(TIỂU LUẬN) BUSINESS LAW ASSIGNMENT

BUSINESS LAW ASSIGNMENTTABLE OF CONTENT Abstract General provision Multiple limited liability company Definition Structure Member’ Council Director Capital Certification Buy-back Transfe

BUSINESS LAW ASSIGNMENT

TABLE OF CONTENT

Abstract

General provision

Multiple limited liability company

Definition

Structure

Member’ Council

Director

Capital

Certification

Buy-back

Transfer

Change the capital

B Sole limited liability company

C Compares with the German law

Reference

In modern times, most small businesses in the world now are LLCs (35 percent), followed by S-corporations, corporations, sole proprietorships, and partnerships with the percent are 33, 19, 12, and 2 respectively Therefore, understanding the rules and[1]

obligations toward the LLCs is vital for people who get involved in this field However, laws regarding the LLCs are different globally, requiring us not only to understand but also know how to apply those in practice This paper will dig deeper into limited liability companies, analyzing their structure, providing some helpful information regarding LLCs in Vietnam and German, and suggesting ideas for Vietnam companies

General provision

When we first talk about a company, we need to know the definition of the most fundamental term “enterprise” According to the enterprise law 2020, an enterprise is

an economic organization that is established legally, has its own name, stable office, assets, and conducts business activities; a business is the consecutive implementation

of one, several, or all of stages of an investment process from the production to the sale of products or provision of services on the market for profit purpose

To establish a company in Vietnam, first of all, organizations and individuals must have the right to establish and manage an enterprise in accordance with Vietnam Law

on Enterprise While organizations or individuals who in the case of Clause 2 (Art.17-Chapter II) are not allowed to form an enterprise such as State authorities, People’s armed forces using state-owned assets to establish enterprises to serve their own interests, Officials and public employees defined by the Law on Officials and the Law

on Public Employees, Minors, People who are facing criminal prosecution, etc In Germany, there are also some conditions for people to become a director of a Limited Liability Company in Germany, which was stated in Section 6

In Vietnam, we have 2 types of business, including state-owned enterprises and non-state-owned enterprises which have 4 subsidiaries limited liability company, shareholding company, private company, and partnership company In this paper, we will delve into limited liability companies

The company was a legal entity; the company owner was a normal person with rights and obligations corresponding to ownership of the company Members are responsible for the debts and other property obligations of the enterprise within the amount of capital committed to contributing to the enterprise

the application of certain favorable tax treatment, as well as personal liability protection, to the relevant “members” [2]

LLC included two types of companies in Vietnam based on its members; indeed, the maximum and the minimum number of members always stay unchanged: at least one member is required to form a single-member LLC, and no more than 50 members may join a multi-member LLC [3]

(*) If a company named “Tan Hiep Phat”, it is illegal for another company named

“Hiep Phat”

The name in Vietnamese of a limited company must have two parts: the type of company must be written as "limited liability company" (or abbreviated as "limited company") and the proper name using the English alphabet, Vietnamese, letters F, J,

Z, W, numbers, and symbols; the name of the limited company must not be identical, identical to the existing name, identical to the name of a state agency or other social organization without the consent of such unit to use or have signs or words contrary to pure style Vietnamese customs The foreign name of the LLC must comply with the(*)

provisions specified in Article 39 of the Enterprise Law 2020

According to Germany’s Law, a business name must include the symbol “Gesellschaft mit beschränkter Haftung” or an easy-to-understand abbreviation of this designation even if it continues under section 22 of the also serves as the shareholder list In all other respects, the provisions of the German Limited Liability Act relating to the terms of the association will apply the appropriate modifications to the sampling protocol [4]

The German law specifies two models of organization and management of limited liability companies: a two-level model of management and a three-level model of management For the three-level management model, the limited company is managed

by the board of members, the director, and the procuracy The Members' Council is the highest authority of the limited company, capable of deciding the company's affairs through its meetings.[7]

For a one-owner limited liability company, the owner is the highest decider of the company For a two-level management model, the director is elected by the company members or exempted through a majority vote According to Article 6, a limited company can have 1 or more directors (board of directors) For limited liability companies with more than 2000 employees that company must have at least two directors, according to law 33 of 1976 (Mitbestimmungsgesetz) The director of a limited company must be a fully qualified individual, be it a German citizen or a

company directors for five years.

The company does not conduct business in the prohibited business lines as regulated

by the State, including trading in explosives, toxins, radioactive substances, prostitution, gambling; producing articles with reactionary contents, anti-state contention, superstition, and trading off rare animals and plants

In addition to the items banned from business according to the government’s regulations, business trading in legal industries require a practicing certificate such as legal service, medical examination, and treatment services to be acceptable to trade in food products and veterinary medicine

The law in German shares the same features as the law in Vietnam which prohibits companies from conducting business harming the government and citizens

As the first country to promulgate regulations on limited liability companies, the German law provisions on limited liability companies are very flexible, but not less strict With flexible changes in regulations on limited liability companies, German law has better ensure the legal rights and interests of entities during the establishment process As a popular business model in Vietnam, limited liability companies require proper legal attention Therefore, the completion of Vietnamese law on limited liability companies based on learning experience in law building of the whole country, including Germany - the homeland of the limited company is urgent

Depending on the type of business you choose, you may need to apply for a license from the agency concerned In addition, a limited company in Vietnam must make a capital contribution as stated in the company registration procedure within 90 days from the date of receipt of the Enterprise Registration Certificate [5] However, in Germany, a company may be established under a simple procedure if there are no more than three shareholders and one director The sampling protocol provided in the Appendix should be used to form a limited liability company under the simplified procedure Besides, no further terms that violate the law can be put in place

A Multiple limited liability company

1 Definition

Two or more (maximum 50 people) members form a multi-member limited liability company As members of a multi-member limited liability company, they have membership rights including attending the board of members meeting, voting rights

The corporate contains a position from the date of being granted the business registration certificate The corporate owner and therefore the company are two separate legal entities Members are chargeable for the debts and other liabilities of the enterprise within the quantity of capital committed to contributing to the enterprise Limited liability companies are not allowed to issue shares to raise capital With the characteristic of a contributing company, the transfer of contributed capital of members of the limited company is limited, when members of a limited liability company want to transfer their contributed capital, first of all, priority must be given

to other members of the company On the billboard of invoices and other transaction papers of the company, the name of the company must be enclosed

The Law of Limited Liability Company (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbHG) is a model created by German lawmakers based on a partnership model and a joint-stock company model, the limited company has an independent legal entity status since the business step is recognized by German law when it has its property, has independent rights and obligations with the company's members, is entitled to act in its name when participating in legal relations, and must take responsibility for liabilities by company property to the extent of their capital

contribution in the company [8]

The LLC’s founder can be either an organization or an individual who must have legal status, age conditions, and capacity for civil acts For multiple–member limited companies, the minimum is 02 members and the maximum is 50 members that are organizations or individuals.[9] Moreover, the members of the two model of LLC always have fully contributed capital to establish the company[10]

2 Structure

A limited liability company with two or more members has a Members’ Council, chairman of the Members' Council, director, or general director[11]

a Member’ Council

The Members' Council is the highest decision-making body of the company, including all individual members of the company and authorized representatives of company members who are organizations.[12]

The chairperson of the Members' Council has the following rights and obligations, comprising to prepare the agenda and operation plan of the Members' Council, to convene, chair, and chair meetings of the Members’ Council or organize the gathering

of members' opinions, to supervise or organize the supervision of the implementation

of resolutions and decisions of the Members' Council

The director or general director is the person who runs the company's day-to-day business operations and takes responsibility before the Members' Council for the performance of his/her rights and obligations [14] The director or general director has the following rights and obligations, consisting of organizing the implementation of resolutions and decisions of the Members' Council, the company's business plans and investment plans, deciding on issues related to the company's day-to-day business operations, issuing the internal management regulations of the company, unless otherwise prescribed by the company's charter Other rights and obligations prescribed

in the company's charter, resolutions, and decisions of the Members' Council, labor contracts

Responsibilities of the chairperson of the Members' Council, director, general director and other managers, at-law representatives, and supervisors are exercise rights and obligations in an honest, prudent and best way to ensure the maximum legal interests

of the company, loyal to the company's interests, not abuse position, position and use information, know-how, business opportunities, other assets of the company for self-interest or for the benefit of other organizations or individuals, promptly, fully and accurately notify the company of the enterprises that they own or have shares, capital contributions Other responsibilities as prescribed by law and the company's charter.[15]

The director or general director is not allowed to increase salary or pay a bonus when the company is unable to pay off due debts.[16]

3 Capital

a Certification

Capital distribution is a necessary task after forming an enterprise In Vietnam, the registered charter capital of a limited liability company is the total assets promised by the owner(s) and shall be written in the company charter The members, in a multiple-member limited liability company, shall contribute sufficient and current assets as promised in the registration within 90 days from the issuance date of the Certificate of Enterprise Registration During this period, the members must contribute the amount that is proportional to their promise The members can only change the asset promised providing that they have the approval from others If after 90 days the company still struggles with the capital dilemma, it can remove the members who didn’t contribute anything, limit the rights of the members who did not contribute enough, and even sell the missing capital under a resolution or decision of the Broad of Members If the company doesn’t have capital enough after 90 days, it must change its charter After a member contributed to a company, he/she will receive a capital contribution certificate including background information regarding the company

b Buy-back

One of the notable rights of the member in any enterprise is the repurchase of stakes

organized the company’s structure, amend the company’s rules, and others followed the company’s rules The request must be written and sent to the company within 15 days In that time, the company must buy back the stake with market price or follow the negotiation between 2 parties The purchase valid if only the company can pay for debts and other obligations after buying the stake If the company cannot buy back the stake, the member has the right to freely transfer his/her stakes to others (can be the member of the company or not)

c Transfer

Except for some special cases, the members can freely transfer their share following rules Firstly, they can offer their shares to other members proportionally under the same conditions Secondly, they can transfer their shares for ones who are not the company’s member regardless no one in the firm buys their shares within 30 days from the first day of offering In case the company turns into sole limited liability company after transferring, the owner must report and change its type within 15 days

Some particular cases need to be noted Firstly, when one member of the company dies, people who inherit his/her assets will become a member of the company Secondly, when one company’s member is declared missing by the Court, people who have responsibility for his/her assets through the Civil Code will employ his/her obligations Thirdly, when one member has mental problems or in jail, his/her representatives will help him/her with obligations and rights Fourthly, when something bad happens with one member without heirs, or when his/her heirs refuse

to accept the assets, all problems will be settled based on the Civil Code Finally, when a member is banned from joining the firm’s business, they must stop involve with the company completely

About the salary, all must be written in the charter and follow the rule Besides, the salary of the directors is based on the result of the business, and it will be calculated into the firm’s financial statement

d Change the capital

Charter is the most vital element for a company If a company wants to grow, it has no choice but increases its capital This section will devote to the change of the capital in the limited liability company in Vietnam Firstly, when a company wants to increase its charter capital, it can do that by raising its members’ contribution or receiving capital from the new members By contract, the firm can decrease its charter capital by returning parts of the contributed capital to the members in proportions if the company operates continuously in at least 2 years from the days when the company is established After changing the amount of charter capital, the company must report that to the business registration authority within 3 days from the day it receives the

B Sole limited liability company

Basically, the sole LLC has the same model as the multiple-member LLC, but they still have some differences One member limited liability company owned by an organization is organized and managed and operates under one of the following two models, including Company President, Director or General Director, or Board of members, director or general director.[17]

The Members' Council has from 3 to 7 members appointed or dismissed by the company owner for terms not exceeding 5 years, perform the rights and obligations of the company on behalf of the company, except for the rights and obligations of the Director or General Director; take responsibility before the law and the company owner for the performance of assigned rights and obligations.[18]

The chairperson of the Members’ Council is appointed by the company owner or elected by members of the Members' Council according to the majority rule [19] The company president appointed by the company owner exercises the rights and obligations of the company owner on behalf of the company owner, take responsibility before the law and the company owner for the exercise of their assigned rights and obligations in accordance with the company's charter, enterprise law 2020 and other relevant laws [20] The decision of the company president on the exercise of the rights and obligations of the company owner takes effect from the date it is approved by the company owner unless otherwise provided in the company charter.[21]

The Members’ Council or the company president appoints or hires a director or general director for a term not exceeding 5 years to run the company's daily business activities The Director or General Director has the following rights and obligations, comprising to organize the implementation of resolutions and decisions of the Members' Council or the company president, to decide on issues related to the company's day-to-day business operations, to appoint, relieve from duty or remove from office the company manager, except for positions falling within the authority of the Members' Council or the company president, to sign a contract on behalf of the company, unless it falls under the authority of the Chairman of the Members’ Council

or the company president, to propose organizational structure plan of the company, to submit annual financial statements to the Board of members of the company's President.[22] The director or general director must satisfy the following criteria and conditions, consisting of not falling into the subjects specified in Clause 2, Article 17

of Enterprise Law, having qualifications and experience in business administration of the company, and other conditions as provided by the company's charter.[23]

C Compares with the German law

establishment decision, business registration certificate, or other equivalent documents (for organizational members), identification documents of the authorized representatives, copies

of registration documents of the organizations which have been legalized by the consular (for foreign organizations), Investment Registration Certificate (for foreign investors) as reported

in Art 21- Chapter II in Vietnamese Enterprise Law.

In German, it is considered easy to form a limited company First of all, you must choose the company name, this is the pre-registration step The next step is to draft the documents - the Articles of Association are the company’s constitutive documents and they contain information about its name, scope, number of founders, shareholders, and number of shares, and other details Then, they must notarize those documents and register the company with appropriate authorities which are the Commercial register (Handelsregister), Trade office (Gewerbeamt), Tax office (Finanzamt).

The first criterion is the difference in the classification of limited liability companies In Vietnam, the limited companies are divided into two types: Single-member and Multi-member limited liability companies (LLC) This division is based on the number of shareholders in the company In fact, a single-member LLC is an enterprise under the ownership of an organization or individual In opposition, a multi-member LLC’s members can be both organizations and individuals Especially, the number of members must be more than 2 and less than 50 In Germany, there are two types of a limited company that is regulated It includes the limited partnership (KG) and the most common business type in Germany- the limited liability company (GmbH) The government relies on charter capital to divide it.

The second criterion is the difference in the rights of the owner in LLCs and GmbH In Vietnam, the shareholders of a company do not have the right to participate in the day-to-day management of the business of a company This ensures the separation of ownership from management The power of decisions making in a company is vested in the board of directors, end of policy decisions are taken at the board level by the majority rule This ensures the unity of direction in management However, in Germany, The General Shareholder's Meeting is the one that ensures the management of the GMBH The day-to-day corporate decisions are made by the company’s director which is appointed by the general meeting of the shareholders (Clause 1- Section 43)

Comparing with the partners in Vietnam, the limited liability company law in German has more complicated rules and obligations Shares can be a different aspect when comparing the LLC companies in Vietnam and German Firstly, In Vietnam, the Enterprise Law 2020 does not set the minimum requirement for the contributing charter capital, but in German, the members need to pay at least twenty-five euros to establish a company Moreover, the German authorities set the nominal value for the shares, requiring them to be a full euro amount which can be variously determined They also require that the sum of the nominal value of the shares must equal the amount of the share capital To be more specific, the assets contributed can be both cash and non-cash assets Secondly, when the owners want to buy more shares, these shares will remain legally independent Payment of capital contributions in respect of the shares shall be made in proportion to the contributions in cash Thirdly, when the firm makes a capital contribution payment, it needs to be made in proportion to the contribution in cash

[02] Vietnam Enterprise Law 2020, Article 1, chapter I

[03] Vietnam Enterprise Law 2020, Article 1, chapter I

[04] German Limited liability Company Act, section2, 1a

[05] Vietnam Enterprise Law 2020, Article 74, clause 2

[06] Vietnam Enterprise Law 2020, Article 47

[07] German Limited liability Company Act, Article 46

[08] German Limited liability Company Act, Article 13

[09] Vietnam Enterprise law 2020, Clause 1 Article 46

[10] Vietnam Enterprise law 2020, in Clause 2 Article 47

[11] Vietnam Enterprise law 2020, clause 1 article 54

[12] Vietnam Enterprise law 2020, clause 1 article 55

[13] Vietnam Enterprise law 2020, clause 2 article 55

[14] Vietnam Enterprise law 2020, clause 1 article 63

[15] Vietnam Enterprise law 2020, clause 1 article 71

[16] Vietnam Enterprise law 2020, clause 2 article 71

[17] Vietnam Enterprise law 2020, clause 1 Article 79

[18] Vietnam Enterprise law 2020, Clause 1 Article 80

[19] Vietnam Enterprise law 2020, Clause 3 Article 80

[20] Vietnam Enterprise law 2020, Clause 1 Article 81

[21] Vietnam Enterprise law 2020, Clause 3 Article 81

[22] Vietnam Enterprise law 2020, clause 2 Article 82

[23] Vietnam Enterprise law 2020, Clause 3 Article 82)