Limited Liability Company (P2) – Single-Member Limited Liability Company

single-member limited liability company

Limited Liability Company (P2) – Single-Member Limited Liability Company

There is a only business Law system for both local local and foreigner investors to do business in Viet Nam, deals with the establishment, organization, restructuring, dissolution, and relevant activities of enterprises, including limited liability company, joint-stock companies, partnerships, sole proprietorships, and groups of enterprises.

We would like to introduce to you four of key topics to know about the business regulations in Viet Nam:

It would be our pleasures to share with you for any query or question about the terms and conditions as well as practical cases which we have been experiencing since years 2000, where the first law on enterprise has allowed private sector to born and blooming.

single-member limited liability companyTYPE 2: SINGLE-MEMBER LIMITED LIABILITY COMPANY

1. Single-member limited liability company

  • A single-member limited liability company is a enterprise under the ownership of an organization or individual (hereinafter referred to as the company’s owner; the company’s owner is liable for the company’s debts and other liabilities up to the company’s charter capital.
  • A single-member limited liability company has its legal status from the issuance date of the Certificate of Business registration.
  • Single-member limited liability companies must not issue shares.

2. Capital contribution to the company’s establishment

  • Charter capital of a single-member limited liability company on the business registration date is total value of assets promised to be contributed by the owner, which is written in the company’s charter.
  • A owner shall make contributions in accordance with the commitment upon enterprise registration within 90 days from the issuance date of the Certificate of Business registration in terms of value and types of assets.
  • If sufficient charter capital is not fully contributed by the deadline, the owner shall register a change to the charter capital within 30 days from the deadline for fully contributing charter capital. In this case, the owner shall take responsibility up to the value of promised capital contribution for the company’s financial obligations incurred before the change to charter capital is registered.
  • The owner, with his/her entire property, shall take responsibility for the company’s financial obligations, the damage caused by failure to contribute capital, or failure to fully and punctually contribute capital.

3. Rights of the company’s owner

The company’s owner has the rights to:

  • Decide the contents of the company’s charter; amend the company’s charter;
  • Decide the annual business plans and development plans of the company;
  • Decide the organizational structure; designate and dismiss the company’s manager;
  • Decide development investment projects;
  • Decide solutions for market development, marketing, and technology;
  • Ratify contracts to take loans, contracts to grant loans, and other contracts prescribed by the company’s charter of which the values are equal to or higher than 50% of the total asset value written in the latest financial statement of the company, or a smaller rate prescribed by the company’s charter;
  • Decide the sale of assets of which the values are equal to or higher than 50% of the total asset value written in the latest financial statement of the company, or a smaller rate prescribed by the company’s charter;
  • Decide increases to the company’s charter capital; transfer part of or all of the company’s charter capital to other organizations and/or individuals;
  • Decide the establishment of subsidiaries, capital contributions to other companies;
  • Supervise and assess the company’s business operation;
  • Decide the use of profit after company’s tax liability and other financial obligations are fulfilled;
  • Decide the company’s restructuring, dissolution, and petition for bankruptcy;
  • Withdraw the entire value of the company’s asset value after the dissolution or bankruptcy process is completed;
  • Exercise other rights prescribed in the law and the company’s charter.

The company’s owner being an individual has the rights to:

  • Decide the contents of the company’s charter; amend the company’s charter;
  • Decide the company’s investments, business operation, and administration, unless otherwise prescribed by the company’s charter;
  • Decide increases to the company’s charter capital; transfer part of or all of the company’s charter capital to other organizations and/or individuals;
  • Decide the use of profit after company’s tax liability and other financial obligations are fulfilled;
  • Decide the company’s restructuring, dissolution, and petition for bankruptcy;
  • Withdraw the entire value of the company’s asset value after the dissolution or bankruptcy process is completed;
  • Exercise other rights prescribed in the law and the company’s charter.

4. Obligations of the company’s owner

  • Contribute charter capital fully and punctually.
  • Adhere to the company’s charter.
  • Determine and separate assets of the owner and those of the company. The company’s owner being an individual must separate the expenditures of his/her own and his/her family from those made in the position of the company’s President, Director, or General Director.
  • Comply with regulations of law on contracts and relevant regulations of law on buying, selling, loaning, borrowing, leasing, renting, and other transactions between the company and the company’s owner.
  • The company’s owner may only withdraw capital by transferring part of or all of the charter capital to another organization or individual; when withdrawing part of or all of charter capital contributed to the company using another method, the owner and relevant organization or individual shall be jointly responsible for the debts and other liabilities of the company.
  • The company’s owner must not receive profit when the company fails to pay the due debts and other liabilities.
  • Fulfill other obligations prescribed by law and the company’s charter.

5. Performance of the company’s owner’s rights in some special cases

  • When the owner transfers, give part of the charter capital to another organization or individual (hereinafter referred to as entity), or the company has a new member, the company shall be converted into a multi-member limited liability company or joint-stock company, register changes to business registration contents with the business registration authority within 10 days from the date on which capital is transfer, given, or the new member is admitted.
  • In case the company’s owner being an individual is detained, sentenced to imprisonment, or deprived of the right to practice by a court as prescribed by law, such member shall authorize another person to perform the rights and obligations of the company’s owner.
  • If the company’s owner being an individual dies, his/her inheritor according to the will or law shall be the owner or member of the company. The company shall be converted correspondingly and register changes to business registration contents within 10 days from the completion of the inheritance process. If the company’s owner being an individual dies without an inheritor or the inheritor renounces the inheritance or has the right to inherit deprived, the owner’s stake shall be settled in accordance with regulations of law on civil affairs.
  • In case the company’s owner being an individual becomes legally incompetent, rights and obligations of the company’s owner shall be performed by the guardian.
  • If the company’s owner being an organization is dissolved or bankrupt, the recipient of the owner’s stake shall become the owner or member of the company. The company shall be converted correspondingly and register changes to business registration contents within 10 days from the completion of the transfer process.

6. Organizational structure of single-member limited liability company under the ownership of an organization

A single-member limited liability company under the ownership of an organization shall apply one of the following organizational models:

  • The company’s President, Director/General Director, and Controller;
  • The Board of members, Director/General Director, and Controller.

Unless otherwise prescribed by the company’s charter, the Chairperson of the Board of members or the company’s President shall be the company’s legal representative.

Unless otherwise prescribed by the company’s charter, the roles, rights and obligations of the Board of members, the company’s President, Director/General Director, and Controller shall comply with the law.

7. The Board of members

  • Members of the Board of members shall be designated and dismissed by the company’s owner; there will be 03 – 07 members, the term of office shall not exceed 05 years. The Board of members, on behalf of the company, shall perform rights and obligations of the company’s owner and the company, except for rights and obligations of the Director/General Director; take legal responsibility to the company’s owner for the fulfillment of rights and obligations in accordance with the law and relevant regulations of law.
  • Rights, obligations, and working relationship between the Board of members and the company’s owner shall comply with the company’s charter Decree relevant regulations of law.
  • The Chairperson of the Board of members shall be designated by the owner or elected by the Board of members under the majority rule following the procedures prescribed in the company’s charter. Unless otherwise prescribed by the company’s charter, the term of office, rights and obligations of the Chairperson of the Board of members shall comply with relevant regulations.
  • The power and method to convene meetings the Board of members shall comply with the law.
  • A meeting of the Board of members shall be held when it is attended at least two thirds of the members. Unless otherwise prescribed by the company’s charter, each member shall have one vote with the equal value. The Board of members may ratify decisions by absentee voting.
  • A Resolution of the Board of members shall be ratified when it is approved by a majority of the attending members. Decisions on amendments to the company’s charter, restructuring of the company, transfer of part of or all of the company’s charter capital must be approved by at least three fourths of the attending members. The Resolution of the Board of members is effective from the day on which it is ratified or on the date written thereon, unless otherwise prescribed by the company’s charter.
  • Every meeting of the Board of members must be recorded in writing, audio recordings, or other electronic media. Contents of minutes of meetings of the Board of members shall comply with the law.

8. The company’s President

  • The company’s President is designated by the owner. The company’s President, on behalf of the company’s owner, shall perform rights and obligations of the company’s owner and the company, except for rights and obligations of the Director/General Director; take legal responsibility to the company’s owner for the fulfillment of rights and obligations in accordance with this Law, relevant regulations of law, and the company’s charter.
  • Rights, obligations, and working relationship between the company’s President and the company’s owner shall comply with the company’s charter, this Law, and relevant regulations of law.
  • A decision of the company’s President’s on performance of rights and obligations of the company’s owner is effective from the day on which it is ratified by the company’s owner, unless otherwise prescribed by the company’s charter.

9. Director/General Director

The Board of members or the company’s President shall designate or hire Director/General Director, the term of office of whom does not exceed 05 years, to administer the company’s everyday business operation. The Director/General Director is legally responsible to the Board of members or the company’s President for fulfillment of his/her rights and obligations. The Chairperson of the Board of members, other members 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 decisions of the Board of members or the company’s President;
  • Decide the issues related to the company’s everyday business operation;
  • Organize the implementation of the company’s business plans and investment plans;
  • Promulgate the company’s rules and regulations;
  • Designate, dismiss the company’s managers, except for those under the management of the Board of members or the company’s President;
  • Sign contracts on behalf of the company, except for those within the competence of the Chairperson of the Board of members or the company’s President;
  • Propose organizational structure plan;
  • Submit annual financial statements to the Board of members or the company’s President;
  • Propose plans for use of profits or loss settlement;
  • Hire employees;
  • Perform other rights and obligations prescribed in the company’s charter, employment contract between Director/General Director and the Chairperson of the Board of members or the company’s President.

The Director/General Director must:

  • Be legally competent and not be any of the persons limited by law;
  • Has qualifications and actual experience of the company’s administration, unless otherwise prescribed by the company’s charter.

10. Controllers

The company’s owner shall decide the number of controllers, designate controllers with terms of office not exceeding 05 years, and establishment of the Control Board. Controllers are legally responsible to the company’s owner for fulfillment of their rights and obligations. Controllers have the following rights and obligations:

  • Inspect the legitimacy, honesty, and cautiousness of the Board of members, the company’s President, and the Director/General Director during the performance of the owner’s rights and business administration;
  • Verify financial statements, business outcome reports, administration reports, and other reports before submitting them to the company’s owner or relevant regulatory bodies; submit verification reports to the company’s owner;
  • Propose solutions, organizational structure, and business administration to the company’s owner;
  • Examine every document of the company at the company’s headquarter, branch, or representative office. Member of the Board of members, the company’s President, Director/General Director, and other managers are obliged to provide sufficient and timely information about the performance of the owner’s rights and business operation at the request of Controllers;
  • Attend and discuss at meetings of the Board of members and other meetings of the company;

Perform other rights and obligations prescribed in the company’s charter or at the request, under decisions of the company’s owner.

Controllers must:

  • Be legally competent and is not any of the persons mimited by law;
  • Not be related persons of members of the Board of members, the company’s President, Director/General Director, and the person competent to directly designate Controllers;
  • Has qualifications in and experience of accounting, audit, or qualifications in and actual experience of the company’s business lines, or satisfy other standards and conditions prescribed in the company’s charter.
  • The company’s charter shall specify the contents and method of cooperation among Controllers.

11. Responsibilities of members of the Board of members, the company’s President, Director/General Director, and Controllers

  • Comply with law, the company’s charter, decisions of the company’s owner with regard to the given rights and obligations.
  • Perform rights and obligations in an honest, discreet manner to ensure the best interests of the company and the company’s owner.
  • Act in the best interest of the company and the company’s owner; do not use information, secrets, business opportunities of the company, or abuse the power, or use the company’s assets for self-seeking purposes or serving the interests of another entity.
  • Provide timely, sufficient, and accurate information for the company about the enterprises that they or their related persons own or have the controlling stake or shares. This Notice shall be put up at the company’s headquarter and branch(es).
  • Other rights and obligations prescribed by the law and the company’s charter.

12. Wages, salaries, and other benefits of managers and Controllers

  • Managers and Controllers shall receive wages, salaries, and other benefits according to the business outcome of the company.
  • The company’s owner shall decide the wages, salaries, and other benefits of members of the Board of members, the company’s President, and Controllers. The wages, salaries, and other benefits of managers and Controllers shall be included in operating expense as prescribed by regulations of law on taxation, relevant regulations of law, and recorded as a separate item in the annual financial statement.
  • Wages, salaries, and other benefits of Controllers may be directly paid by the company’s owner as prescribed by the company’s charter.

13. Organizational structure of single-member limited liability company under the ownership of an individual

  • A single-member limited liability company under the ownership of an individual shall has a the company’s President and a Director/General Director.
  • The company’s President may hire a Director/General Director or concurrently hold such position.
  • Rights and obligations of the Director/General Director shall be specified in the company’s charter and employment contract between the Director/General Director and the company’s President.

14. Contracts, transactions between the company and related persons

Unless otherwise prescribed by the company’s charter, the contracts and transactions between a single-member limited liability company under the ownership of an organization and the following persons must be considered and decided by the Board of members or the company’s President, the Director/General Director, and Controllers:

  • The company’s owner and related persons of the company’s owner;
  • Members of the Board of members, the Director/General Director, and Controllers;
  • Related persons of the persons mentioned in Point b of this Clause;
  • Managers of the company’s owner, persons to designate such managers;
  • Relevant persons of the persons mentioned in Point d of this Clause.

The person who concludes the contract must send a notification to the Board of members or the company’s President, the Director/General Director, and Controllers of the entities related to such contract/transaction The notification shall be enclosed with the draft contract or main contents of the transaction.

Unless otherwise prescribed by the company’s charter, the Board of members, the company’s President, and Controllers shall decide whether to accept the contract/transaction within 10 days from the day on which the notification is received under the majority rule. Each of the said people has a vote. Persons with related interest must not vote.

A contract/transaction mentioned above shall only be accepted when all of the conditions below are satisfied:

  • Parties to the contract/transaction are independent legal entities with separate interests, rights, obligations, and assets;
  • Prices in the contract/transaction are market prices at the time the contract is concluded or the transaction is made;
  • The company’s owner fulfills the obligations prescribed by law.

The contract/transaction made against the regulations and causes damage to the company shall be annulled and dealt with as prescribed by law. The person who concludes the contract and related persons of the parties concerned shall be jointly responsible for the damage inflicted and shall pay compensation for such damage, and return to the company the profits derived from such contract/transaction.

Every contract and transaction between a single-member limited liability company under the ownership of an individual with the company’s owner or related person of the company’s owner must be recorded in writing. Such records shall be kept separately as company’s documents.

15. Adjustment to charter capital

A single-member limited liability company shall adjusts its charter capital in the following cases:

  • Part of stakes in the company’s charter capital is returned, provided that the company has continued its business operation for more than 02 years from the business registration date, and that all debts and liabilities can be paid after the return;
  • Charter capital is not provided by the owner fully and punctually as prescribed by law.

Charter capital of a single-member limited liability company shall be increased when the company’s owner makes additional investment or raise additional capital from other persons. The owner shall decide the method and level of increase to charter capital.

If charter capital is increased by raising capital from other persons, the company must be converted into one of the following types of business entity:

  • A multi-member limited liability company; the company must register changes to business registration contents within 10 days from the completion of charter capital adjustment; or
  • A joint-stock company as prescribed by law.

 

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