Profits of a two member limited liability company are only distributed to members after tax liabilities have been fulfilled?
What are the regulations on the organizational structure of a multi member limited liability company in Vietnam?
Pursuant to Article 54 of the 2020 Law on Enterprises of Vietnam, the organizational and management structure of a multi member limited liability company in Vietnam is as follows:
- A multiple-member limited liability company shall have a Board of Members, President of the Board of Members, Director/General Director.
- A state-owned multiple-member limited liability company prescribed in Point b Clause 1 Article 88 of this Law and each subsidiary company of a state-owned enterprise prescribed in Clause 1 Article 88 of this Law shall have a Board of Controllers. The establishment of the Board of Controllers in other companies shall be decided by themselves.
- A company shall have at least one legal representative who holds the title of President of the Board of Members, Director/General Director. Unless otherwise prescribed by the company's charter, the President of the Board of Members shall be the company’s legal representative.
Profits of a two-member limited liability company are only distributed to members after tax liabilities have been fulfilled?
Is it possible to distribute profits to members only after tax liabilities have been fulfilled?
Pursuant to Point c, Clause 1, Article 49 of the 2020 Law on Enterprises of Vietnam (amended by Clause 1, Article 7 of the 2022 Law on amendments to certain articles of the law on public investment, the law public-private partnership investment, the law on investment, the law on housing, the law on procurement, the law on electricity, the law on enterprises, the law on special excise duties and the law on civil judgment enforcement) stipulating the rights of members of multi-member limited liability companies as follows:
Rights of members of the company
1. A member of the company has the following rights:
a) Participate in meetings of the Board of Members; discuss, propose, vote on the issues within the jurisdiction of the Board of Members;
b) Have a number of votes that are proportional to the member’s holding, except for the cases specified in Clause 2 Article 47 of this Law;
c) Receive profit in proportion to the member’s holding after the company has fully paid taxes and fulfilled other financial obligations prescribed by law;
d) Receive part of the remaining assets in proportion to the member’s holding when the company is dissolved or goes bankrupt;
dd) Be given priority to contribute more capital when the company increases its charter capital;
e) Transfer, give away or otherwise dispose of the member’s own stake in accordance with regulations of law and the company's charter;
g) File lawsuits in their own name of in the company’s name against the President of the Board of Members, the Director/General Director, other executives, legal representatives in accordance with Article 72 of this Law;
h) Other rights prescribed by this Law and the company's charter.
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At the same time, according to Clause Article 69 of the 2020 Law on Enterprises of Vietnam, the conditions for profit distribution of a multi-member limited liability company are as follows:
Conditions for profit distribution
A company’s profit may only be distributed to its members after its tax liabilities and other financial obligations have been fulfilled as prescribed by law and it is able to fully pay its due debts and other liabilities after profit is distributed.
Thus, a company’s profit may only be distributed to its members after its tax liabilities and other financial obligations have been fulfilled as prescribed by law.
That is, the company must fulfill these obligations first before distributing profits to members, so the company cannot use the reason to retain this profit to pay tax.
What are the obligations of a member of a multi-member limited liability company?
Pursuant to Article 50 of the 2020 Law on Enterprises of Vietnam (amended by Clause 2, Article 7 of the 2022 Law on amendments to certain articles of the law on public investment, the law public-private partnership investment, the law on investment, the law on housing, the law on procurement, the law on electricity, the law on enterprises, the law on special excise duties and the law on civil judgment enforcement) stipulating the obligations of members of multi-member limited liability companies as follows:
- Fully and punctually contribute capital as promised; take on a liability for the company’s debts and liabilities which is equal to the contributed capital, except for the cases specified in Clause 2 and Clause 4 Article 47 of this Law.
- Do not withdraw capital from the company in any shape or form; except for the cases specified in Articles 51, 52, 53 and 68 of this Law.
- Comply with the company's charter.
- Implement the resolutions and decisions of the Board of Members.
- Take personal responsibility when performing the following actions in the name of the company:
+ Violations of law;
+ Business operations or transactions that do not serve the company’s interests and cause damage to others;
+ Pay debts before they are due while the company is facing financial risks.
- Other obligations prescribed by law.
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