Convening Members’ Council Meetings under Vietnamese Law

How is the Members’ Council meeting regulated under the law? What are the conditions and procedures for conducting a Members’ Council meeting?

1. Regulations on the Members’ Council

Article 55 of the Law on Enterprises 2020 provides on the Members’ Council as follows:

– The Members’ Council is the highest decision-making body of the company, comprising all members of the company who are individuals and authorized representatives of members that are organizations. The company charter regulates the meeting schedule of the Members’ Council, but it must meet at least once a year.

– The Members’ Council has the following rights and obligations:

+ Decide on the company’s development strategy and annual business plan;

+ Decide on increases or decreases in charter capital, decide on the time and method of raising additional capital; decide on bond issuance;

+ Decide on the company’s development investment projects; market development, marketing and technology transfer solutions;

+ Approve loan and lending contracts, asset sale contracts and other contracts provided in the company charter with a value of 50% or more of the total asset value recorded in the company’s most recently published financial statements, or another smaller ratio or value provided in the company charter;

+ Elect, dismiss and remove the Chairman of the Members’ Council; decide on the appointment, dismissal, removal, signing and termination of contracts for the Director or General Director, Chief Accountant, Controller and other managers provided in the company charter;

+ Decide on salaries, remuneration, bonuses and other benefits for the Chairman of the Members’ Council, the Director or General Director, the Chief Accountant and other managers provided in the company charter;

+ Approve annual financial statements, plans for profit use and distribution or loss handling plans of the company;

+ Decide on the company’s management organizational structure;

+ Decide on the establishment of subsidiaries, branches and representative offices;

+ Amend and supplement the company charter;

+ Decide on company reorganization;

+ Decide on company dissolution or request bankruptcy;

+ Other rights and obligations under this Law and the company charter.”

Accordingly, the Members’ Council is the highest decision-making body in an LLC comprising individual and organizational members of the company. The Members’ Council must meet at least once a year.

2. Convening the Members’ Council meeting

Article 57 of the Law on Enterprises 2020 provides on convening the Members’ Council meeting, specifically:

– The Members’ Council is convened at the request of the Chairman of the Members’ Council or at the request of a member or group of members as provided in Clauses 2 and 3, Article 49 of this Law. Where the Chairman of the Members’ Council fails to convene the Members’ Council at the request of a member or group of members within 15 days from the date of receiving the request, such member or group of members shall convene the Members’ Council. Reasonable costs for convening and conducting the Members’ Council meeting will be reimbursed by the company.

– The Chairman of the Members’ Council or the person convening the meeting prepares the meeting agenda, document contents, convenes, presides and acts as chair of the Members’ Council meeting. Members have the right to propose additional agenda items in writing. The proposal must include the following main contents:

+ Full name, contact address, nationality, legal document number of the individual for an individual member; name, enterprise code or legal document number, head office address for an organizational member; full name and signature of the proposing member or their authorized representative;

+ The contributed capital ratio, number and issuance date of the contributed capital certificate;

+ The proposed content to be added to the meeting agenda;

+ Reasons for the proposal.

– The Chairman of the Members’ Council or the person convening the meeting must accept the proposal and add it to the Members’ Council meeting agenda if the proposal contains all required contents under Clause 2 of this Article and is sent to the company’s head office no later than 01 working day before the Members’ Council meeting date; where the proposal is presented immediately before the meeting begins, the proposal is accepted if a majority of the attending members agree.

– The meeting invitation notice for the Members’ Council may be sent by paper invitation, telephone, fax, electronic means or other methods provided in the company charter and sent directly to each member of the Members’ Council. The invitation notice must clearly state the time, location and agenda of the meeting.

– The agenda and meeting documents must be sent to company members before the meeting. Documents used in the meeting relating to decisions on amending and supplementing the company charter, approving the company’s development strategy, approving annual financial statements, reorganization or dissolution of the company must be sent to members no later than 07 working days before the meeting date. The time limit for sending other documents is provided in the company charter.

– Where the company charter does not provide, the request to convene the Members’ Council meeting under Clause 1 of this Article must be in writing and include the following main contents:

+ Full name, contact address, nationality, legal document number of the individual for an individual member; name, enterprise code or legal document number, head office address for an organizational member; the contributed capital ratio, number and issuance date of the contributed capital certificate of each requesting member;

+ Reasons for requesting the Members’ Council meeting and the issues to be resolved;

+ The expected meeting agenda;

+ Full name and signature of each requesting member or their authorized representative.

– Where the request to convene the Members’ Council meeting does not contain all required contents under Clause 6 of this Article, the Chairman of the Members’ Council must notify in writing of the non-convening of the Members’ Council meeting to the relevant members or group of members within 07 working days from the date of receiving the request. In other cases, the Chairman of the Members’ Council must convene the Members’ Council meeting within 15 days from the date of receiving the request.

– Where the Chairman of the Members’ Council fails to convene the Members’ Council meeting under Clause 7 of this Article, he/she is personally liable for damages to the company and the relevant company members.

Accordingly, the Members’ Council meeting is convened at the request of the Chairman of the Members’ Council or at the request of a member or group of company members. Reasonable costs for convening and conducting the Members’ Council meeting will be reimbursed by the company. The meeting invitation notice will be sent to each member of the Members’ Council. The invitation notice must clearly state the time, location and agenda of the meeting.

3. What are the conditions and procedures for conducting the Members’ Council meeting?

Article 58 of the Law on Enterprises 2020 provides on the conditions and procedures for conducting the Members’ Council meeting as follows:

– The Members’ Council meeting is conducted when attending members own 65% or more of the charter capital; the specific ratio is provided in the company charter.

– Where the first Members’ Council meeting fails to meet the conditions in Clause 1 of this Article and the company charter provides otherwise, convening the Members’ Council meeting is carried out as follows:

+ The second meeting invitation notice must be sent within 15 days from the intended date of the first meeting. The second Members’ Council meeting is conducted when attending members own 50% or more of the charter capital;

+ Where the second Members’ Council meeting fails to meet the conditions in point a of this Clause, the third meeting invitation notice must be sent within 10 days from the intended date of the second meeting. The third Members’ Council meeting is conducted regardless of the number of attending members and the charter capital represented by the attending members.

– Members and authorized representatives of members must attend and vote at the Members’ Council meeting. The procedures for conducting the Members’ Council meeting and the form of voting are provided in the company charter.

– Where a meeting meeting the conditions in this Article fails to complete the agenda within the expected period, it may be extended but not beyond 30 days from the opening date of that meeting.

Accordingly, in your case, the company proceeding with the meeting with only 50% of members attending cannot be said to be non-compliant with the law. Because the law does not look at the number of attending members but at the percentage of charter capital. That is, if those 50% of attending members own 65% or more of the charter capital, the company conducting the Members’ Council meeting is reasonable, grounded in Clause 1, Article 58 of the Law on Enterprises 2020.