Multiple-member limited liability company is a popular type of enterprise chosen by foreign investor when make investment Vietnam in the form of establishment of a business organization. Accordingly, foreign investors should comprehend the provisions of the law on the organizational structure of a multiple-member limited liability company to facilitate the process of enterprise management.
Under the Article 54 of the Law on Enterprise, the structure of multiple-member limited liability company could be demonstrated as the following diagram:
According to the diagram:
1. Board of Members
The Board of Members is the supreme governing body of the company, consists of all members that are individuals and authorized representatives of members that are organizations. The company’s charter shall specify the frequency of meetings of the Board of Members but at least one meeting shall be held per year.
The Board of Members has the rights to:[1]
- Participate in meetings of the Board of Members; discuss, propose, vote on the issues within the jurisdiction of the Board of Members;
- Have a number of votes that are proportional to the member’s holding, unless otherwise provided for by law;
- Receive profit in proportion to the member’s holding after the company has fully paid taxes and fulfilled other financial obligations prescribed by law;
- Receive part of the remaining assets in proportion to the member’s holding when the company is dissolved or goes bankrupt;
- Be given priority to contribute more capital when the company increases its charter capital;
- Transfer, give away or otherwise dispose of the member’s own stake in accordance with regulations of law and the company’s charter;
- File lawsuits by themselves or in their own name of in the company’s name against the President of the Board of Members, the Chief Executive Officer, other executives, legal representatives as prescribed by law; and
- Other rights prescribed by this Law and the company’s charter.
2. Chairperson of the Board of Members
The Board of Members shall elect a member as the Chairperson, who may concurrently hold the position of Chief Executive Officer of the company.[2] The term of office of the President of the Board of Members shall be specified in the company’s charter bust must not exceed 05 years and has no term limit.[3]
The company must have at least one legal representative who holds one of the titles of Chairperson of the Board of Members, Chief Executive Officer. In case the company’s charter does not specify for it, the Chairperson of the Board of Members is the legal representative of the company.
The Chairperson of the Board of Members has the following rights and obligations[4]:
- Plan the activities of the Board of Members;
- Draw up agenda and prepare documents for meetings or surveys of the Board of Members;
- Convene and chair meetings of the Board of Members or organize surveys of the Board of Members;
- Supervise or organize supervision of the implementation of resolutions and decisions of the Board of Members;
- Sign resolutions and decisions of the Board of Members on its behalf;
- Other rights and obligations prescribed by Law and the company’s charter.
3. Chief Executive Officer
The Chief Executive Officeris the person who manages daily business operation and is responsible to the Board of Members for his/her performance[5].
The Chief Executive Officer has the following rights and obligations:[6]
- Organize the implementation of resolutions and decisions of the Board of Members;
- Decide everyday operating issues of the company;
- Organize implementation of the company’s busines plans and investment plans;
- Issue the company’s rules and regulations unless otherwise prescribed by the company’s charter;
- Designate, dismiss the company’s executives, except those within jurisdiction of the Board of Members;
- Enter into contracts on behalf of the company, except those within jurisdiction of the President of the Board of Members;
- Propose the company’s organizational structure;
- Submit annual financial statements to the Board of Members;
- Propose plans for use and distribution of profits or settlement of business losses;
- Recruit employees; and
- Other rights and obligations specified in the company’s charter, resolution and decisions of the Board of Members, and his/her employment contract.
4. Board of Supervisors
The Board of Supervisors shall have 1 – 5 Controllers. The term of office of a controller shall not exceed 05 years and without term limit. In case the Board of Supervisors only has 01 controller, he/she shall be the Chief Controller and shall satisfy corresponding conditions.[7]
The Board of Supervisors shall have following rights and obligations:[8]
- Supervise the Board of Members and the Chief Executive Officer managing the company;
- Inspect the rationality, legitimacy, truthfulness and prudency in business administration; systematic organization, uniformity and appropriateness of accounting works, statistics and preparation of financial statements;
- Validate the adequacy, legitimacy and truthfulness of the income statements, annual and biannual financial statements, reports on performance of the Board of Directors; submit validation reports at the annual General Meeting of Board of Members. Review contracts and transactions with related persons subject to approval by the Board of Members and offer recommendations;
- Review, inspect and evaluate the effectiveness of the internal control, internal audit, risk management and early warning systems of the company;
- Inspect accounting books, accounting records, other documents of the company, the company’s administration where necessary, under resolutions of the Board of Members;
- When requested by Member(s), the Board of Supervisors shall carry out an inspection within 07 working days from the day on which the request is received. Within 15 days after the end of the inspection, the Board of Supervisors shall submit a report to the Board of Members. The inspection must not obstruct normal operation of the Board of Members or interrupt the company’s business operation;
- Propose changes or improvements to the company’s organizational structure and administration to the Board of Members;
- Participate in and discuss at the meetings of the Board of Members and other meetings of the company;
- Employ independent counsels and internal audit unit of the company to perform their tasks; and
- Other rights and obligations prescribed by this Law, the company’s charter and resolution of the Board of Members.
[1] Law on Enterprise 2020, Article 49.1
[2] Law on Enterprise 2020, Article 56.1
[3] Law on Enterprise 2020, Article 56.3
[4] Law on Enterprise 2020, Article 56.2
[5] Law on Enterprise 2020, Article 63.1
[6] Law on Enterprise 2020, Article 63.2
[7] Law on Enterprise 2020, Article 65.1
[8] Law on Enterprise 2020, Article 170
