Single-member LLC (single-member limited liability company) is one of the types of businesses specified in the Law on Enterprise in Vietnam. So, conditions for the establishment of a single-member LLC are defined as follows.
I. Overview of single-member limited liability company:
Under the provisions of Clause 1, Article 74 of the Law on Enterprises 2020, a single-member LLC is an enterprise owned by an organization or individual. The company owner is responsible for the debts and other liabilities of the company to the extent of the company’s charter capital.
Also according to the provisions of Article 74 of the Law on Enterprises, in Clauses 2, 3 and 4: Type of single-member limited liability company with legal status but not having the right to issue shares to raise capital, is only allowed to issue share issuance for the purpose of converting into a joint stock company. However, this type of business is allowed to issue bonds in accordance with the law.
With such advantages: the owner has the “supreme” right in operating the company, has the right to decide all company issues, the responsible regime within capital. Therefore, the procedures and conditions for establishing a one-member limited liability company as well as other legal issues such as capital increase, capital reduction, transfer, … will usually be simpler.
II. Conditions for the establishment of a single-member LLC
1. Condition of owner:
Owner of a limited liability company is an individual or organization that establishes itself without contributing capital to any other individual or organization. However, it should be noted that the cases in which it is impossible to become the owner of a single-member limited liability company specified in Clause 2, Article 17 of this Law, include:
– State agencies and people’s armed forces units use state assets to set up business enterprises to make profits for their own agencies or units;
– Cadres, civil servants and public employees according to the provisions of the Law on Cadres and Civil Servants and the Law on Public Employees;
– Officers, non-commissioned officers, professional soldiers, defense workers and employees in agencies and units of the Vietnam People’s Army; Professional officers and non-commissioned officers, police workers in agencies and units of the Vietnam People’s Public Security, except for those appointed as authorized representatives to manage the State’s capital contribution in enterprises or management at state-owned enterprises;
– Professional leaders and managers in State enterprises as prescribed at Point a, Clause 1, Article 88 of this Law, except those appointed to act as authorized representatives to manage the State’s contributed capital in other enterprises;
– Minors; people with limited civil act capacity; people with loss of civil act capacity; people with cognitive difficulties and behavior mastery; organizations have no legal status;
– Persons being examined for penal liability, being held in custody, serving a prison sentence, serving administrative handling measures at compulsory detoxification establishments, compulsory education establishments or banned by courts hold certain posts, prohibit practicing certain occupations or do certain jobs; in other cases according to the provisions of the Bankruptcy Law, the Anti-Corruption Law.
– Organizations being commercial legal entities are prohibited from doing business or operating in certain fields in accordance with the Criminal Code.
2. Condition of company name:
According to Article 37 of the Law on Enterprise 2020, a company name must ensure the following elements:
– The Vietnamese name of an enterprise includes two elements in the order: Type of the enterprise; First name.
– The name of the business type is written as “limited liability company” or “limited company”.
– The proper name of the enterprise is written in Vietnamese letters, the letters F, J, Z, W, numbers and symbols.
– The name of the company must be attached at the company’s head office, branches, representative offices and business locations. Company name must be printed or written on transaction papers, documents and publications issued by the company.
Note: Prohibitions in naming a company according to Article 38 of the Law on Enterprises 2020:
– Naming the same or intentionally causing confusion with the companies previously registered (Specific provisions in Article 41 of this Law).
– Using words that violate Vietnamese traditions, culture, and fine traditions.
– Use of names of state agencies, people’s armed forces units, names of political organizations, socio-political organizations, socio-political-professional organizations, social organizations, social organizations – profession, wholly or partly by the proper name of a company, unless otherwise approved by such agency, unit or organization.
3. Conditions of business lines:
The Company is allowed to conduct business in a business line that is not prohibited under the provisions of Clause 1, Article 7 of the Law on Enterprises 2020 and has registered its business lines with state management agencies.However, there are conditional business investment sectors specified in Appendix IV of the Law on Enterprises 2020. Enterprises may not conduct business without meeting the business conditions specified in this Law or without guarantee ensure that business conditions are maintained during operation.
4. Conditions on charter capital.
The minimum amount of the charter capital of a single-member limited liability company is not required by law. The law only stipulates that “The charter capital of a one-member limited liability company when registering for a business is the total value of assets committed to contribute by the company owner and recorded in the company charter”. But with the provisions in Clause 4, Article 75 of the Enterprise Law 2020: “The owner of the company is responsible with all his assets for the financial obligations of the company”, the owner can decide the charter capital within the ability to allow.
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