by the company’s charter, organizational structure, functions, rights and duties of the Board of Members, the company’s President, the Director/General Director shall comply with Law on Enterprises.

The Board of Members

The Board of Members shall have 03 – 07 members. The members shall be designated and dismissed by the owner with a 5-year term of office. The Board of Members shall perform the owner’s rights and obligations in the owner’s name; perform the company’s rights and obligations in the company’s name, except the rights and obligations of the Director/General Director; take responsibility to the law and the owner for their performance as prescribed by the company’s charter, Law on Enterprises and relevant laws.

Rights, obligations and working regulations of the Board of Members shall comply with the company’s charter, Law on Enterprises and relevant laws.

The President of the Board of Members shall be designated by the owner or elected by members of the Board of Members under the majority rule following the procedures specified in the company’s charter. Unless otherwise prescribed by the company’s charter, the term of office, rights and obligations of the President of the Board of Members shall comply with Article 56 and relevant regulations of Law on Enterprises.

Meetings of the Board of Members shall be convened in accordance with Article 57 of Law on Enterprises.

A meeting of the Board of Members shall be conducted when it is participated in by at least two thirds of the members. Unless otherwise prescribed by the company’s charter, each member shall have one vote with equal value. The Board of Members may ratify its resolutions and decisions by questionnaire survey.

A resolution or decision of the Board of Members will be ratified when it is voted for by more than 50% of the participating members or by a number of participating members that hold more than 50% of the total votes. Revisions to the company’s charter, reorganization of the company, transfer of all or part of the company’s charter capital must be voted for by than 75% of the participating members or by a number of participating members that hold more than 75% of the total votes. A resolution or decision of the Board of Members takes effect from the day on which it is ratified or on the effective date written therein unless otherwise prescribed by the company’s charter.

Minutes of every meeting the Board of Members shall be taken in accordance with Clause 2 Article 60 of Law on Enterprises. Audio recording and other electronic forms are optional.

The company’s President

The company’s President shall be designated by the company’s owner, perform the owner’s rights and obligations in the owner’s name; perform the company’s rights and obligations in the company’s name, except the rights and obligations of the Director/General Director; take responsibility to the law and the owner for his/her performance as prescribed by the company’s charter, Law on Enterprises and relevant laws.

Rights, obligations and working regulations of the company’s President shall comply with the company’s charter, Law on Enterprises and relevant laws.

A decision of the company’s President on performance of his/her rights and obligations shall be effective from the day on which it is approved by the owner unless otherwise prescribed by the company’s charter.

The Director/General Director

The Board of Members or the company’s President shall designate or hire the Director/General Director within a term of office not exceeding 05 years to manage the company’s everyday business. The Director/General Director shall be responsible for the law and the Board of Members or the company’s President for his/her performance. The President of the Board of Members, another member of the Board of Members or the company’s President may concurrently hold the position of Director/General Director unless otherwise prescribed by law or the company’s charter.

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

– Organize the implementation of resolutions and decisions of the Board of Members or the company’s President;

– Decide everyday operating issues of the company;

– Organize implementation of the company’s business plans and investment plans;

– Issue the company’s rules and regulations;

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

– Enter into contracts in the company’s name, except those within jurisdiction of the President of the Board of Members or the company’s President;

– Propose the company’s organizational structure;

– Submit annual financial statements to the Board of Members or the company’s President;

– Propose plans for use of profits or settlement of business losses;

– Recruit employees;

– Other rights and obligations specified in the company’s charter and the employment contract.

To hold the position of Director/General Director, a person shall satisfy the following requirements:

– He/she is not one of the persons specified in Clause 2 Article 17 of Law on Enterprises;

– He/she has professional qualifications and experience of busines administration and satisfies other conditions specified in the company’s charter.

Responsibilities of members of the Board of Members, the company’s President, the Director/General Director, other executives and Controllers

– Comply with regulations of law, the company’s charter, decisions of the company’s owner in performance of their rights and obligations.

– Perform their rights and obligations in an honest and prudent manner to serve the best and lawful interests of the company and its owner.

– Be loyal to the interests of the company and its owner; do not abuse their power and position or use the enterprise’s information, secrets, business opportunities and assets for personal gain or serve any other organization’s or individual’s interests.

– Promptly and fully notify the company of the enterprises that they own or have shares/stakes or that their related persons own, jointly own or have separate controlling shares/stakes. The notifications shall be retained at the company’s headquarters.

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

Salaries, bonuses and other benefits of the company’s executives and Controllers

– The company’s executives and Controllers shall receive salaries, bonuses and other benefits according to the company’s business performance.

– The company’s owner shall decide the salaries, bonuses and other benefits of members of the Board of Members, the company’s President and Controllers. Salaries , bonuses and other benefits of the company’s executives and Controllers shall be recorded as the company’s expenses in accordance with regulations of law on corporate income tax and relevant laws and shall be placed in a separate section in the company’s annual financial statements.

– The Controllers’ the salaries, bonuses and other benefits may be directly paid by the company’s owner as prescribed by the company’s charter.

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

Organizational structure of a single-member limited liability company owned by an individual

A single-member limited liability company owned by an individual shall have a President and a Director/General Director.

A company’s owner shall be the President who may concurrently hold the position of Director/General Director or hire another person as the Director/General Director.

Rights and obligations of the Director/General Director shall be specified in the company’s charter and the employment contract.

Contracts and transactions between the company and related persons

Unless otherwise prescribed by the company’s charter, contracts and transactions between a single-member limited liability company owned by an organization and the following persons are subject to approval by the Board of Members or the company’s President, Director/General Director and Controllers:

– The owner of the company and the owner’s related persons;

– Members of the Board of Members, the company’s President, Director/General Director and Controllers;

– Related persons of the persons mentioned in Point b of Clause 1 of Article 86 of Law on Enterprises

– Executives of the company’s owner, the person having the power to designate these executives;

– Related persons of the persons mentioned in Point d of Clause 1 of Article 86 of Law on Enterprises

The person who concludes a contract or carries on a transaction in the company’s name shall send a notification to the Board of Members or the company’s President, Director/General Director and Controllers of the related persons and interests; the notification shall be enclosed with the draft contract or summary of the transaction.

Unless otherwise prescribed by the company’s charter, members of the Board of Members or the company’s President, Director/General Director and Controllers shall decide whether to approve the contract or transaction within 10 days from the receipt of the notification under majority rule. Each person shall have one vote; related persons of the parties shall not vote.

A contract or transaction mentioned in Clause 1 of Article 4 of Law on Enterprises shall only be approved if the following conditions are fully satisfied:

– The parties to the contract or transaction are independent legal entities with separate rights, obligations, assets and interests;

– The prices applied to the contract or transactions are market prices at the time the contract is concluded or the time the transaction is conducted;

– The company’s owner fulfills the obligations specified in Clause 4 Article 77 of Law on Enterprises.

A contract or transaction shall be invalidated under a court decision and handled as prescribed by law if it is concluded or carried out against regulations of Clauses 1, 2, 3 and 4 of Article 86 of Law on Enterprises. The person who concludes the contract or carries out the transaction and related persons of the parties shall jointly pay compensation for any damage caused and return the benefits generated by such contract or transaction to the company.

Every contract and transaction between a single-member limited liability company owned by an individual and the company’s owner or related persons of the owner shall be recorded in separate documents of the company.

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If you need any further information, please contact  LSX Law firm: at +84846175333 or Email: [email protected]

Frequently asked questions

What models of organization shall a single-member LLC owned by an organization apply?

A single-member limited liability company owned by an organization shall apply one of the two models below:
– A company with a President and the Director/General Director;
– A company with a Board of Members and the Director/General Director.

How many legal representatives shall a single-member limited liability company at least have?

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

How many members shall the Board of Members of a single-member LLC have?

The Board of Members of a single-member LLC shall have 03 – 07 members

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