I. Understanding the Chairman of the Members' Council in a Limited Liability Company
1. Definition of the Chairman of the Members' Council
According to Article 56 of the Law on Enterprise 2020, the Members' Council is the highest decision-making body in a multi-member limited liability company (LLC). The Chairman of the Members' Council is elected by its members to organize and lead its activities and to sign resolutions on behalf of the Council.
2. Organizational model and governance structure of a Limited Liability Company; the role of the Chairman
Pursuant to Article 55 of the Law on Enterprise 2020, the organizational structure of a Limited Liability Company includes:
- Members' Council: Consists of all capital-contributing members and is the body responsible for making major decisions.
- Director or General Director: Manages the company’s day-to-day operations.
- Chairman of the Members' Council: Leads the Council, convenes meetings, and oversees the implementation of its resolutions.
II. Legal provisions regarding the Chairman of the Members' Council
1. Conditions to become the Chairman
According to Article 55 of the Law on Enterprise 2020, the Chairman must:
- Be a member of the Members' Council;
- Be elected by other Council members;
- Not fall under the prohibitions listed in Article 17 of the Law on Enterprise 2020, including:
+ State authorities or armed forces using State assets for private gain;
+ Civil servants or public employees (Law on Cadres and Civil Servants and Law on Public Employees);
+ Armed forces personnel, including officers, non-commissioned officers, professional soldiers, workers, defense officials in the Army or People's Police unless appointed as a state capital representative;
+ Managers in State-owned enterprises (except where designated as a representative of state capital);
+ Minors or Individuals restricted or incapable of exercising civil acts;
+ Persons under criminal investigation, criminal sentences or subject to judicial bans by Court;
+ Organizations without legal person status, or those banned from doing business under the Criminal Code.
2. Election or dismissal procedures and processes for the Chairman
Processes and procedures for electing or dismissing the Chairman of the Members' Council, as follows:
- According to Clause 2, Article 55 of the Law on Enterprises 2020, the Chairman is elected or dismissed by:
+ Vote of the Council members. Accordingly, voting ratios are typically over 50% (under the company's charter).
- Based on the company's charter or Council resolutions.
3. Rights and duties of the Chairman
Under Clause 2, Article 55 of the Law on Enterprise 2020, the Chairman is vested with the following rights and duties:
- Determine strategic development and annual business plans;
- Decide on increase or decrease in charter capital, time and methods of raising additional funds, and bond issuance;
- Approve the company’s investment and development projects, marketing strategies, and technology transfers;
- Approve loan, lending, asset sale contracts, and other contracts valued at 50% or more of the total company assets recorded in the most recent financial statement, or other threshold contracts stated as the company‘s charter;
- Elect, dismiss, remove the Chairman of the Board of Members; decide to appoint, dismiss, remove, sign and terminate contracts with the Director or General Director, Chief Accountant, Controller and other managers as prescribed in the company’s charter;
- Determine salary, bonuses, and benefits for the Chairman, the Director or General Director, Chief Accountant, and other managers as prescribed in the company’s charter;
- Approve the annual financial report, profit distribution, and loss-handling plans;
- Decide the company’s management structure;
- Approve the establishment of subsidiaries, branches, or representative offices;
- Amend and supplement the company’s charter;
- Decide on company reorganization;
- Decide on company dissolution or initiate bankruptcy proceedings.
III. Questions about the Chairman of the Members' Council
1. When can the Chairman convene a Members' Council meeting?
According to Clause 1, Article 57 and Clause 3, Article 58 of the Law on Enterprise 2020, the Chairman may convene a meeting when:
- There is an issue requiring discussion based on the approved agenda;
- A member or group of members holding at least 10% of the charter capital (or a lower percentage if specified in the charter), group of members owning more than 90% of charter capital and the company’s charter does not stipulate a smaller ratio.
2. Who has the authority to elect the Chairman?
As stated in Clause 2, Article 55 of the Law on Enterprise 2020, the Chairman of the Members' Council in a multi-member LLC is elected by the Members' Council.
3. Can the Chairman also serve as the Director or General Director?
According to Article 56 of the Law on Enterprise 2020, the Chairman may concurrently serve as Director or General Director if permitted by the company‘s charter and approved by the Members' Council.
4. Under what circumstances can the Chairman be dismissed?
Under Clause 1, Article 94 of the Law on Enterprise 2020, the Chairman can be dismissed in cases such as:
- Failing to meet qualifications and conditions under Article 93;
- Having voluntary resignation approved by the representative authority in writing;
- Obtaining reassignment, retirement, or job transfer;
- Lacking the competence or qualifications for the assigned role;
- Having health issues or loss of credibility in performing the role.
IV. Legal consultancy and services related to the Chairman of the Members' Council
The above content is provided by NPLaw to assist clients in understanding the legal role and responsibilities of the Chairman of the Members' Council in a limited liability company. If you have any further questions on this matter or other legal concerns, please do not hesitate to contact our experienced legal team for direct consultation and support.
