Viet Nam legal relations on The Director/General Director of a single-member LLC

The Director/General Director is an important position in a single-member limited liability company. Viet Nam law has regulations of legal status of the Director/General Director  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 are The Director/General Director selected? What are the rights and obligations of The Director/General Director? Thanks for answering me!”

Legal grounds

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

*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.

*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.

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.

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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Conclusion: So the above is Viet Nam legal relations on The Director/General Director of a single-member LLC. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com