A Limited Liability Company in Vietnam (LLC)
15 November 2019
In Vietnam A Limited Liability Company (LLC) is a business entity with 1 to 50 members. This type of entity is best suited to small, medium sized businesses, coporate structure is simple.
Unlike a Joint-Stock Company, a Limited Liability company doesn’t issue shares. However, it allows members to have different capital contributions , giving members similar rights and responsibilities to shareholders.
Capital contributed Members are only responsible for debts and other financial duties within his/her amount of contributed capital. This is an advantage of the LLC, it ensures safe to all members
A Limited Liability Company is established through the contribution of capital from founders. The liability of the founders is restricted to the amount of capital recorded within the company’s charter.
A Limited Liability Company must obtain a licence for the areas of activity it conducts business. The licences can be obtained either prior or after the registration of the company.
All capital contribution within the LLC must be made within 90 days after receiving the business registration certificate.
Depending on the industry, a LLC can be a wholly foreign owned enterprise (WFOE) or a partially foreign owned venture. Every LLC in Vietnam must have one legal representative residing in the country.
Charter capital of a company is the total capital contributed or committed to contribute by members or shareholders in a given period and recorded in the company’s charter. The law does not specify the minimum or maximum amount of charter capital of a company.
No need to prove charter capital. When establishing a company or contributing capital to a company, it is not necessary to prove the charter capital in a bank account.
What assets can be contributed as capital?
According to Article 35 of the latest 2014 Law on Enterprises:
- Contributed assets may be Vietnam dong (VND), freely convertible foreign currencies, gold, land using value, intellectual property rights, technology, technical secret and other assets that are denominated in Vietnam Dong.
- Intellectual property rights used to contribute capital include: copyright, rights related to copyright, industrial property rights, rights to plant varieties and other intellectual property rights as prescribed by the law on intellectual property. Only individuals and organizations that are lawful owners of the above rights may use such assets to contribute capital.
Two types of Limited Liability Companies in Vietnam
There are two types of Limited Liability Companies in Vietnam, single-member or multi-member. A single-member LLC can be owned by an organization or an individual. A multi-member LLC is made up of no more than 50 members or organizations.
Single-member limited liability company
- Corporate structure consisting of only one member
- The owner of a single-member LLC has the ultimate authority on all business operations
- Owner is only liable within the enterprise’s charter capital
Within a Limited Liability Company, all members have to contribute capital in full and on time.
- All members are responsible for debts and other liabilities of the company to the extent of the capital contributed
- Purchase and transfer of capital between members are strictly regulated by law
- Managers can easily control the capital contributed by members
- Outsiders entering the company is limited
Corporate structure of a limited liability company
Limited Liability Company corporate structure is made up of a Member’s Council, chairman of member’s council a General Director and an Inspection Committee (for enterprises with more than 11 founders). In a multi-member LLC, each member is part of and participates in the Member’s Council, or appoint representatives to manage their investment (if they are organizations).
The member’s council is the highest decision-making body and is formed by the founders. The Members’ Council elects a Chairman to lead and organise the work of the council. The Chairman of the Members’ Council must be a member or authorised representative of a corporate member. Unlike the General Director, the Chairman of the Members’ Council does not have to reside in Vietnam.
Director / General director
The Director is responsible for managing the day to day activities of the company. This role can be allocated to a member. This position can also be outsourced.
If the director is a foreign citizen, he or she requires a work permit for which he or she needs to have at least 3 years’ experience in a managing role.
The Inspection Committee is the main supervisory board of the management structure. For enterprises with less than 11 members, there is no need to allocate an Inspection Committee.
In the event of adding new members to an already established Limited Liability Company, the existing founders must redefine the agreement of distribution of units (or ownership percentage) as LLCs are not able to exchange or issue shares.
There are several options to add new members to an existing Limited Liability Company:
The first option is to issue new units which will increase the total capital of the company; which will then require a re-definement of structural and/or procedural rules.
The second option is for the existing owners to each transfer a portion of their units to the new member.
Another option is for one member to sell their unit or part of it to a non-member. However, this option is limited as the other members have a preemption right to the unit to be sold. Assignment of units or part of it by way of gifts is also possible.
If the recipient of the gift is a family member, such as spouse, parent, child, etc. the recipient will automatically become the member of the company. In other cases the Members’ Council must approve the gift.
The addition of a new member is entirely dependent on the existing operating agreement and decisions of the Member’s Council.
Find out more about common tyes of a foreign entity in Vietnam .