Rights & obligations of partnership’s capital contributor in Vietnam
To set up a business unit, founders have to prepare an appropriate amount of capital to ensure the operation of the business. The source of capital comes from capital contributors, usually referred to as partners in a partnership. After contributing assets to the company’s capital, capital contributors will gain the corresponding rights and obligations. So, in this article, LSX legal firm will give you an insight into: “Rights & obligations of partnership’s capital contributor in Vietnam”
Legal ground
- Law on Enterprise 2020
Partnership under the Law on Enterprise
According to Article 177 of the law on enterprise 2020:
- A partnership has at least 02 partners as joint owners of the company and do business under the same name ((hereinafter referred to as “general partner”). There can be limited partners in addition to general partners. A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets, a limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.
- A partnership has the status of a juridical person from the day of issuance of the Certificate of Enterprise Registration.
- Partnerships must not issue any kind of securities.
Rights and obligations of limited partners
The rights of limited partners
- Firstly, participate in meetings, discuss and vote at the meetings of the Board of Partners on revisions to the charter, changes in rights and obligations of limited partners, reorganization and dissolution of the company, and other contents of the charter directly affecting their rights and obligations;
- Secondly, receive distributed profits in proportion to their holdings;
- Thirdly, be provided with the partnership’s annual financial statements; request the President of the Board of Partners and general partners to fully and accurately provide information about the partnership’s business performance; examine accounting books, records, transactions, and other documents of the company;
- Fourthly, transfer their stakes to other persons;
- Fifthly, do business within the partnership’s business lines in their own names in other persons’ names;
- Leave as inheritance, give away, pledge or otherwise dispose of their stakes in accordance with regulations of law and the charter. In case a limited partner dies, his/her heir shall be a new limited partner;
- Receive part of the partnership’s remaining assets in proportion to their holdings in case the partnership is dissolved or goes bankrupt;
- Also, other rights prescribed by Law and the company’s charter.
The obligations of limited partners
- Take on a liability for the partnership’s debts and other liabilities which is equal to their promised capital contribution;
- Do not participate in the administration of the partnership; do not do business in the partnership’s name;
- Comply with the partnership’s charter, resolutions, and decisions of the Board of Partners;
- Other obligations prescribed by Law and the partnership’s charter.
Rights and obligations of general partners
The rights of general partners
- Participate in meetings, discuss and vote on the partnership’s issues; each general partner shall have one vote or a specific number of votes specified in the partnership’s charter;
- Do business in the partnership’s business lines on its behalf; negotiate and enter into contracts, transactions, or agreements under conditions that the partner believes to be most beneficial to the partnership;
- Use the partnership’s assets to do business in its business lines. In case a general partner advances money to do business on behalf of the partnership, he/she is entitled to request the partnership to reimburse the principal and interest thereon at the market rate;
- Request the partnership to pay compensation for the damage that is not on account of that partner.
- Request the partnership and other general partners to provide information about the partnership’s business performance; inspect the partnership’s assets, account records, and other documents where necessary;
- Receive distributed profits in proportion to his/her stake or as agreed;
- Receive the remaining assets in proportion to his/her stake upon the partnership’s dissolution or bankruptcy unless another ratio is specified in the charter;
- When a general partner dies, his/her hair shall receive a value of assets minus the partner’s debts and other liabilities. The heir may become a general partner if accepted by the Board of Partners;
- Other rights prescribed by this Law and the company’s charter.
The obligations of general partners
- Firstly, manage and do business in an honest and prudent manner to ensure the partnership’s lawful and best interests;
- Secondly, manage and do business in accordance with the law, the charter, resolutions, and decisions of the Board of Partners; pay compensation for the damage caused by his/her violations of these;
- Thirdly, do not use the partnership’s assets for personal gain or to serve the interests of any other organization or individual;
- Fourthly, return to the partnership the money or assets that he/she received when doing business in his/her own name, in the partnership’s or another person’s name and has not returned to the partnership and pay for any damage caused by this action;
- Fifthly, jointly pay the partnership’s remaining debts (if any) after all of the partnership’s assets are used to pay them;
- Incur the loss that is proportional to his/her stake or as agreed in the charter in case the partnership makes a loss;
- Submit monthly written reports on his/her performance to the partnership; provide information on his/her performance for other partners on request;
- Lastly, other obligations prescribed by Law and the charter.
The board of partners of a partnership
- The Board of Partners consists of all partners and shall elect a partner as the President of the Board of Partners, who may concurrently hold the position of Director/General Director of the partnership unless otherwise prescribed by the charter.
- A general partner has the right to request a meeting of the Board of Partners to discuss and decide its business. The requesting partner shall prepare the meeting documents and agenda.
- The Board of Partners has the right to decide all business activities of the partnership. Unless otherwise prescribed by the charter, the following issues are subject to approval by at least three-fourths (3/4) of the general partners:
- Orientation for development of the partnership;
- Revisions to the charter;
- Admission of new partners;
- Permission for withdrawal or exclusion of a partner;
- Investment in projects;
- Taking of loans and other methods for raising capital; granting a loan that is worth at least 50% of the partnership’s charter capital, unless a higher rate is prescribed by the charter;
- Purchase or sale of assets whose value is equal to or greater than the partnership’s charter capital, unless a higher value is prescribed by the charter;
- Ratification of the annual financial statement, total distributable profit, and distributed profit of each partner;
- Dissolution or bankruptcy of the company.
- Other issues that are not mentioned in Clause 3 of this will be ratified if approved by at least two-thirds (2/3) of the general partners; a specific ratio shall be specified in the charter.
- The rights to vote of limited partners shall comply with this Law and the charter.
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Contact LSX
Finally, hope this article is useful for you to answer the question about “Rights & obligations of partnership’s capital contributor in Vietnam”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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Related questions
A partnership’s assets include:
Firstly, Assets that are contributed by the partners and have been transferred to the company;
Secondly, Assets created under the partnership’s name;
Thirdly, Assets obtained from business activities performed by general partners on behalf of the company and from business activities of the partnership performed by general partners in their own names;
Lastly, Other assets prescribed by law.
General partners must not transfer part or all of their contributed capital in the company to another person without the consent of the remaining general partners.
Limited partners have the right to transfer their contributed capital in the company to another person.
A person can be a general partner of 2 partnerships with the consent of the other general partners.
Conclusion: So the above is Rights & obligations of partnership’s capital contributor in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
