Issue 011124 – Organizational structure and positions in a single-member limited liability company

Dear Valued Clients,

Organizational structure is the solid foundation of a business, it determines the flexibility, operational efficiency and adaptability of the business to market fluctuations. In the current context of fierce competition, a single-member limited liability company with a simple, easy-to-manage organizational structure is the optimal choice for many small and medium-sized enterprises.

This article will provide customers with detailed information about the organizational structure of a single-member limited liability company. From organizational structure to titles in a single-member limited liability company. Please follow the article to better understand this type of business.

1. Organizational structure of a single-member limited liability company

A single-member limited liability company is a popular type of business in Vietnam with a very simple and easy-to-manage organizational structure. Depending on the owner, the organizational structure of a single-member limited liability company can be changed to suit the purpose of operation and legal regulations.

• Companies owned individuals  

According to the Enterprises Law 2020, the organizational chart of a single-member limited liability company owned by an individual usually has two key positions: Chairman of the company and Director or General Director.

The owner has the right to appoint or concurrently hold these positions. When an individual owner holds multiple positions in the company, management and operation still need to ensure efficiency.

• Companies owned by an organization

When a single-member limited liability company is owned by an organization, the organizational structure of the company is often more complicated than when an individual owns it. According to the provisions of Article 79 of the Enterprises Law 2020, there are two main models of single-member limited liability companies owned by organizations:

1. Chairman of the company, Director or General Director.
2. Board of members, Director or General Director.

• State-owned enterprises

For a single-member limited liability company owned by the State, the organizational structure often includes the participation of Board of Supervisors, to ensure transparency and efficiency in management. According to Article 79, Clause 2 of the Enterprise Law 2020, there are two main organizational models applicable to this type of enterprise:

The first model includes the Chairman of the company, the Director or General Director, and Board of Supervisors.

The second model includes the Board of Members, the Director or General Director, and Board of Supervisors.

2. Board of members

According to Clauses 1 and 2, Article 80 of the Enterprise Law, the board of members in a single-member limited liability company consists of 03 to 07 members, appointed and dismissed by the company owner with a term of no more than 05 years.

The board of members is the highest decision-making body in the company. This is a group of members in the company who are individuals or authorized representatives of company members who are organizations, playing a role in deciding important issues in the operation and management of the company.

• Regarding the conditions for holding a meeting of the Board of Members

For the model of a single-member limited liability company, the Enterprise Law 2020 does not stipulate the number of meetings of the Board of Members within a certain period of time. Therefore, the number of meetings of the Board of Members will comply with the Company Charter.

In a single-member limited liability company, a meeting of the Board of Members is held when at least two-thirds of the total number of members of the Board of Members attend the meeting[1].

• Regarding the conditions for passing a decision

The Company Charter is the highest document regulating the company’s operations. Regulations on the approval rate for passing a decision of the Board of Members will be implemented in accordance with the Company Charter.

In case the Company Charter does not have specific provisions, the following provisions shall apply:

Resolutions and decisions of the Board of Members shall be adopted when more than 50% of the members attending the meeting approve or the number of members attending the meeting owns more than 50% of the total number of votes in favor. Amendments and supplements to the Company Charter, reorganization of the Company, transfer of part or all of the Company’s charter capital must be approved by at least 75% of the members attending the meeting or the number of members attending the meeting owning 75% or more of the total number of votes in favor. Resolutions and decisions of the Board of Members shall take effect from the date of approval or from the date stated in such resolution or decision[2].

3. Chairman of the company

The Chairman of a single-member limited liability company is an important position, responsible for representing and managing the enterprise. According to the Enterprise Law 2020, there are two different models of company chairman:

• In the case of a company whose owner is an individual, the Chairman of the company is the owner and can concurrently or hire another person to be the Director or General Director[3].
• In the case of a company whose owner is an organization, the Chairman of the company is appointed by the company owner, the Chairman of the company on behalf of the company owner exercises the rights and obligations of the company owner[4].

The rights and obligations of the Chairman of a single-member limited liability company are implemented according to the provisions of the Company Charter, the Enterprise Law 2020 and other relevant laws.

• In the case where the Chairman of the company is appointed by the owner, the Chairman of the company shall, on behalf of the owner of the company, exercise the rights and obligations of the owner of the company; on behalf of the company, exercise the rights and obligations of the company, except for the rights and obligations of the Director or General Director; be responsible before the law and the owner of the company for the exercise of the rights and obligations assigned according to other regulations.
• In the case where the Owner is the Chairman of the company or concurrently the Director/General Director, the Chairman of the company shall exercise the rights and obligations corresponding to the positions prescribed in the Enterprise Law s and the Company Charter.

4. Director, General Director

The Director or General Director in a single-member limited liability company is an important role in managing and operating the daily business activities of a single-member limited liability company. The Director or General Director is the person who operates the daily business activities of the Company and is also responsible before the law and the Board of Members or the Chairman of the Company for the implementation of his/her rights and obligations.

The appointment of the Director or General Director is stipulated in Article 82 of the Enterprise Law 2020 as follows: The Board of Members or the Chairman of the Company appoints or hires the Director or General Director for a term of no more than 05 years

The Company Charter may allow the Chairman of the Board of Members, another member of the Board of Members or the Chairman of the Company to concurrently hold the position of Director or General Director, unless otherwise provided by law or the Charter.

The Director and General Director of a single-member limited liability company have the following rights and obligations:

• Organize the implementation of resolutions and decisions of the Board of Members or the Chairman of the company;
• Decide on issues related to the daily business operations of the company;
• Organize the implementation of the company’s business plan and investment plan;
• Issue internal management regulations;
• Appoint, dismiss, and remove company managers, except for positions under the authority of the Board of Members or the Chairman of the company;
• Sign contracts on behalf of the company, except for cases under the authority of the Chairman of the Board of Members or the Chairman of the company;
• Propose plans for the organization’s structure;
• Submit annual financial reports to the Board of Members or the Chairman of the company;
• Propose plans for using profits or handling losses in business;
• Labor recruitment;
• Other rights and obligations as stipulated in the Company Charter and labor contract.

5. Board of Supervisors, Supervisors

For a single-member limited liability company whose owner is a state-owned enterprise, according to Clause 1, Article 88 of the Enterprise Law, the company must establish a Board of Supervisors.

In other cases, the company can decide whether to establish a Board of Supervisors or not. In other words, a company whose owner is not a state-owned enterprise is not required to establish a Board of Supervisors. The establishment depends on the needs and model of each company.

In the case of establishing a Board of Supervisors, the Board of Supervisors has from 01 to 05 Supervisors. The term of office of a supervisor is not more than 05 years and can be reappointed for an unlimited number of terms. In case the Board of Supervisors has only 01 Supervisor, that Supervisor is also the Head of the Board of Supervisors and must meet the standards of the Head of the Board of Supervisors.

As usual, we hope you find this Legal Update helpful and look forward to working with you in the upcoming time.

Kind regards,

ENT Law LLC

The full version of this Legal Update can be found here.

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[1] Clause 5, Article 80 of the Enterprise Law 2020

[2] Clause 6, Article 80 of the Enterprise Law 2020

[3] Article 85 of Enterprise Law 2020

[4] Article 81 of the Enterprise Law 2020