Organizational Structure of a Limited Liability Company with Two or More Members According to the Law on Enterprises 2020

Organizational Structure of a Limited Liability Company with Two or More Members is designed to ensure flexible and effective management. It also helps to clearly delineate the authority and responsibilities among members. Understanding and correctly applying this organizational structure is particularly important for businesses. Let’s explore the elements that make up the organizational structure of this type of business in the article below.

Organizational Structure of a Limited Liability Company with Two or More Members

Regulations on limited liability companies with two or more members

Article 46 of the Law on Enterprises 2020 stipulates the following for a limited liability company with two or more members:

• The company has between 02 and 50 members, which may be organizations or individuals.
• Members are responsible for the company’s debts and other financial obligations to the extent of their capital contribution. Exceptions are specified in Clause 4, Article 47 of the Law on  Enterprises 2020.
• Members’ capital contributions can only be transferred according to the provisions of Articles 51, 52, and 53 of the Law on  Enterprises 2020.
• A limited liability company with two or more members obtains legal status from the date it is issued a Business Registration Certificate.
• A limited liability company with two or more members is not allowed to issue shares, except in cases where it converts to a joint-stock company.
• The company may issue bonds in accordance with the Law on  Enterprises 2020 and other relevant legal regulations. The issuance of private bonds must comply with Articles 128 and 129 of the Law on  Enterprises 2020.

These regulations aim to ensure that a limited liability company with two or more members operates effectively, transparently, and in compliance with the law, while also protecting the interests of members and business partners.

Organizational Structure of a Limited Liability Company with Two or More Members

According to Article 54 of the Law on  Enterprises 2020, a limited liability company with two or more members can organize its management under one of the following two models:

• Member Council, Chairman of the Member Council, Director, or General Director.
• Member Council, Chairman of the Member Council, Supervisory Board, Director, or General Director (for a limited liability company with two or more members that is a state-owned enterprise as specified in point b of clause 1 of Article 88 the Law on  Enterprises 2020 and a subsidiary of a state-owned enterprise as specified in clause 1 of Article 88 the Law on  Enterprises 2020).

Additionally, within the organizational structure of a limited Liability company with two or more members, there must be at least one legal representative. This person holds one of the following titles: Chairman of the Member Council, Director, or General Director. If the company’s charter does not specify, the Chairman of the Member Council is the legal representative of the company.

Company Management Model Organization

Management Structure in a Limited Liability Company with Two or More Members

Member Council

Role: The Member Council is the highest decision-making body of a limited liability company with two or more members.

Composition: It includes all individual members of the company and representatives authorized by organizational members of the company.

Powers and Duties:

• Attend Member Meetings: Members have the right to attend meetings of the Members’ Council.
• Voting Rights: Voting rights are proportionate to the amount of capital contribution.
• Profit Distribution: Members are entitled to a share of the profits corresponding to their capital contribution. In the event of company dissolution or bankruptcy, the Members’ Council will receive the remaining value of the company’s assets. This share will be determined based on the initial capital contribution ratio.
• Priority in Additional Capital Contributions: Members have the right to contribute additional capital when the company increases its charter capital.
• Right to Sue Management: Members have the right to file lawsuits against the company’s management according to legal regulations.
• Right to Convene Meetings: Members have the right to call meetings.
• Access to Records: Members have the right to review records, documents, and financial reports, including accounting books, and to make copies of them.

Legal Basis: Clause 1, Article 55 of the Law on  Enterprises 2020.

Chairman of the Members’ Council

Role: The Chairman of the Members’ Council is the leader of the Council, elected by the Council members.

Powers and Duties:

• Develop an action plan for the Members’ Council.
• Prepare documents, convene, and preside over meetings or solicit the opinions of members.
• Supervise the activities of the Members’ Council within the scope of the resolutions adopted.
• Represent the Members’ Council in signing decisions and resolutions.

Term: The term of the Chairman of the Members’ Council is not more than 5 years and is subject to the regulations of the company’s charter.

Legal Basis: Article 56 of the Law on  Enterprises 2020.

Director / General Director

Role: The Director or General Director is responsible for the daily management of the company.

Powers and Responsibilities:

• Organize the implementation of decisions made by the Members’ Council.
• Decide on issues related to the company’s daily business operations.
• Issue the company’s internal management regulations.
• Appoint, dismiss, and remove managerial positions within the company, except for positions under the authority of the Members’ Council.
• Sign contracts on behalf of the company, except in cases under the authority of the Chairman of the Members’ Council or the company’s legal representative.
• Present the annual financial settlement report to the Members’ Council.
• Recruit employees.

Requirements for Appointment as Director or General Director:

• Must not be among the individuals listed in Clause 2, Article 17 of the Law on  Enterprises 2020.
• Must meet the professional qualifications, experience, and relevant degrees.
• Must not be a family member or relative of the company’s management, the representative of the company’s capital, or state representatives at the company.
• Must meet any other conditions specified in the company’s charter.

Legal Basis: Article 63 of the Law on  Enterprises 2020.

Supervisory Board

Regulations and Structure of the Supervisory Board:

A Supervisory Board is required to be established for limited liability companies with two or more members that are state-owned enterprises. Other cases are regulated by the company itself (based on Clause 2, Article 54 of the Law on  Enterprises 2020).

The Supervisory Board consists of 01 to 05 members, depending on the size of the company.

The term of a member of the Supervisory Board is no more than 05 years and may be reappointed, but no more than 02 consecutive terms at the same company.

If the Supervisory Board has only 01 member, that member also serves as the Head of the Supervisory Board and must meet the standards of the Head of the Supervisory Board

Legal basis: Clause 1, Article 103 of the Law on  Enterprises 2020.

Powers and Responsibilities:

• Inspect the reasonableness, legality, accuracy, and diligence in managing and operating business activities, including accounting, statistical work, and financial reporting.
• Evaluate the company’s annual financial statements.
• Review accounting books, documents, and financial reports of the company as necessary or as decided by the Members’ Council or upon request by members or a group of members holding 10% or more of the charter capital.
• Other rights and obligations as specified in Articles 105 and 106 of the Law on  Enterprises 2020.

Legal Basis: Article 104 of the Law on  Enterprises 2020.

Management Board in a Limited Liability Company with Two or More Members.

Management Consulting Services for Organizational Structure of Limited Liability Companies with Two or More Members

Designing a reasonable organizational structure of a limited liability company with two or more members not only optimizes the company’s resources but also enhances operational efficiency. To support our clients, Long Phan offers consulting services for managing the organizational structure of a limited liability company with two or more members, including the following scope of work:

• Research, analyze, and evaluate the current organizational structure of the business comprehensively.
• Develop a new organizational structure model based on factors such as scale, industry, and the business’s development strategy.
• Support the business in implementing the new organizational structure model.
• Advise on shaping development strategies and ensuring coordination between departments within the company.
• Provide consulting on business management and issues related to the rights and obligations of company members.

The organizational structure of a limited liability company with two or more members is designed to ensure flexibility and efficiency in management. At the same time, it clearly defines the powers and responsibilities among members. With professional support from consulting services, the process of establishing the company will be smoother. If you wish to use our consulting services for managing the organizational structure of a limited liability company with two or more members, please call our hotline at 0906.735.386.