Common deal structures | Vietnam | Global Private M&A Guide – Limited External Content | Baker McKenzie Resource Hub

(i) SMLLC

An SMLLC is owned by one organization or individual member (company owner), who is liable for the debts and liabilities of the enterprise to the extent of the amount of the charter capital of the enterprise. An SMLLC has the same legal status as an MMLLC and a JSC, but the company owner has more autonomy concerning decisions made about the enterprise. The company owner may appoint either a representative to be president, or more than one representative to create a board of management (BOM) (comprising three to seven persons), which will implement the company owner’s rights and obligations on its behalf.

In addition, there is no statutory term of office for the president. However, the statutory term of office for BOM members cannot exceed five years.

Similar to an MMLLC, an SMLLC must have a director or general director appointed or hired by the president or the BOM, who is responsible for the day-to-day operation of the enterprise and is usually the legal representative of the enterprise, although the charter may provide otherwise. An SMLLC is allowed to have several legal representatives, as long as one of them resides in Vietnam, and must authorize another person if they need to travel abroad. The president or the chairperson of the BOM will be the default legal representative if the charter is silent on that point.

The company owner must appoint controller(s) in a number at its discretion. Controllers bear responsibility for supervising the performance of the BOM (or the president) and the director (or general director), and carrying out other tasks assigned by the company owner. The controllers can have a term of office not exceeding five years.

A company owner must contribute capital in a full and timely manner. An SMLLC can decrease its charter capital in two cases:

• When the limited liability company returns part of its contributed charter capital to the limited liability company owner, as long as the limited liability company is continuously operating for more than two years from the date of enterprise registration and the limited liability company ensures that it is able to pay all debts and other liabilities after returning the capital to the company owner
• When the company owner fails to contribute the charter capital as committed

An SMLLC may increase its charter capital by way of additional investment from the company owner or by obtaining capital contributions from other persons. In the event that part of the charter capital is contributed by or transferred to another organization or individual, the enterprise must register to convert into an MMLLC or a JSC within 10 days of the date of complete transfer.

The company owner shall contribute the registered charter capital within 90 days from the issuance of the ERC. If the company owner does not fully contribute the registered charter capital, it must register for the decrease in charter capital within 30 days from the deadline of capital contribution and shall be liable for the financial obligations of the SMLLC to the extent of all assets owned by them for failing to contribute prior to the registration of the charter capital decrease. However, the deadline for capital contributions in the form of assets (such as land use rights and equipment) is extended until the completion of the transfer of the ownership of these assets into the legal entity.

(ii) MMLLC

An MMLLC is an enterprise that has more than one but no more than 50 members, which may be organizations, individuals or a combination of both. A member can transfer, dispose of or ask the enterprise to buy back its capital contribution portion in accordance with the Enterprise Law or as stipulated in the enterprise charter.

An MMLLC must have one director or general director of the company appointed by the BOM, who may or may not be a member of the enterprise. The general director is responsible for the day-to-day operation of the enterprise and can be appointed by the BOM as the legal representative of the company. Similar to an SMLLC, an MMLLC can have many legal representatives, as long as one of the legal representatives resides in Vietnam, and must authorize another person if they need to travel abroad. The BOM is the highest decision-making body of an MMLLC, and its members’ voting rights are allocated in proportion to their respective capital contribution. An MMLLC with more than 11 members must also establish a control committee.

(iii) JSC

A JSC is an enterprise whose charter capital is divided into shares held by three or more organizations or individuals. Shareholders are responsible for the debts and liabilities of the enterprise to the extent of the amount of their contributed capital. A JSC has the right to issue securities in order to raise capital, and it may list on a stock exchange if it satisfies the stock exchange’s requirements. A shareholder can transfer, dispose of or ask the enterprise to buy back its shares in accordance with the Enterprise Law or as stipulated in the enterprise charter.

Similar to an SMLLC and an MMLLC, a JSC can have many legal representatives as long as one of the legal representatives resides in Vietnam, and must authorize another person if they need to travel abroad. In cases where there is only one legal representative, the chairperson of the board of management or the (general) director shall be the legal representative of the JSC.

A JSC must have common shares and may have preferred shares and/or issue bonds.

A JSC has the right to select its organizational, managerial and operational structure in accordance with one of the two following methods (except where securities laws provide otherwise):

• General meeting of shareholders (GSM), the board of management, control committee and the (general) director. Where a JSC has fewer than 11 shareholders, and the shareholders are organizations holding less than 50% of the total company shares, there is no requirement for a control committee.
• GSM, board of management and (general) director. In this case, at least 20% of the members of the board of management must be independent and an internal auditing committee must be established directly under the board of management.