Partnerships in Vietnam

You want to learn more about Partnerships - one of the most popular types of enterprise in Vietnam?

1.      What is Partnerships?

According to Article 177 Law on Enterprises 2020, Partnerships is a enterprise in which:

- There are least 02 partners that are joint owners of the company and do business under the same name (hereinafter referred to as “general partner”). There can be limited partners in addition to general partners

- A partnership has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued 

2.      Partners of Partnerships

2.1. General Partners

A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets.

-        Rights of general partners (Article 181.1 Law on Eterprises 2020):

·        a) Participate in meetings, discuss and vote on the partnership’s issues; each general partner shall have one vote or a specific number of votes specified in the partnership’s charter;

·        b) Do business in the partnership’s business lines on its behalf; negotiate and enter into contracts, transactions or agreements under conditions that the partner believes to be most beneficial to the partnership;

·        c) Use the partnership’s assets to do business in its business lines. In case a general partner advances money to do business on behalf of the partnership, he/she is entitled to request the partnership to reimburse the principal and interest thereon at market rate;

·        d) Request the partnership to pay compensation for damage that is not on account of that partner.

·        dd) Request the partnership and other general partners to provide information about the partnership’s business performance; inspect the partnership’s assets, account records and other documents where necessary;  

·        e) Receive distributed profits in proportion to his/her stake or as agreed;

·        g) Receive the remaining assets in proportion to his/her stake upon the partnership’s dissolution or bankruptcy unless another ratio is specified in the charter;

·        h) When a general partner dies, his/her heir shall receive a value of assets minus the partner’s debts and other liabilities. The heir may become a general partner if accepted by the Board of Partners;

·        i) Other rights prescribed by this Law and the company's charter.

-        Obligations of general partners (Article 181.2 Law on Eterprises 2020):

·        a) Manage and do business in an honest and prudent manner to ensure the partnership’s lawful and best interests;

·        b) Manage and do business in accordance with law, the charter, resolutions and decisions of the Board of Partners; pay compensation for the damage caused by his/her violations of these;

·        c) Do not use the partnership’s assets for personal gain or to serve the interests of any other organization or individual;

·        d) Return to the partnership the money or assets that he/she received when doing business in his/her own name, in the partnership’s or another person’s name and has not returned to the partnership and pay for any damage caused by this action;  

·        dd) Jointly pay the partnership’s remaining debts (if any) after all of the partnership’s assets are used to pay them;

·        e) Incur the loss that is proportional to his/her stake or as agreed in the charter in case the partnership makes a loss;

·        g) Submit monthly written reports on his/her performance to the partnership; provide information on his/her performance for other partners on request;

·        h) Other obligations prescribed by Law and the charter.

-        Limitations of general parters (Article 181.2 Law on Eterprises 2020):

1. A general partner must not be the owner of a sole proprietorship; must not be a general partner of another partnership unless it is accepted by the other general partners.

2. A general partner must not, in their own names or others’ names, do business in the same busines lines as those of the partnership for personal gain or to serve the interests of another organization or individual.

3. A general partner must not transfer part or all of his/her stake in the company to another organization or individual unless it is accepted by the other general partners.

2.2. Limited partners

A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.

- Rights of limited partners (Article 187.1 Law on Enterprises 2020):

a) Participate in meetings, discuss and vote at the meetings of the Board of Partners on revisions to the charter, changes in rights and obligations of limited partners, reorganization and dissolution of the company and other contents of the charter directly affecting their rights and obligations;

b) Receive distributed profits in proportion to their holdings;

c) Be provided with the partnership’s annual financial statements; request the President of the Board of Partners and general partners to fully and accurately provide information about the partnership’s business performance; examine accounting books, records, transactions and other documents of the company;

d) Transfer their stakes to other persons;

dd) Do business within the partnership’s business lines in their own names in other persons’ names;

e) Leave as inheritance, give away, pledge or otherwise dispose of their stakes in accordance with regulations of law and the charter. In case a limited partner dies, his/her heir shall be a new limited partner;

g) Receive part of the partnership’s remaining assets in proportion to their holdings in case the partnership is dissolved or goes bankrupt;

h) Other rights prescribed by Law and the company's charter.

- Obligations of limited partners (Article 187.1 Law on Enterprises 2020):

a) Take on a liability for the partnership’s debts and other liabilities which is equal to their promised capital contribution;

b) Do not participate in administration of the partnership; do not do business in the partnership’s name;

c) Comply with the partnership’s charter, resolutions and decisions of the Board of Partners;

d) Other obligations prescribed by Law and the partnership’s charter. 

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