Rights and obligations of capital contributors in a partnership in Vietnam

Partnership is one of the most popular types of businesses in our country. The appearance of the partnership is extremely important; contribute to the diversification of business methods of enterprises. The law of our country has specific provisions on the conditions for the establishment of a partnership; as well as property regulations; liability of the partnership for its business. Another issue, which is the rights and obligations of capital contributors in a partnership, are also concerned by many subjects. So, does our country’s corporate law stipulate the rights and obligations of capital contributors in a partnership?
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Legal grounds

Enterprise Law 2020

Consulting content

Concept of a partnership

The concept of a partnership is defined in Article 177 of the Enterprise Law 2020; Specifically:

A partnership is an enterprise; in which there must be at least 02 members who are common owners of the company; doing business together under a common name (hereinafter referred to as general partners). In addition to general partners, the company may have additional capital contributors; General partners must be individuals, responsible with all their assets for the obligations of the company; Capital contributors are organizations or individuals and are only responsible for the company’s debts within the amount of capital they have committed to contribute to the company.

About partnership members

A partnership under the Enterprise Law can have two types of members:

General partners: must be individuals, must be in the company and must have at least two members. The general partner is the core of the partnership, because without this member, the partnership cannot be established and operated. General partners in a partnership company are linked with each other mainly on the basis of personal identity, capital association is a secondary factor.

Capital-contributing members: can be individuals or organizations; may or may not be in a partnership. Capital contributors do not have an important role as general partners, their participation makes the company’s ability to raise capital higher. Capital-contributing members are not required to associate personally, nor are they required to be individuals like general partners. Capital-contributing members in a partnership are still limited in some of the rights that shareholders in a joint-stock company; or a member of a limited liability company owning; This comes from the nature of association and the liability regime of the partnership members.

About the regime of property liability of members of a partnership

General partners must be jointly and severally liable for all debts incurred in the business activities of the enterprise.

Unlimited liability for all debts of a member shows: a general partner is not only responsible for the number of assets put into the business; but is liable with all its assets for all debts of the company. The general partners are jointly and severally liable for unlimited liability. The unlimited liability of the general partner arises after the liability of the company; because a partnership has assets independent of its members.

Capital contributors: responsible for the amount of capital contributed to the company. In business, if the company encounters difficulties and losses; capital-contributing members are only liable for the end of the capital contributed to the company; in case the company is dissolved or goes bankrupt but the remaining assets of the company are not enough to pay the debt; Capital contributors do not have to use their own assets to pay debts on behalf of the company.

Capital of partnership company

Charter capital of a partnership is the total value of assets that members have contributed or committed to contribute when establishing the company. Assets contributed as capital can be fully contributed when establishing the company, can be contributed over time; progress committed to contribute is agreed and approved by the members.

General partners and capital contributors when they do not want to be members of the company; they have the right to transfer their contributed capital to the remaining members; or to a person who is not a member of the company; or withdraw capital from the company.
About capital raising of partnerships

A partnership may not issue any securities to publicly raise capital to the public. When there is a need to increase charter capital; the company will mobilize by admitting new members; increase the capital contribution of each member or record an increase in the value of the company’s assets.
When the company needs to increase working capital; the company can mobilize by borrowing from organizations and individuals; or other sources to meet the company’s capital needs.

About the legal status of a partnership

According to the provisions of the Enterprise Law, a partnership has legal status from the date of issuance of the Certificate of Business Registration.

Rights and obligations of capital contributors in a partnership

Article 187 of the Enterprise Law 2020 provides for the rights and obligations of capital-contributing members in a partnership as follows:

Rights of capital-contributing members

• Attend meetings, discuss and vote at the Members’ Council on amendments and supplements to the company’s charter, amendment and supplementation of rights; and obligations of capital contributors, on reorganization and dissolution of the company; and other contents of the company’s charter that are directly related to their rights and obligations;
• To receive annual profit sharing in proportion to the proportion of contributed capital in the company’s charter capital;
• To be provided with the company’s annual financial statements; have the right to request the Chairman of the Members’ Council and general partners to provide full information; truthful information about the company’s business situation and results; review the company’s accounting books, minutes, contracts, transactions, records and other documents;
• Transferring his/her capital contribution in the company to another person;
• On behalf of the individual; or conduct business on behalf of another person in the company’s line of business;
• To dispose of their capital contribution by inheritance, donation, mortgage or pledge; and other forms as prescribed by law and the company’s charter; in case of death, the heir shall replace the deceased member as a capital contributing member of the company;
• To receive a part of the remaining asset value of the company in proportion to the percentage of contributed capital in the company’s charter capital when the company is dissolved or goes bankrupt;
• Other rights as prescribed by this Law and the company’s charter

Obligations of capital contributors

Capital-contributing members have the following obligations:

• To be responsible for the company’s debts and other property obligations within the amount of capital committed to contribute;
• Not to participate in the management of the company, not to conduct business on behalf of the company;
• Comply with the company’s charter, resolutions and decisions of the Members’ Council;
• Other obligations as prescribed by this Law and the company’s charter.

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