What are rights and obligations of general partners in a partnership in Vietnam?

Partnership is one of four enterprise types under Vietnam Law on Enterprise 2020. In partnerships, there can be two types of members: general partners (required) and limited partners (optional). Then, what is a general partner? What are rights and obligations of general partners in a partnership? Let’s find out with Lawyer X through this article!

Legal grounds

Vietnam Law on Enterprise 2020

What is a partnership? What is a general partner?

Enterprise means an organization that has a proper name, assets, premises, is established or registered in accordance with law for business purposes. According to Law on Enterprises 2020, there are four types of enterprises including: Private enterprises, Partnerships, Limited Liability Companies, and Shareholding Companies.

Partnership is an enterprise that has characteristics as follows:

– There are at least 02 partners that are joint owners of the company and do business under the same name (referred to as “general partner”). There can be limited partners in addition to general partners;

– Partnership has the status of a juridical person.

– Partnership must not issue any kind of securities.

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.

Rights and obligations of general partners

Rights of general partners

A general partner has the rights to:

– 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 market rate;

– Request the partnership to pay compensation for 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 heir 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.

Obligations of general partners

A general partner has the obligations to:

– Manage and do business in an honest and prudent manner to ensure the partnership’s lawful and best interests;

– Manage and do business in accordance with law, the charter, resolutions and decisions of the Board of Partners; pay compensation for the damage caused by his/her violations of these;

– Do not use the partnership’s assets for personal gain or to serve the interests of any other organization or individual;

– 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;

– 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;

– Other obligations prescribed by Law and the charter.

Limitations of general partners

A general partner has the following limitations of rights:

– A general partner must not be the owner of a sole proprietorship, must not be a general partner of another partnership unless it is accepted by the other general partners.

– A general partner must not, in their own names or others’ names, do business in the same business lines as those of the partnership for personal gain or to serve the interests of another organization or individual.

– A general partner must not transfer part or all of his/her stake in the company to another organization or individual unless it is accepted by the other general partners.

Termination of general partners and admission of new partners

Termination of general partners

A general partner status will be terminated if he/she:

– voluntarily withdraws capital from the partnership; A general partner is entitled to withdraw capital from the partnership if it is accepted by the Board of Partners. In this case, the withdrawing partner shall make a written notification at least 06 months before the withdrawal date and may only withdraw capital at the end of the fiscal year after the financial statement of the same year has been ratified.

– is dead, missing or incapacitated; has limited legal capacity; has difficulty controlling his/her own behaviors;

– is excluded from the partnership; A general partner will be excluded from the partnership if he/she:

+ is not able to contribute capital or fails to contribute capital as promised after a second notice is made by the company;

+ violates the regulations of Article 180 of this Law;

+ fails to do business in an honest and prudent manner or has inappropriate actions causing serious damage to the interest of the partnership and other partners; or

+fails to fulfill a general partner’s obligations.

– is serving an imprisonment sentence or banned by the court from doing certain jobs;

– In other cases specified in the charter.

Admission of new partners

A partnership may admit new general partners and limited partners; the admission of a new partner is subject to approval by the Board of Partners. The new general partner or limited partner shall fully contribute capital as promised within 15 days from the day on which the admission is approved unless a different time limit is decided by the Board of Partners. The new general partner has a joint liability for the company’s debts and liabilities which is equal to his/her total assets, unless otherwise agreed upon by the new partner and the other partners.

Related article:

Procedures for setting up an insurance business in Vietnam

Conditions for foreigners to establish a company in Vietnam

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