Business structure in Vietnam

General understanding of business structure in VietnamForms of business in VietnamDissolution of an enterpriseRe-structuring of a company in VietnamDefinition of an enterpriseCharacteristics of an enterpriseFormation of an enterprise

Minh Nguyen 7/20/2012 yiuyuiu 1 1 Topic 2 Business Structures Ha, Thi Thanh Binh (LLD) Outlines 2 • General understanding of business structures in Vietnam. • Forms of business in Vietnam. • Dissolution of an enterprise. • Re-structuring of a company in Vietnam. Ha, Thi Thanh Binh (LLD) General understanding of Business structures in Vietnam 3 • Definition of an enterprise. • Characteristics of an enterprise. • Formation of an enterprise. Ha, Thi Thanh Binh (LLD) Definition of an enterprise 4 • Enterprise means an economic organization that has its own name, assets, permanent transaction office, and has been lawfully registered for the purpose of conducting business. (Art 4.1 of the LOE). • Business means the continuous implementation of one, several or all of stages of an investment process, from the production to sale of products or provision of services on the market for profit purposes. Ha, Thi Thanh Binh (LLD) Characteristics of an enterprise 5 • has its own name. • has its own asset separated from other’s. • has a permanent registered office. • has to be established in accordance with the law. • carry out business for the purpose of making profits. Ha, Thi Thanh Binh (LLD) Formation of an enterprises • The right to set up a business • The procedures to set up a business • Business name Ha, Thi Thanh Binh (LLD) 6 Minh Nguyen 7/20/2012 yiuyuiu 2 The right to set up a business 7 • Founders and managers of an enterprise • Capital contributors to an enterprise Ha, Thi Thanh Binh (LLD) Founders and managers of an enterprise 8 • Founder means anyone who owns a private enterprise or who formulates, approves and signs the original charter of the company. • Manager means the owner or director of a private enterprise, general partner of a partnership, chairman of the members’ council, president of a company, member of the management board, director or general director or other important managerial positions provided for in the company’s charter. • Who? – Every individual and organization (having legal entity status) except those who are listed in Art 13.2 of the LOE. Ha, Thi Thanh Binh (LLD) Capital contributors to an enterprise 9 • Those who contribute capital to the registered (charter) capital of an enterprise. • Who? – Every individual and organization (having legal entity status) except those who are listed in Art 13.4 of the LOE. Ha, Thi Thanh Binh (LLD) Forms of capital contribution 10 • Vietnamese currency, • Freely convertible foreign currency, • Gold, • Value of land use rights, • Value of intellectual property, technology, technical know how, • Other assets as provided for in the charter of the company. Ha, Thi Thanh Binh (LLD) The procedures to set up a business 11 • Prepare and submit the business registration application dossier as required under the LOE to a competent business registration authority. • Business registration certificate to be issued within 10 days from the date of receiving sufficient documents. • Announcement of the establishment within 30 days from the date of receiving the business registration certificate as required in Art. 28 of the LOE. Ha, Thi Thanh Binh (LLD) Conditions for the grant of a business registration certificate 12 • Business lines to be registered are not prohibited; • The name of the proposed enterprise complies with the provisions of Art 31, 32, 33, 34 of the LOE; • The proposed enterprise has its business registered office in accordance with Art. 35 of the LOE; • Business registration dossier is sufficient as required by law • Business registration fee is fully paid. Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 3 Prohibited lines of business 13 - Trading in weapons, ammunition, military equipment, military items and specialist military technical equipment of the armed forces; - Trading in explosives, poisonous chemicals and radioactive substances; - Trading in drugs of addiction; - Prostitution, organizing prostitution services and trading in women and children; - Providing gambling services or operating gambling venues; - Trading in chemical substances of high toxicity. - Trading in any items which belong to the historical, cultural or museum heritage; - ….others provided in Art. 7 of Decree 102/2010/NĐ-CP. Ha, Thi Thanh Binh (LLD) Conditional lines of business 14 - In the form of a business license issued by the relevant authority body. - In the form of fulfillment of regulations (such as requirement on foods hygiene and safe, by means of regulations on fire prevention and fire-fighting ….(business conditions that do not require a license). - In the form of legal capital requirements. - In the form of practicing certificates. Ha, Thi Thanh Binh (LLD) Business name 15 • Functions • Requirements – Components (Art. 31) – Vietnamese and foreign name (Art. 33) – Prohibitions (Art. 32) – Identical and confused names (Art. 34) Ha, Thi Thanh Binh (LLD) Selected forms of business structure in Vietnam 16 • Private enterprise • Partnership • Company – One member limited liability company – Two or more member limited liability company – Joint stock company Ha, Thi Thanh Binh (LLD) Private Enterprise 17 • Definition • Characteristics • Management • Special rights of the owner Ha, Thi Thanh Binh (LLD) Definition 18 A private enterprise is an enterprise owned by one individual who shall be liable for all activities of the enterprise to the extent of all his or her assets. (Art.141 of the LOE). Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 4 Characteristics 19 - is an independent business, it has freedom of carrying on its business and it can conduct business autonomously. - is formed by an individual who is owner and manages the business. - Does not have legal entity status. - The owner shall be unlimited liable for all activities of the enterprise. Ha, Thi Thanh Binh (LLD) Management of enterprise 20 • The owner shall have – total discretion in making all business decisions; – total discretion in deciding on the use of profits after payment of taxes and performance of other financial obligations as stipulated by law. • The owner may manage and administer the business operation or employ other person to do so. • Where another person is employed as the director managing the enterprise, the owner must – declare this with the business registration body and – remain responsible for all business activities of the enterprise. Ha, Thi Thanh Binh (LLD) Special rights of owner of a private enterprise 21 - Lease of enterprise  A written report and a notarized copy of the lease contract must be submitted to the business registration body and the tax authorities. - Sale of private enterprise • No later than 15 days prior to the date of transferring the enterprise to the purchaser, the owner must provide written notice to the business registration body. • The purchaser and seller of an enterprise must comply with the provisions of the law. - Suspension of operation • A written notice must be submitted to the business registration body and the tax authority of the duration of such suspension no later than 15 days prior to suspension of the business operation of the enterprise. Ha, Thi Thanh Binh (LLD) PARTNERSHIP 22 • Definition • Characteristics • Management • Partners Ha, Thi Thanh Binh (LLD) Definition 23 According to Art 130 of the LOE, a partnership is a business in which: • There must be at least two unlimited liability partners doing business together under a common name. In addition to whom there may be limited liability partners (the literal translation is “capital contributing partners”) • Unlimited liability partners must be individuals who have professional qualifications and credibility and shall be liable for the obligations of the partnership to the extent of all their assets. • Limited liability partners shall only be liable for the debts of the partnership to the extent of the amount of the capital they have contributed to the partnership. Ha, Thi Thanh Binh (LLD) Characteristics 24 – There are two types of partnership. One is the partnership with all unlimited liability partners, the other is the partnership with both unlimited and limited liability partners. – It is compulsory that a partnership must have unlimited liability partners. A partnership may have limited liability partners. – Only unlimited liability partners shall be directly involved in the management of the partnership’s business operation, limited liability partners shall not be involved in the management of the partnership or conduct business activities in the name of the partnership. – Partnership has a legal status separated from its partners. – Partnership is not entitled to issue securities to the public. Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 5 Management 25 • Shall be agreed by unlimited liability partners in the charter of the partnership. • Unlimited liability partners shall have equal right upon making decisions on issues of management of the partnership unless otherwise provided for in the Charter. Ha, Thi Thanh Binh (LLD) Management Structure 26 • Partners’ Council • Director Ha, Thi Thanh Binh (LLD) The Partners’ Council 27 + comprise all unlimited liability partners. + is the highest decision-making body of the partnership. + make decisions on all activities of the partnership. + when voting, each unlimited liability partner shall have one vote unless otherwise provided for in the Charter. Ha, Thi Thanh Binh (LLD) The Partners’ Council (cont.) 28 + Resolutions on the following issues must be approved by at least three-fourth of all unlimited liability partners unless otherwise provided for by the charter: – Business plan of the partnership; – Admission of unlimited liability partners; – Dismissal of unlimited liability partners; – Amendments of and additions to the charter of the partnership; – Dissolution of the partnership, – Decision on the sell or purchase of assets valued at or more than the charter capital of the partnership… + Other matters shall be decided by at least two-third of all unlimited liability partners. Ha, Thi Thanh Binh (LLD) The Partners’ Council (cont.) 29 + All resolutions of the Partners’ Council must be recorded in a meeting minutes book. Ha, Thi Thanh Binh (LLD) A director of a partnership shall have the following duties: 30 + To delegate, regulate and coordinate the tasks of the unlimited liability partners; + To manage the business affairs of the partnership; + To perform other duties as authorized by unlimited liability partners. Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 6 Admission of partners 31 • A person shall be admitted as an unlimited liability partners or as a limited liability partner of the partnership upon agreement of the Partners’ Council. • An unlimited liability partner admitted to the partnership shall only be liable for the obligations of the partnership arising after such partner has been registered with the business registration body. Ha, Thi Thanh Binh (LLD) Termination of status as partner 32 • The status as an unlimited partner shall be terminated in the following circumstances: + Death or death declaration by a court; + Disappearance declaration by a court or reduction or loss of capacity for civil acts; + Voluntary withdrawal from the partnership; + Dismissal from the partnership. + Other cases provided for in the partnership’s charter • The status of a limited liability partner shall be terminated when: + Death or death declaration by a court; + Assignment of his or her share of equity to other; + Leave his or her share of equity at will to others. Ha, Thi Thanh Binh (LLD) Rights and obligations of partners 33 • Unlimited liability partners • Limited liability partners Ha, Thi Thanh Binh (LLD) Unlimited liability partners 34 - share managerial positions and inspect all activities of the partnership. - appoint one of themselves to the position of director. - on their own initiative, perform their duties in order to achieve the objectives of the partnership; - represent the partnership in negotiating and signing contracts; - represent the partnership before the law and before State bodies within the scope of their respective duties. Ha, Thi Thanh Binh (LLD) Unlimited liability partner (cont.) 35 • shall not concurrently act as unlimited liability partner of other partnerships or as the owner of private enterprise unless otherwise agreed by other unlimited liability partners; • shall not, on their own behalf or on behalf of a third party, conduct business activities in the same line of business as the partnership; • shall not, on behalf of the partnership, sign contracts or establish and conduct other transactions for their own benefit or for the benefit of other persons. • shall have other obligations as stipulated in the charter of the partnership. Ha, Thi Thanh Binh (LLD) Unlimited liability partners (Cont.)Unlimited liability partners (Cont.) 36 • Contribute in full their amount of capital to partnership as undertaken; • Accept liability for the obligations of the partnership to the extent of their own assets; • Bear losses in the event of failure of business operations in accordance with the principles stipulated in the charter of the partnership; • Act honestly and diligently for the lawful interests of the partnership when managing or conducting business on behalf of, or when representing the partnership; • Comply strictly with the internal regulations of the partnership; Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 7 Limited liability partners (Rights) 37 • Participate in discussions and vote on amendment of and addition to the rights and obligations of limited liability partners as stipulated in the charter of the partnership and on the reorganization and dissolution of the partnership; • Receive distribution of profits and distribution of residual values of assets upon dissolution of the partnership as stipulated in the charter of the partnership; • Assign their shares of equity in the partnership to others; • Be informed of the business operation and management of the partnership; sight the accounting books and other records of the partnership; • Other rights as provided for in the charter of the partnership. Ha, Thi Thanh Binh (LLD) Limited liability partners (Obligations) 38 • Contribute the amount of capital as undertaken and to be liable for the liabilities of the partnership to the extent of the amount of capital undertaken to contribute to the partnership. • Not to be involved in the management of the partnership or conduct business activities in the name of the partnership. • To comply strictly with the internal regulations and decisions of the partnership; • Other obligations as provided for in the charter of the partnership. Ha, Thi Thanh Binh (LLD) ONE- MEMBER LIMITED LIABILITY COMPANY 39 • Definition • Characteristics • Management • Owner of the company Ha, Thi Thanh Binh (LLD) Definition 40 A one member limited liability company is an enterprise owned by an organization or an individual (hereinafter referred to as company owner); the owner shall be liable for all debts and other property obligations of the enterprise within the amount of the charter capital of the enterprise. (Art. 63) Ha, Thi Thanh Binh (LLD) Characteristics 41 • is owned by either an organization or an individual • The owner of the company has limited liability. • is not entitled to issue shares. • shall have legal entity status from the date of issuance of the enterprise registration certificate. Ha, Thi Thanh Binh (LLD) Management 42 • One member limited liability owned by an organization • One member limited liability owned by an individual Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 8 One member limited liability owned by an organization 43 • The first model of management structure shall comprise the Member’s Council, the director (general director) and controller(s) • The second model of management structure shall comprise the president of the company, the director (general director) and controller(s). Ha, Thi Thanh Binh (LLD) One member limited liability owned by an individual 44 • President • Director Ha, Thi Thanh Binh (LLD) Rights of the company owner (Art. 64) 45 • To make decisions on the contents of the amendment of and addition to the charter of the company; • To make decisions on the organizational and management structure of the company, to appoint, remove or dismiss managerial personnel of the company. • To make decisions on adjustments of charter capital of the company; • To make decisions on investment projects valued at 50% or more of the total value of the assets recorded in the accounting books of the company; • To organize supervision and assessment of the business operation of the company; • To make decisions on the use of profits; • To make decisions on reorganization of the company… Ha, Thi Thanh Binh (LLD) Obligations of the company owner (Art. 65) 46 • To contribute capital in full and on time as registered. • To comply with the charter of the company; • To keep assets of the company and that of the owner separated. The owner of the company being an individual must separate between expenditures of himself or herself and that of the director if he or she acts as the director of the company; • To comply with the laws on contracts and relevant laws on any purchase, sale, borrowing, lending, leasing or other transactions between the company and the owner; • To perform other obligations in accordance with the law. Ha, Thi Thanh Binh (LLD) Restrictions on the rights of the company owners (Art. 66) 47 • Must not directly withdraw part or all of the capital already contributed to the company. • May only withdraw capital by way of assignment of part or all of the capital to other organizations and individuals. • Must not withdraw profits of the company in case the company has not paid in full all debts and other property obligations due and payable. Ha, Thi Thanh Binh (LLD) LIMITED LIABILITY COMPANY WITH TWO OR MORE MEMBERS 48 • Definition • Characteristics • Management • Members Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 9 Definition 49 A limited liability company is an enterprise which has two or more members contributing to its capital. A limited liability company has legal entity status. A member shall be liable for the debts and other property obligations of the enterprise within the amount of capital that it has undertaken to contribute to the enterprise. A limited liability company must not issue shares. Ha, Thi Thanh Binh (LLD) Characteristics 50 • The company has legal entity status. • A member may be an organization or an individual, the number of the members shall be at least two and shall not exceed fifty (50). • A member shall be liable for the debts and other property obligations of the company within the amount of capital that it has undertaken to contribute to the company (limited liability). • The transfer of capital contribution of each member may be conducted in accordance with Art. 44 of the LOE. • The company must not issue shares. Ha, Thi Thanh Binh (LLD) Management Structure 51 • Members’ Council • Director (General Director) • Controlling Board (if required) Ha, Thi Thanh Binh (LLD) Members’ Council 52 • Shall comprise all members. Where a member is an organization, such member shall appoint its representative to be on the Members’ Council. • Shall be the highest decision-making authority of the company. • Shall meet at least once a year. • The Members’ Council shall pass resolutions within its authority by way of voting at meetings or obtaining written opinions. Ha, Thi Thanh Binh (LLD) Members’ Council Meeting 53 • Conditions to conduct a meeting – The participation of members representing of at least 75% of the charter capital. – If the 1 st meeting fails, the 2 nd meeting must be held within 15 days and with the participation of members representing at least 50% of the charter capital. – If the 2 nd meeting fails, the 3 rd meeting must be held within 10 days regardless of the number of participating members. Ha, Thi Thanh Binh (LLD) Passing of Resolutions in the Members’ Council Meeting 54 • approved by the number of votes representing at least 75% of the capital of the attending members (the specific percentage shall be stipulated in the charter of the company) in respect of decisions such as those relating to the sale of assets valued at 50% or more of the total value of assets recorded in the accounting books of the company, or the smaller percentage as stipulated in the charter of the company; the amendment of and addition to the charter of the company, the re-organization or dissolution of the company . • approved by the number of votes representing at least 65% of the capital of the attending members in respect of decisions on other matters. The specific percentage shall be stipulated in the charter of the company. Ha, Thi Thanh Binh (LLD) Minh Nguyen 7/20/2012 yiuyuiu 10 Passing of resolutions by obtaining written opinions 55 • must be approved by members representing at least 75% of the charter capital. The specific percentage shall be stipulated in the charter of the company. Ha, Thi Thanh Binh (LLD) The Members’ Council’s rights and duties (Art. 47.2) 56 • Include but not limited to the following: – Decide on the development strategy and annual business plan; – Decide on the increase or decrease of the charter capital, time and methods for mobilizing capital; – Decide on method of investment and investment projects values at over 50% of total value assets recorded in the financial statement most recently published by the company or at a smaller ratio provided for in the company’s charter; – Elect, remove or dismiss the chairman of the Members’ Council – Decide to appoint, remove, dismiss, sign or terminate contracts with director or general director; – Decide on the management organizational structure of the company; – Decide on opening of subsidiary companies, branches and/or representative offices; – Decide on the company’s reorganization… Ha, Thi Thanh Binh (LLD) Chairman of the Members’ Council 57 • shall be elected by the Members’ Council. • may concurrently act as the director of the company. • His or her rights and duties are stipulated in Art 49.2 of the LOE. • The term of the chairman shall not exceed 5 years and may be re-elected for unlimited number of terms. Ha, Thi Thanh Binh (LLD) Director (General Director) 58 • is the person who manages the day-to-day business operation of the company • is responsible to the Members’ Council for the exercise of his or her rights and the performance of his or her obligations. • shall be the legal representative of the company if the charter of the company does not provide that the chairman of the Members’ Council is the legal representative of the company. • The director’s rights and duties are stipulated in Art 55.2 of the LOE. Ha, Thi Thanh Binh (LLD) Controlling Board 59 • A company having eleven or more members must set up a Controlling Board. • Rights, obligations, criteria, conditions and working rules of the Controlling Board and its head shall be provided for in the company’s charter. Ha, Thi Thanh Binh (LLD) Ways to become a company member 60 An organization or an individual may become a member of a two or more members limited liability company by one of the following ways: • Contribute capital to the company when the company is established. • Contribute capital to the company when the company admits new members. • Be assigned shares of equity (capital transfer) by members of the company. • Inherit shares of equity from members of the company… Ha, Thi Thanh Binh (LLD) [...]... meeting must be held within 20 days regardless of the voting shares represented by participating shareholders 79 Ha, Thi Thanh Binh (LLD) 80 Ha, Thi Thanh Binh (LLD) Passing of Resolutions in the Shareholders Meeting Passing of resolutions by obtaining written opinions • approved by at least 75 % of the total votes of all participating shareholders (the specific percentage shall be stipulated in the... not higher than the intended interest paid to bonds to be issued 75 76 Ha, Thi Thanh Binh (LLD) Ha, Thi Thanh Binh (LLD) Management • • • • Management General Meeting of Shareholders Board of Management Director (general director) Controlling Board (compulsory in joint stock companies of more than 11 shareholders being individuals or with a shareholder being an organization holding more than 50% of... Shareholders General Meeting Board of Management Controlling Board Director (GD) 77 Ha, Thi Thanh Binh (LLD) 78 Ha, Thi Thanh Binh (LLD) yiuyuiu 13 Minh Nguyen 7/20/2012 General Meeting of Shareholders Shareholders General Meeting • Shall include all shareholders which have the right to vote • Shall be the highest decision-making authority of a shareholding company • Ordinary (Annual) General Meeting of Shareholders... extraordinary General Meeting of Shareholders may be held in accordance with Art 97.3 of the LOE • Conditions to conduct a meeting – The participation of shareholders representing at least 65% of the voting shares – If the 1st meeting fails, the 2nd meeting must be held within 30 days and with the participation of shareholders representing at least 51% of the voting shares – If the 2nd meeting fails,... joint stock company The holder of an ordinary share is called an ordinary shareholder Ordinary shareholder shall have the rights as stipulated in Art 79 and obligations stipulated in Art 80 of the LOE 69 Ha, Thi Thanh Binh (LLD) Voting preference shareholder (cont.) Voting preference share • • • • 70 Ha, Thi Thanh Binh (LLD) Shall carry more vote than an ordinary share The numbers of votes per voting... the company, except for issues which fall within the authority of the General Meeting of Shareholders; • shall pass resolutions by way of voting at meetings, obtaining written opinions, or other ways as stipulated in the charter of the company 85 Ha, Thi Thanh Binh (LLD) 86 Ha, Thi Thanh Binh (LLD) Director Meetings • Each member shall have one vote • Meetings of the BOM shall be convened at any time... enterprise sends the dossier on the dissolution to the business registration office – The business registration office will withdraw the enterprise’s business certificate and erase the name of the enterprise in its business registration book – – – – • When – A company no longer has the minimum number of members as provided for by the Law on Enterprises, – The business registration certificate is withdrawn •... legality, truthfulness and carefulness of business management and direction, accounting and statistical work, and making of financial statements; – To verify business reports, annual and biannual financial statements of the company’s management of the BOM… • Voluntary dissolution • Compulsory dissolution 95 Ha, Thi Thanh Binh (LLD) yiuyuiu 96 Ha, Thi Thanh Binh (LLD) 16 Minh Nguyen 7/20/2012 Voluntary dissolution... of business and investment plans; – To organize the implementation of decisions adopted by the BOM; – To appoint, remove or dismiss managers of the Company – To recruit laborers and decide on their salary and allowance… 91 92 Ha, Thi Thanh Binh (LLD) Ha, Thi Thanh Binh (LLD) Members Controlling Board • • Members • Rights and duties • • • • • A joint stock company having over 11 shareholders being individuals... ordinary shares Owners of ordinary shares shall be called ordinary shareholders Joint stock company may have preference shares Owners of preference shares shall be called preference shareholder Preference shares may include the following: • Voting preference shares; • Dividend preference shares; • Redeemable preference shares; Other preference shares stipulated in the charter of the company • • • Ordinary . Minh Nguyen 7 /20 /20 12 yiuyuiu 1 1 Topic 2 Business Structures Ha, Thi Thanh Binh (LLD) Outlines 2 • General understanding of business structures in Vietnam. • Forms of business in Vietnam. •. Thanh Binh (LLD) Minh Nguyen 7 /20 /20 12 yiuyuiu 4 Characteristics 19 - is an independent business, it has freedom of carrying on its business and it can conduct business autonomously. - is formed. receiving the business registration certificate as required in Art. 28 of the LOE. Ha, Thi Thanh Binh (LLD) Conditions for the grant of a business registration certificate 12 • Business lines