I. Overview of capital-contributing members of partnerships

Current enterprise laws provide different regulations for each type of enterprise. So how does the law regulate partnerships and its capital-contributing members? NPLaw shall provide relevant legal regulations on capital-contributing members in partnerships through the following article.

II. Legal regulations on capital-contributing members of partnerships

1. Rights and obligations of capital-contributing members of partnerships

Pursuant to Point c, Clause 1, Article 177 of the Law on Enterprise 2020, a capital-contributing member of a partnership may be an organization or an individual and shall be liable for the debts of the partnership only within the scope of the capital amount committed to be contributed to the partnership.

Specifically, pursuant to Clause 1, Article 187 of the Law on Enterprise 2020, capital-contributing members of a partnership have the following rights:

  • To participate in meetings, discussions, and voting at the Members’ Council on amendments and supplements to the company charter, amendments and supplements to the rights and obligations of capital-contributing members, reorganization or dissolution of the company, and other contents of the company charter directly related to their rights and obligations;
  • To receive annual profit distributions corresponding to the ratio of their capital contribution to the charter capital of the company;
  • To be provided with the company’s annual financial statements; to request the Chairperson of the Members’ Council or general partners to fully and truthfully provide information on the company’s business status and performance; to inspect accounting books, minutes, contracts, transactions, records, and other documents of the company;
  • To transfer their capital contribution to other persons;
  • To conduct business in the same business lines of the company in their own name or in the name of another person;
  • To dispose of their capital contribution by inheritance, donation, mortgage, pledge, or other forms in accordance with law and the company charter; in the case of death, the heir shall replace the deceased member to become a capital-contributing member of the partnership;
  • To receive a portion of the remaining asset value of the company corresponding to the ratio of their capital contribution to the charter capital upon dissolution or bankruptcy of the company;
  • Other rights as prescribed by the Law on Enterprise 2020 and the company charter.

Capital-contributing members of a partnership are obliged to execute the obligations prescribed in Clause 2, Article 187 of the Law on Enterprise 2020, including:

  • To be liable for the debts and other property obligations of the company within the scope of the committed capital contribution;
  • Not to participate in the management of the company and not to conduct business activities in the name of the company;
  • To comply with the company charter and resolutions and decisions of the Members’ Council;
  • Other obligations as prescribed by the Law on Enterprise 2020 and the company charter.

2. Capital contribution time of members in a partnership

Pursuant to Clause 2, Article 186 of the Law on Enterprise 2020, both general partners and capital-contributing members are required to fully contribute the committed capital amount to the company within 15 days from the date on which they are approved by the Members’ Council, unless the Members’ Council decides otherwise.

In cases where a general partner or a capital-contributing member fails to fully and duly contribute the committed capital, the unpaid portion shall be deemed a debt owed by such member to the company, and such member shall be liable for compensation for any damage caused to the company. In such a case, the Members’ Council may decide to expel the relevant capital-contributing member from the partnership.

Accordingly, the contribution of charter capital of a partnership is based on the capital commitments of its members. Unlike joint-stock companies or limited liability companies, current laws do not provide a specific statutory time for capital contribution applicable exclusively to partnerships.

3. Conditions for capital-contributing members of partnerships

New capital-contributing members of a partnership engage when the financial capacity of existing members is limited and external investment capital is required.

Capital-contributing members must be organizations or individuals, except for the cases prescribed in Clause 3, Article 17 of the Law on Enterprise 2020, including:

  • Units of the People’s Armed Forces and State authorities using State assets to contribute capital to enterprises for the purpose of gaining private benefits for their own units or agencies;
  • Persons prohibited from contributing capital to enterprises in accordance with the Law on Cadres and Civil Servants, the Law on Public Employees, and the Law on Anti-Corruption.

The admission of additional general partners must be approved by the Members’ Council of the partnership, with at least two-thirds (2/3) of the total members voting in favor.

Capital-contributing members must contribute capital within the prescribed time of 15 days from the date of approval. In cases where a capital-contributing member fails to fully and duly contribute the committed capital:

  • The unpaid capital amount shall be treated as a debt owed by such member to the company; or
  • Such members may be expelled from the company by decision of the Members’ Council.

III. Common questions regarding capital-contributing members of partnerships

1. Are capital-contributing members of a partnership entitled to execute economic contracts with other parties?

Pursuant to Clause 1, Article 184 of the Law on Enterprise 2020, the legal representative of a partnership is a general partner.

Moreover, pursuant to Point b, Clause 2, Article 187 of the Law on Enterprise 2020, capital-contributing members are not permitted to participate in the management of the company or conduct business activities in the name of the company.

Accordingly, capital-contributing members of a partnership are not entitled to represent the partnership in executing contracts with other parties, unless they are duly authorized by a general partner.

2. How is a case handled where a capital-contributing member fails to fully and timely contribute the committed capital?

The capital contribution obligations of capital-contributing members in a partnership are prescribed in Clause 3, Article 178 of the Law on Enterprise 2020. Accordingly, where a capital-contributing member fails to fully and duly contribute the committed capital, the unpaid portion shall be deemed a debt owed by such member to the company.

In such a case, the relevant capital-contributing member may be expelled from the partnership by decision of the Members’ Council.

Accordingly, where a capital-contributing member of a partnership fails to fully and timely contribute the committed capital, such member may be expelled from the partnership. Only a general partner who fails to fully and timely contribute the committed capital and causes damage to the company is required to compensate for such damage.

3. Are capital-contributing members of a partnership allowed to transfer their capital contribution?

Pursuant to Point d, Clause 1, Article 187 of the Law on Enterprise 2020, capital-contributing members have the right to transfer their capital contribution in the company to other persons.

4. In the case of bankruptcy of a partnership, are capital-contributing members liable?

Pursuant to Point c, Clause 1, Article 177 of the Law on Enterprise 2020, capital-contributing members, whether organizations or individuals, are liable for the company’s debts only within the scope of their committed capital contributions. Meanwhile, according to Point b, Clause 1 of the same Article, general partners must be individuals and bear unlimited liability with all of their assets for the obligations of the company.

Accordingly, in the case that a partnership becomes bankrupt, capital-contributing members are not required to use their personal assets to settle the company’s debts.

IV. Consulting and implementation services related to capital-contributing members of partnerships

The above constitutes nplaw’s responses to inquiries regarding capital-contributing members of partnerships. Should you have any further questions or require clarification on related matters, please contact NPLaw using the following details: