Rights and Obligations of the Owner of a Single-Member Limited Liability Company

What is a single-member limited liability company? What rights and obligations does the company owner have?

1. What is asingle-member limited liabilitycompany?

Article 74 of the Law on Enterprises 2020 provides on single-member limited liability companies as follows:

“Article 74. Single-member limited liability companies

1. A single-member limited liability company is an enterprise owned by one organization or one individual (hereinafter referred to as the company owner). The company owner is liable for the company’s debts and other asset obligations within the charter capital of the company.

2. A single-member limited liability company has legal person status from the date it is granted the Enterprise Registration Certificate.

3. A single-member limited liability company may not issue shares, except for conversion into a joint stock company.

4. A single-member limited liability company may issue bonds as prescribed by this Law and other relevant laws; private placement of bonds shall follow Articles 128 and 129 of this Law.”

Accordingly, a single-member LLC is an enterprise owned by one organization or one individual, liable for the company’s debts and other asset obligations within the charter capital of the company. A single-member LLC may issue bonds but may not issue shares.

2. How is capital contribution to establish a single-member LLC regulated?

Capital contribution to establish a single-member LLC is regulated in Article 75 of the Law on Enterprises 2020, specifically:

“Article 75. Capital contribution to establish a company

1. The charter capital of a single-member limited liability company upon enterprise registration is the total value of assets committed by the company owner and recorded in the company charter.

2. The company owner must fully contribute the committed assets of the correct type within 90 days from the date of issuance of the Enterprise Registration Certificate, excluding the time for transporting and importing contributed assets and carrying out administrative procedures to transfer asset ownership. Within this period, the company owner has rights and obligations corresponding to the committed contributed capital.

3. Where charter capital is not fully contributed within the time limit prescribed in Clause 2 of this Article, the company owner must register to change the charter capital to the value of the actually contributed capital within 30 days from the last day for full contribution of charter capital. In this case, the owner is liable corresponding to the committed contributed capital for the company’s financial obligations arising during the period before the last day the company registers the change of charter capital as prescribed in this Clause.

4. The company owner is liable with all of their assets for the company’s financial obligations and damages arising from failure to contribute, insufficient contribution, or late contribution of charter capital as prescribed in this Article.”

Accordingly, the charter capital of a single-member LLC is the total value of assets committed by the company owner and recorded in the company charter upon enterprise registration. Within 90 days from the date of issuance of the Enterprise Registration Certificate, the company owner must fully contribute the committed assets of the correct type.

3. What rights and obligations does the company owner have?

The rights and obligations of the owner of a single-member limited liability company are regulated in Article 76 and Article 77 of the Law on Enterprises 2020, specifically:

The company owner’s rights include:

– A company owner that is an organization has the following rights:

– Deciding the contents of the company charter and amending and supplementing the company charter;

– Deciding the company’s development strategy and annual business plan;

– Deciding the company’s management organizational structure; appointing, relieving and dismissing managers and Controllers of the company;

– Deciding development investment projects;

– Deciding market development, marketing and technology solutions;

– Approving loan, lending, asset sale contracts and other contracts prescribed by the company charter with a value of 50% or more of the total asset value recorded in the company’s most recent financial report, or another smaller ratio or value prescribed by the company charter;

– Approving the company’s financial reports;

– Deciding to increase the company’s charter capital; transferring part or all of the company’s charter capital to other organizations or individuals; deciding to issue bonds;

– Deciding to establish subsidiaries and contribute capital to other companies;

– Organizing supervision and evaluation of the company’s business operations;

– Deciding the use of profits after the company has fulfilled tax obligations and other financial obligations;

– Deciding to reorganize, dissolve and request bankruptcy of the company;

– Recovering the entire asset value of the company after the company completes dissolution or bankruptcy;

– Other rights as prescribed by this Law and the company charter.

– A company owner that is an individual has the rights prescribed in Points a, h, l, m, n and o of Clause 1 of this Article; deciding investment, business and internal administration of the company, unless the company charter has other provisions.

The company owner’s obligations include:

– Fully and timely contributing the company’s charter capital.

– Complying with the company charter.

– Identifying and separating the assets of the company owner from the assets of the company. A company owner that is an individual must separate their personal and family expenditures from those of the Company President, Director or General Director.

– Complying with laws on contracts and other relevant laws in purchases, sales, borrowing, lending, leasing, contracts and other transactions between the company and the company owner.

– The company owner may only withdraw capital by transferring part or all of the charter capital to another organization or individual; where part or all of the contributed charter capital is withdrawn from the company in another form, the company owner and the relevant individuals and organizations are jointly liable for the company’s debts and other asset obligations.

– The company owner may not withdraw profits when the company has not fully paid its due debts and other asset obligations.

– Other obligations as prescribed by this Law and the company charter.

ANT Legal