Some confusion about members of a Vietnamese limited liability company
A Vietnamese limited liability company (công ty trách nhiệm hữu hạn) only has two levels of management (the Members’ Council and the General Director) as opposed to three levels of management in a joint stock company (Shareholders’ Meeting, the Board of Directors and the General Director). Therefore, there are some confusion in the Enterprise Law about members of a limited liability company. In particular,
Who is a member of the Members’ Council?- Article 47.1 of the Enterprise Law provides that Members’ Council of a limited liability company consists of “members” of the company. An institutional member of a limited liability appoints its authorised representatives to participate in the Members’ Council. Therefore, a member of the Members’ Council of a limited liability company should be members of the company who hold the ownership interest in the company and should not be the authorised representatives of an institutional member. Unfortunately, the Enterprise Law does not distinguish clearly between an institutional member and its authorised representatives in the operation of the Members’ Council. For example, Article 49.1 of the Enterprise Law provides that the Chairman of the Members’ Council is a natural person and is a member. If applying Article 49.1 of the Enterprise Law literally then a member being an institution cannot be the Chairman of the Members’ Council.
What are the duties of a member of the Members’ Council? Article 56.1 of the Enterprise Law requires a member of a limited liability company to have fiduciary-like obligations as regards to the company including (1) to exercise the delegated rights and perform the delegated duties honestly and diligently and to his/her best ability to assure the best lawful interests of the company; and (2) to be loyal to the interest of the company. It appears that Article 56.1 of the Enterprise Law considers a member of the Members’ Council equivalent to a member of the Board of Directors of a joint stock company. This is an inaccurate comparison. A member of a limited liability should have the rights and obligations equivalent to those of a shareholder (not a director) of a joint stock company.