Following the previous article, this article shall discuss about the meeting of the owners of a Limited Liability Company with two members or more – one of the most popular types of companies in Vietnam. We will also look at how the owners exercise their ownership during different stages of the meeting. Law on Enterprises (2020) calls this meeting the ‘Meeting of the Members’ Council’ and gives different provisions pertaining to this meeting from those of the General Meetings of Shareholders (which we have learned about in the last article). This article will provide an analysis of the legal provisions that allow the owner of a limited liability company (LLC) with two or more members to exercise his/her ownership rights during the meeting of members’ council. This gives a better understanding of this activity.
In the organizational structure of a LLC with two or more members, the Members’ Council is considered the highest decision-making department, including all owners of the company who may be individuals and authorized representatives of the company’s members. Accordingly, the Members’ Council has the right to decide on issues of the company related to plans and strategies, the organizational structure of the company management, the establishment of subsidiaries, branches, representative offices, amending and supplementing the company’s charter, reorganizing the company etc. These are important tasks and conducting the meetings of the Members’ Council enables in making the decisions related to these activities.
1. The meeting of the Members’ Council (hereinafter referred to as “The Meeting”)
The meeting of The Members’ Council is different from the General Meeting of Shareholders of a joint-stock company. The Law on Enterprise does not stipulate that the meeting must take place in Vietnam. It even does not stipulate the way the meeting should be conducted. Accordingly, the company owners are free to stipulate these factors in the charter of the enterprise. Thus, it can be understood that the law allows the meeting of the Members’ Council to be conducted online (or other methods in accordance with the company’s charter) and the owners can participate in this meeting while abroad. This is also affirmed indirectly through the provisions on the forms of voting of members when attending the meeting. Members are considered to attend and vote at the meeting when they are “Attending and voting through online conferences, electronic voting or other electronic forms” – (Article 59.4 of the Law on Enterprises, 2020).
Additionally, unlike the general meeting of shareholders of a joint-stock company which comprises 2 different types of meetings (annual and unexpected), Article 55.1 of the Law on Enterprises (2020) only stipulates that the minimum number of meetings of the Members’ Council in each year is 1 (once).
It also allows the company to regulate the classification of the meeting in the charter. In connection with the practice, most companies often use the sample charter prescribed by laws and often take the terms of The Meeting lightly. This means that the owners of the companies – who are member(s) of the Members’ Council, have little opportunity to stay updated about the business situation of the company and know how their contributed capital has been utilized.
In order to evade the potential risks, the Members’ Council of a LLC with two or more members may refer to the regulations on ‘Shareholders’ Meeting of the joint-stock company’ and record these provisions in the company charter.
2. Competence to convene The Meeting
Article 57 of the Law on Enterprises stipulates that The Meeting can be convened following the request of the Chairman of the Members’ Council, who is elected by the Members’ Council according to the terms or the request of a member or a group of members owning 10% or more of charter capital or a smaller percentage prescribed by the company’s charter.
The competence to convene The Meeting belongs to the Chairman of the Members’ Council. However, in case the Chairman does not proceed to conduct the meeting after 15 days after receiving a valid request from a member/ a group of members, the member(s) making such request shall have the right to convene the meeting themselves. Thus, in accordance with the Law, members, or groups of members of the company have the right to actively propose and bring important issues of the company to the Members’ Council.
Besides, each member of the Members’ Council also has the right to be informed in advance about the important agenda Of The Meeting as well as the right to propose additional aspects of The Meeting agenda in writing. The chairman of the convener and executive of the meeting must approve the valid petition of the members of the Members’ Council and supplement the meeting agenda accordingly.
3. Conditions for conducting The Meeting
To conduct The Meeting, the number of members attending The Meeting should represent at least 65% of the registered charter capital of the company or as prescribed by the Charter. In case the number of members attending The Meeting is insufficient or lower than 65%, The Meeting shall be postponed or not conducted. After the first meeting is postponed or could not be held, The Meeting will be held for a second and third time. Each time a meeting is conducted, the percentage of participants will be reduced to 50% and will not on the number of members.
4. The rights of members of the Members’ Council during The Meeting
Members are entitled to attend, discuss, speak and implement the right to vote in The Meeting, this is one of the basic rights of the owners of the limited liability company, and it can be said that The Meeting is an effective mechanism for the members of the company to implement their ownership rights of the company. Members or their authorized representatives may give opinions, vote in their endorsements or disapprove of the issues raised during the meeting. These issues are only passed when endorsed by a certain number of participants (Article 59 of the Law on Enterprises). If some members disagree or have other opinions on a certain issue, this content must be recorded in the minutes of The Meeting.
The rights of the owner(s) in The Meeting not only extend to preparation and conducting, but also after the meeting ends. Pursuant to Article 62 of the Law on Enterprises (2020), members/groups of members owning 10% or more of charter capital or a smaller percentage as prescribed by the company’s charter have the right to request the Court or Arbitration to annul the past resolution or decision. In case the company has a member owning more than 90% of charter capital and the company’s charter does not stipulate a smaller percentage, such member may also make such request.
However, unlike the similar provisions of joint-stock companies, the opposing resolutions and decisions still take effect from the date of approval or from the effective date of writing, until the court or arbitration’s annulment decisions take effect. This doesn’t apply to cases where provisional urgent measures are taken under the decisions of competent agencies.
Based on the above information, we can see that ‘Law on Enterprises’ in general, and the regulations on The Meeting of the LLC (with two or more members in particular), are very diverse regulations through which the owners can exercise their ownership rights. To learn more about how to prepare for and hold The Meeting, readers can go through Article 57 to Article 62 of the Law on Enterprises (2020).