Is the general partner in Vietnam required to give prior notice when withdrawing capital from the partnership?

Hello, Lawnet would like to answer as follows:

1. Is the general partner in Vietnam required to give prior notice when withdrawing capital from the partnership?

Article 185 of the Law on Enterprises 2020 stipulates the case of termination of general partners as follows:

- A general partner status will be terminated if he/she:

+ Voluntarily withdraws capital from the partnership;

+ Is dead, missing or incapacitated; has limited legal capacity; has difficulty controlling his/her own behaviors;

+ Is excluded from the partnership;

+ Is serving an imprisonment sentence or banned by the court from doing certain jobs;

+ In other cases specified in the charter.

- A general partner is entitled to withdraw capital from the partnership if it is accepted by the Board of Partners. In this case, the withdrawing partner shall make a written notification at least 06 months before the withdrawal date and may only withdraw capital at the end of the fiscal year after the financial statement of the same year has been ratified.

- A general partner will be excluded from the partnership if he/she:

+ Is not able to contribute capital or fails to contribute capital as promised after a second notice is made by the company;

+ Violates the regulations of Article 180 of the Law on Enterprises 2020;

+ Fails to do business in an honest and prudent manner or has inappropriate actions causing serious damage to the interest of the partnership and other partners; or

+ Fails to fulfill a general partner’s obligations.

- In case of termination due to a partner’s being incapacitated or having limited legal capacity or having difficulty controlling his/her behaviors, his/her stake shall be fairly returned.

- For 02 years from the date of termination in the following cases, the partner still jointly has a liability for the company’s debts that occur before the termination date which is equal to his/her total assets.

+ Voluntarily withdraw capital from the partnership;

+ Be excluded from the partnership;

+ Be serving an imprisonment sentence or banned by the court from doing certain jobs;

+ In other cases specified in the charter.

- After termination of a general partner whose name is used as part of or the whole partnership’s name, that general partner or his/her heir or legal representative is entitled to request the partnership to stop using that name.

Thus, A general partner is entitled to withdraw capital from the partnership if it is accepted by the Board of Partners. In this case, the withdrawing partner shall make a written notification at least 06 months before the withdrawal date and may only withdraw capital at the end of the fiscal year after the financial statement of the same year has been ratified.

2. What rights and obligations of a general partner in Vietnam?

Rights of a general partner in Vietnam

According to Article 181 of the Law on Enterprises 2020, a general partner has the rights to:

- 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;

- 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;

- 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;

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

- 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;  

- Receive distributed profits in proportion to his/her stake or as agreed;

- 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;

- 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;

- Other rights prescribed by the Law on Enterprises 2020 and the company's charter.

Obligations of a general partner in Vietnam

According to Article 181 of the Law on Enterprises 2020, a general partner has the following obligations:

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

- 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;

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

- 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;  

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

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

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

- Other obligations prescribed by Law and the charter.

Thus, general partners have many rights such as the right to participate in management, business, use of assets, request information, share profits, divide remaining assets of the company, and other rights.

In addition, general partners also comply with many important obligations such as the obligation to manage and do business in an honest and prudent manner, not to seek personal gain, to bear losses corresponding to their capital contributions, and to incur the loss that is proportional to his/her stake or as agreed in the charter in case the partnership makes a loss and other obligations.

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