What are the rights and obligations of general partners and limited partners in a partnership in Vietnam?
What are the conditions for becoming a new partner of a partnership in Vietnam?
According to the provisions of Article 186 of the 2020 Law on Enterprises in Vietnam on the admission of new partners of a partnership as follows:
Admission of new partners
1. A partnership may admit new general partners and limited partners; the admission of a new partner is subject to approval by the Board of Partners.
2. The new general partner or limited partner shall fully contribute capital as promised within 15 days from the day on which the admission is approved unless a different time limit is decided by the Board of Partners.
3. The new general partner has a joint liability for the company’s debts and liabilities which is equal to his/her total assets, unless otherwise agreed upon by the new partner and the other partners.
Thus, when the above conditions are met, the investor can become a new partner of the partnership.
However, to become a general partner of a partnership, in addition to the above conditions, a general partner of a partnership is the person who runs the company's day-to-day business operations. Therefore, it is necessary to have qualifications, practice certificates (for partnerships with conditional business lines) as well as professional qualifications.
What are the rights and obligations of general partners and limited partners in a partnership in Vietnam?
What are the rights and obligations of general partners and limited partners?
According to the provisions of Clause 1, Article 181 of the 2020 Law on Enterprises in Vietnam on the rights of general partners as follows:
Rights and obligations of general partners
1. A general partner has the rights to:
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.
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According to the provisions of Clause 2, Article 181 of the 2020 Law on Enterprises in Vietnam on the obligations of general partners as follows:
Rights and obligations of general partners
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2. A general partner has the following obligations:
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.
According to the provisions of Clause 1, Article 187 of the 2020 Law on Enterprises in Vietnam on the rights of limited partners as follows:
Rights and obligations of limited partners
1. Limited partners have the rights to:
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.
According to the provisions of Clause 2, Article 187 of the 2020 Law on Enterprises in Vietnam, limited partners have the obligations to:
- Take on a liability for the partnership’s debts and other liabilities which is equal to their promised capital contribution;
- Do not participate in administration of the partnership; do not do business in the partnership’s name;
- Comply with the partnership’s charter, resolutions and decisions of the Board of Partners;
- Other obligations prescribed by Law and the partnership’s charter.
What is the difference between a general partner and a limited partner?
Based on the regulations on general partners and limited partners, the differences between general partners and limited partners can be seen as follows:
- A general partner is a mandatory individual when establishing a partnership, while a limited partner is an individual and can join after the partnership is established.
- General partners have unlimited liability for assets, limited partners only have limited liability to the extent of their contributed capital.
- General partners have the right to administer and manage business activities of the partnership, on behalf of the company when carrying out business activities of the company. Limited partners act as investors and do not participate in the management of the company's business activities
- A general partner has the limitations specified in Article 180 of the 2020 Law on Enterprises in Vietnam:
+ 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.
+ 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.
+ 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.
Limited partners do not have such limitations.
- General partners have at least 2 members or more, limited partners may or may not have a maximum limit.
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