BUSINESS LAW

TUTORIAL 3

1. Give your statement: T or F? and explain why?

- The general partner, who is removed from the company, is jointly responsible for the debts and property
obligations of that partnership within 02 years from the date of termination of general partner’s status

 TRUE. According to Clause 5, Article 185 in Law on Enterprise 2020, For 02 years from the date of
termination in the cases specified in Points a, c, d and dd Clause 1 of this Article, the partner still jointly
has a liability for the company’s debts that occur before the termination date which is equal to his/her
total assets.

- Members in partnership can be individuals or organizations

 FALSE. According to Point b, Clause 1, Article 177 in Law on Enterprise 2020, a general partner
shall be an individual whose liability for the company’s obligations is equal to all of his/her assets;

3. DISCUSSION QUESTIONS

- Please analyze the basic characteristics of the type of Sole Proprietorship?

1. Single ownership: A sole proprietorship is wholly owned by one individual. The individual supplies the
total capital from his own wealth or from borrowed funds.

2. One-man control: The proprietor alone takes all the decisions pertaining to the business. He is not
required to consult anybody. Ownership and management are vested in the same person. Some persons
may be employed to help the owner but ultimate control lies with him.

3. No legal entity: A sole proprietorship has no legal identity separate from that of its owner. The law
makes no distinction between the proprietor and his business. The business and the owner exist together.
If the owner dies or becomes insolvent the business is dissolved. Business and the proprietor are one and
the same.

4. Unlimited liability: The proprietor is personally liable for all the debts of the business. In case the
assets are insufficient to meet its debts, the personal property of the proprietor can be attached.

5. No profit-sharing: The sole proprietor alone is entitled to all the profits and losses of business. He bears
the complete risk and there is nobody to share the profits or losses.

- Explain why the law allows only one eligible individual to establish Sole Proprietorship?
Because in a sole proprietorship, this type of company just needs only 1 person to complete control of the
business and he/she also keeps all the profits.

4. CASE STUDIES

An Binh Sole Proprietorship owned by Mr. An is based in Ho Chi Minh City specializes in the electrical
system installation business. Mr. An is looking to increase the scale and open the scope of his business to
the organization, introduction and trade promotion, so he has the following plans:

Mr. An opened another branch of An Binh Sole Proprietorship in Hanoi City and set up another Sole
Proprietorship to conduct business, introduction and trade promotion;

An Binh Sole Proprietorship invests capital to establish an additional one-member limited liability
company to organize, introduce and promote trade, and issue 1,000 corporate bonds to borrow;

Mr. An contributed capital with Mr. Jerry (of US nationality) and Ms. Anna Nguyen (of Vietnamese and
Canadian nationality) to set up Business Households in the organization, introduction and trade
promotion.

Could you please tell me that according to the current law, Mr. An's intentions are legal? Why?

 “Mr. An opening another branch of An Binh Sole Proprietorship in Hanoi City” is legal. Because it
follows Term 1, Article 45 of Vietnam Enterprise Law 2020 which states that “An enterprise may
establish branches and representative offices in Vietnam and other countries; an enterprise may have
more than one branch and representative office in an administrative division”.

 “Mr. An setting up another Sole Proprietorship to conduct business, introduction and trade promotion”
is illegal. Because according to Term 3, Article 188 of Vietnam Enterprise Law 2020 – “An individual
may only establish one sole proprietorship”, Mr. An, who has already established An Binh Sole
Proprietorship, will not be allowed to establish another sole proprietorship.

 “An Binh Sole Proprietorship investing capital to establish an additional one-member limited liability
company” is legal. Because according to Term 4, Article 188 of Vietnam Enterprise Law 2020 - “A sole
proprietorship must not contribute capital upon establishment or purchase shares or stakes of partnerships,
limited liability companies or joint stock companies”, a sole proprietorship is only not allowed to
contribute capital upon establishment or purchase shares or stakes of LLCs, it is not prohibited from
forming and owning LLCs by itself.

 “Mr. An contributing capital with Mr. Jerry and Ms. Anna Nguyen to set up Business Households” is
illegal. Term 3 of Article 188 in Vietnam Enterprise Law 2020 states that “the owner of a sole
proprietorship must not concurrently own a Business Household or hold the position of general partner of
a partnership”. Therefore, Mr. An, who is already the owner of An Binh Sole Proprietorship, cannot set
up and own Business Households. In addition, Term 1 of Vietnam Decree 01/2021/ND-CP Enterprise
Registration states that only Vietnam citizens have the right to establish Business Households, so Mr.
Jerry and Ms. Anna Nguyen are also not allowed to set up Business Households.

5. CASE STUDIES
Company A is a Partnership with two Partners, Mr. X and Ms. Y. After a period of operation, Company
A intends to increase its charter capital. However, neither Mr. X nor Ms. Y are able to contribute more
capital and do not want to share the management rights of the company with others.
Ask:
a) Please tell us how the company can increase its charter capital and still meet the expectations of
Mr. X and Ms. Y?
 They can increase the charter capital by admitting limited partners. According to Clause 1, Article 186,
a partnership may admit new general partners and limited partners; the admission of a new partner is
subject to approval by the Board of Partners.
b) After increasing the charter capital for a while, Mr. X and Ms. Y want to convert company A into
a limited liability company with multi members in order to expand its business activities into
fields new business. Is this conversion possible? Why?
 Yes.
6. CASE STUDIES
Mr .Nguyen Van Hoa is the owner owner of An Hoa Sole Proprietorship headquartered in Ho Chi Minh
City trading alcohol .He wants to join Roska Company (Thailand nationality) to contribute capital to
establish a food production and processing enterprise in Dong Nai City .
Ask:
a) Please advise Mr .Hoa and Roska about choosing the legal form of business in Vietnam?
 Suggestion: Multi-member limited liability company (2 members). This business legal form is suitable
to the mentioned situation (a member of a two-member limited liability company is an individual or
organization that can hold Vietnamese or foreign nationality) and the exist companies are not not falling
into the cases of prohibition on the establishment, capital contribution, share purchase, purchase of
capital contribution and management of enterprises specified in Article 18 of the Law on Enterprises
2014.

b) After a period of operation, suppose that Roska wants to transfer all of its contributed capital to
Mr .Hoa ,what are the legal consequences of this transfer to the company?
 The company's charter capital is unchanged, the company proceeds to change / add member
o In case the assignment leads to only one member, within 15 days of completion of the transfer,
the company must change its business type and register for changes in business registration contents. The
company sends or submits transformation documents to the business registration office where the
enterprise is registered or the investment authority that has issued the investment certificate. Conversion
dossiers comply with the Government's Decree No. 43/2010 / ND-CP of April 15, 2010, on enterprise
registration.
o In case a new member is admitted in a limited liability company with two or more members, it is
necessary to proceed with the member change registration procedure.
o In case individuals transfer their contributed capital, attention should be paid to the payment of
personal income tax according to the provisions of the tax law.
Mr.Hoa automatically inherits all rights and legal interest, liability for debts, including tax debts,
employment contracts and other obligations of the converted company.
c) If after the food production and processing enterprise comes into operation, Mr .Hoa wants to merge
his Sole Proprietorship into the enterprise he plans to establish, will the merging be in accordance with
the law? Why?
 According to Clause 1, Article 153 of the Law on Enterprises stipulates that “One or more companies
of the same type can be merged into another company by transferring all assets, rights, obligations and
legitimate interests to the merging company; and at the same time, the merged company will be
terminated”. In other words, two companies of different types would not be merged. In this case, Sole
Proprietorship could not be merged with Single-Member Limited Liability Company.

However, the owner can replace the process with some of the following moderate steps to legalize his
strategy:

• Procedures for converting Sole Proprietorship An Hoa into Single-Member Limited Liability
Company An Hoa.

• Procedures for merging Single-Member Limited Liability Company An Hoa with Food
production and processing enterprise, which is recommended to become Single-Member Limited
Liability Company (the name of business will be dependent on Mr.Hoa). Finally Mr. Hoa entirely
operates this Single-Member Limited Liability Company.