How is a single-member limited liability company organized and managed?

Can anyone establish and manage a business in Vietnam?

Pursuant to the provisions of Article 17 of the Law on Enterprises 2020 on the right to establish, contribute capital, buy shares, purchase capital contributions and manage enterprises, as follows:

“1. Organizations and individuals have the right to establish and manage enterprises in Vietnam according to the provisions of this Law, except for the cases specified in Clause 2 of this Article.

2. The following organizations and individuals do not have the right to establish and manage businesses in Vietnam:

a) State agencies and units of the people’s armed forces use state assets to establish business enterprises to make private profits for their agencies and units;

b) Cadres, civil servants and public employees according to the provisions of the Law on Cadres and Civil Servants and the Law on Public Employees;

c) Officers, non-commissioned officers, professional soldiers, workers, and defense officials in agencies and units of the Vietnam People’s Army; officers, professional non-commissioned officers, and police workers in agencies and units of the Vietnam People’s Police, except those appointed as authorized representatives to manage the State’s capital contribution in enterprises or manage state-owned enterprises;

d) Leading and professional managers in state-owned enterprises as prescribed in Point a, Clause 1, Article 88 of this Law, except those appointed as authorized representatives to manage the State’s capital contribution in other enterprises;

d) Minors; people with limited civil act capacity; people who have lost their civil act capacity; people with difficulty in cognition and behavior control; organizations without legal status;

e) People who are being prosecuted for criminal liability, detained, are serving prison sentences, are serving administrative measures at compulsory drug treatment facilities, compulsory education establishments or are banned by the Court from holding certain positions, practicing professions or doing certain jobs; Other cases according to the provisions of the Bankruptcy Law and the Law on Prevention and Combat of Corruption.

If the Business Registration Authority requests, the person registering to establish a business must submit a criminal record card to the Business Registration Authority;

g) Organizations are commercial legal entities banned from doing business and operating in certain fields according to the provisions of the Penal Code.

The Enterprise Law allows individuals and organizations the right to establish businesses in Vietnam. These entities have the right to participate in corporate legal relations and have equal rights and obligations recognized in the law.

However, not everyone is allowed to establish and manage an Enterprise in Vietnam because the law also limits the right to establish and manage an enterprise in some specific cases as stated to ensure the interests of the Enterprise as well as other benefits when participating in corporate legal relations.

What conditions are required for the owner of a single-member limited liability company?

Pursuant to the provisions of Clause 25, Article 4 of the Law on Enterprises 2020:“A person who establishes an enterprise is an individual or organization that establishes or contributes capital to establish an enterprise.”

At clause 24 Article 4 of the Law on Enterprises 2020: “Enterprise managers are private enterprise managers and company managers, including private enterprise owners, partners, Chairman of the Board of Members, members of the Board of Members, Company President, Chairman of the Board of Directors, members of the Board of Directors, Director or General Director and individuals holding other management positions as prescribed in the company Charter.”

And in Clause 1, Article 74 of the Law on Enterprises 2020,  “A one-member limited liability company is an enterprise owned by an organization or an individual (hereinafter referred to as the company owner). The company owner is responsible for the debts and other property obligations of the company within the scope of the company’s charter capital.”

Thus, the owner of a one-member limited liability company must meet the above conditions, stipulated in Article 17 of the Law on Enterprises 2020 on the rights to establish, contribute capital, buy shares, buy capital contributions and manage businesses, as well as specific regulations on single-member limited liability companies.

What is the management model of a single-member limited liability company owned by an organization?

Article 79 of the Law on Enterprises 2020 stipulates that a single-member limited liability company owned by an organization is managed and operates according to one of the following two models:

– Company President, Director or General Director;

– Board of members, Director or General Director.

For companies whose owners are state-owned enterprises according to the provisions of the Enterprise Law, a Control Board must be established; Other cases are decided by the company.

The organizational structure, working regime, standards, conditions, dismissal, dismissal, rights, obligations and responsibilities of the Supervisory Board and Controllers are implemented accordingly in accordance with the provisions of the Law.

The company must have at least one legal representative who holds one of the following positions: Chairman of the Board of Members, Company President or Director or General Director.

In cases where the company charter does not stipulate, the Chairman of the Board of Members or the President of the company is the legal representative of the company. If the company charter does not stipulate otherwise, the organizational structure, operations, functions, rights and obligations of the Board of members, company chairman, director or general director shall comply with regulations.

The organizational and management structure of a single-member limited liability company, whether it is an organization or an individual, has different regulations to suit each type of entity. This meets the needs of business owners and ensures the operation of the organization when becoming the owner of a business. Thanks to that, the organization can both exercise its rights and ensure compliance with the principles of the law.