Limited Liability Company
A limited liability company (LLC) is an enterprise that has legal person status, starting from the date of issuance of its business registration certificate. As such, the owners of the LLC and the LLC itself are separate legal entities: in a court of law, the company is a legal person and its owners are natural persons, with rights and obligations in respect of their ownership of the enterprise.
Owners of the LLC are referred to as members and they can be both natural and legal persons. Each company has its own charter and board of directors (known as Board of Members, BOM). As a legal entity, it has the right to establish unlimited number of business locations, branches and representative offices domestically or abroad, but one of its biggest advantages is the responsibility of owners for the debts and liabilities of the company limited to the extent of the amount of capital that each member has contributed or committed to contribute to the company. In practice, this means that members of the LLC can only lose their investment and not more. However, unlike Joint Stock Company (or shareholding company), an LLC cannot issue shares.
There are two types of limited liability company in Vietnam:
- Single Member LLC – has only one member
- Multi Member LLC – has two or more members (limited to 50 legal and/or natural persons)
Single Member LLC
As the name implies, a single member LLC has only one member (company owner) who is also liable for the debts and liabilities of the company to the extent of their invested capital. The owner may and may not appoint representatives to be a president and create a BOM – creation of BOM is purely voluntary. However, if assigned, at least two thirds of its members must be present at the board meetings where resolutions are adopted when they are approved by more than a half of the number of attending representatives.
Structure and Control
The owner appointed president or BOM has obligation to appoint a (general) director who oversees day-to-day operation of the company (unless stated otherwise in the charter). The director’s and BOM’s performance is subsequently supervised by one to three controllers appointed by the owner. Apart from their monitoring role, they may also carry out other tasks as assigned by the owner.
The company owner is responsible for full capital contribution in a timely manner. During its life, the Single Member LLC cannot reduce charter capital, only increase it by way of additional investment by the owner or other party. Should the additional capital be contributed by another individual or organisation, the company effectively becomes a Multiple Member LLC and must register its status accordingly within 10 days from the date of transfer.
Multiple Member LLC
Up to 50 individuals or organisations can become members comprising a Multi Member LLC.
Rights of a Multiple Member LLC include but are not limited to the following:
- Attend meetings of BOM
- Cast votes in a number that is proportionate to its capital contribution
- Be distributed shares and profits proportional to its capital contribution
- Be given priority in contributing additional capital
Additionally, the Enterprise Law also enables members to transfer, dispose or sell their capital contribution portion back to the company.
Structure and Control
The highest decision making body of a Multiple Member LLC is the BOM, the members of which are appointed in regard to the amount of their invested capital. Once the board exceeds 11 members, a Control Committee must be established to oversee BOM’s activity.
Meetings undertaken by the BOM can be called by either the chairperson or a member(s) possessing more than 10% of the overall capital. Voting make take a form of normal votes, written options, electronic means and other methods and the Enterprise Law prescribes that a resolution shall be adopted upon approval of members representing over 65% of the capital.
Similarly as in the case of a Single Member LLC, the BOM has to appoint a general director who may or may not be the company’s member. Director oversees day-to-day operations and is usually the legal representative of the company.