What is a partnership? Is a partnership allowed to issue shares in Vietnam?

Hello,Lawnet would like to answer as follows:

1. What is a partnership? Is a partnership allowed to issue shares in Vietnam?

Pursuant to Clause 1, Article 177 of the Law on Enterprises 2020, a partnership is an enterprise in which:

- There are least 02 partners that are joint owners of the company and do business under the same name ((hereinafter referred to as “general partner”). There can be limited partners in addition to general partners;

- A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets;

- A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.

A partnership is a type of enterprise governed by the Law on Enterprises 2020 and has legal status from the date of issuance of the Business Registration Certificate.

Is a partnership allowed to issue shares in Vietnam?

According to the provisions of Clause 3, Article 177 of the Law on Enterprises 2020, a partnership must not issue any kind of securities.

At the same time, according to the provisions of Clause 1, Article 4 of the Law on Securities 2019, securities include the following assets:

- Shares, bonds, fund certificates;

- Warrants, secured warrants, pull options, depository receipts;

- Derivatives;

- Other kinds of securities defined by the Government.

A share certificate is a certificate issued by a joint stock company, a book entry or electronic data that certifies the ownership of one or a number of shares of the company. A share certificate shall contain the following information:(Clause 1, Article 121 of the Law on Enterprises 2020)

So, shares are a type of security that only joint stock companies are allowed to issue, so there is no need to care about how much total capital a partnership needs to have to issue shares. According to the Law on Enterprises 2020, partnerships from the beginning are not allowed to issue securities in general and issue shares in particular.

2. What are the limitations of general partners in Vietnam?

In Article 180 of the Law on Enterprises 2020, regulations on the limitations of general partners are as follows:

- 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.

It can be seen that a general partner of a partnership has many limitations in terms of rights, but looking at another aspect, there are some limitations that will not be applied if the general partner receives the consent of the remaining partnership members. Only acting in the name of an individual or on behalf of another person doing business in the same industry or line of business of the company for personal gain or serving the interests of other organizations or individuals is absolutely not allowed, even if you obtain the consent of the remaining partners, because this is a violation of business ethics.

Best regards!

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