The management structure of a partnership consists of the Partners’ Council and the Chairman of the Partners’ Council (who may also concurrently hold the position of Director or General Director of the company, unless otherwise stipulated in the company’s Charter).
1. What is a Partnership?
According to Article 177 of the Law on Enterprises of Vietnam 2020, a partnership is an enterprise in which:
- There must be at least two members who are co-owners of the company and conduct business together under a common name (hereinafter referred to as general partners). In addition to general partners, the company may have limited partners.
- A general partner must be an individual and is liable for the company’s obligations with all of their assets.
- A limited partner may be an organization or individual and is only liable for the company’s debts within the scope of the capital they have committed to contribute to the company.
A partnership has legal entity status from the date it is granted an Enterprise Registration Certificate.
Note: A partnership is not permitted to issue any type of securities.
2. Management Structure of a Partnership
Clause 1, Article 182 of the Law on Enterprises of Vietnam 2020 stipulates that a partnership may organize its operations with the following model: a Partners’ Council and a Chairman of the Partners’ Council (who may also concurrently hold the position of Director or General Director of the company, unless otherwise stipulated in the company’s Charter).
2.1. Partners’ Council
The Partners’ Council comprises all members of the company (general partners and limited partners).
- General partners: Must be individuals and are liable for the company’s obligations with all of their assets.
- Limited partners: May be individuals or organizations and are only liable for the company’s debts within the scope of their committed capital contributions.
The Partners’ Council has the authority to decide on all business affairs of the company.
2.2. Chairman of the Partners’ Council
The Chairman of the Partners’ Council is a general partner elected by the Partners’ Council. The Chairman of the Partners’ Council will also concurrently serve as the Director or General Director, unless the company’s Charter provides otherwise.
The Chairman of the Partners’ Council and the Director/General Director have the following duties:
- Manage and operate daily business activities in the capacity of a general partner.
- Convene and organize meetings of the Partners’ Council; sign resolutions and decisions of the Partners’ Council.
- Assign and coordinate business activities among the general partners.
- Organize and store company accounting books, invoices, documents, and other materials completely and truthfully as required by law.
- Represent the company as the petitioner for civil matters, plaintiff, defendant, or a person with related rights and obligations before Arbitration or a Court; represent the company in exercising other rights and obligations as prescribed by law.
- Perform other duties as stipulated in the company’s Charter.
3. Legal Representative of a Partnership
According to Article 184 of the Law on Enterprises of Vietnam 2020, the general partners are the legal representatives of the company and organize its day-to-day business operations. Any restrictions on a general partner’s performance of the company’s daily business activities are only effective against a third party if that party is aware of such restrictions.
4. Analysis of the Advantages and Disadvantages of a Partnership
Below is an analysis of the advantages and disadvantages of a partnership:
| Advantages | Disadvantages |
|---|---|
| High Personal Reputation: A partnership combines the personal reputation of its general partners, which easily builds trust with partners and customers. | High Risk: The unlimited joint liability regime means general partners are liable for the company’s obligations with all of their assets. |
| Simple Management: Due to the small number of members, managing and operating the company is easy, making it suitable for small and medium-sized enterprises. | Operational Difficulties: If members do not agree, the company’s operations may face difficulties. |
| High Expertise: General partners are often individuals with high professional qualifications and credibility, which builds trust with partners. | Limited Capital Mobilization: Not being able to issue stocks or securities restricts the ability to raise capital from the market. |
| Legal Entity Status: Having legal entity status means the company is recognized as a separate legal subject, which helps stabilize its legal operations. | No Financial Separation: There is no clear distinction between company assets and personal assets, which can lead to financial risks. |
| Suitable for Small Enterprises: The organizational structure is lean and easy to manage, suitable for small and medium-sized enterprises. | Joint and Several Liability: General partners have unlimited liability, posing a significant risk in case of debts or legal obligations. |
