Viet Nam legal regulations on The Board of Members of a single-member LLC

by Hà Ngọc

A single-member limited liability company in Viet Nam may be organized with The Board of Members. Viet Nam law has regulations of legal status of the Board of Members of a single-member LLC. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I would like to ask about how does the Board of Members of a single-member LLC establish? What are the rights and obligations of the Board of Members? Thanks for answering me!”

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.

Viet Nam legal relations on The Board of Members of a single-member LLC
Viet Nam legal relations on The Board of Members of a single-member LLC

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.

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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Frequently asked questions

How long is the term of office of The Board of Members of a single-member LLC?

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.

Shall the Board of Members of a single-member LLC perform the owner’s rights and obligations?

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.

How shall the President of the Board of Members be designated?

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.

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