In a partnership business, the admission of new members to the company is an important process that requires attention to various legal and contractual aspects. The implementation of this process requires care to ensure transparency, compliance with the Law and create a solid foundation for a business relationship.

Based on the statistics of the General Statistics Office of Vietnam from 2010 to now, the ratio of partnerships to the total number of enterprises has never exceeded 0.2%. This is a rather “picky” type of business that people choose to start a business partly because of the special mechanisms that this type of enterprise requires. Therefore, when preparing to begin the process of adding new partner business, a partnership should focus on the following points:

1. Clarity in goal definition and expansion strategies

Clearly defining the expansion strategy and goals is crucial. The company needs to determine the specific goal of accepting new members, considering whether this is in line with the current development strategy of the business or not. If the goal is to expand the market or increase competitiveness, the admission of new members can be considered a necessary step.

2. Membership type selection

Next comes another important step, which is choosing the right type of membership.

Currently, partnerships have two types of members:

  • General partners are individuals who are responsible with their entire assets for the company’s obligations;
  • Capital contributors are organizations or individuals, only being responsible for the company’s debts within the amount of capital they have committed to contribute to the company.

In case an organization intends to become a new member of a partnership, it can only participate as a contributing member.

Depending on the development stage of the company and the legal and financial factors, choosing between a general or a limited partner will affect the rights, responsibilities and ability to interact with new members because these e have different natures of operating in companies. General partners are joint owners of a company, doing business together under a common name. As for capital-contributing members, they only contribute capital to a company, and are entitled to an annual profit sharing in proportion to the percentage of contributed capital in the company’s charter capital.

3. Verification of new member identity verification and financial proof

The process of carrying out legal procedures needs to be carried out meticulously and accurately. This includes verifying the new member’s identity and financial standing, and ensuring that they meet the legal and financial requirements to be part of such a company.

4. Approval by the Members’ Council

According to the Enterprise Law (2020), the admission of new members must be agreed upon and approved by the Members’ Council. In all cases, without the approval of the Members’ Council, the candidate cannot become a general partner and a capital-contributing member of such a partnership. Within 15 days from the date of approval, the new member must fully pay the amount of capital committed to be contributed to such company, unless the Members’ Council declares another time limit.

5. Implementation of capital contribution contracts and procedures for new member registration

The establishment of a contract is an indispensable step in the process of receiving new members. The contract needs to be carefully drafted, clearly defining the rights and obligations of a new member, as well as terms related to profit sharing, management, and interaction in a business-based environment. This is regulated by the Enterprises Law (2020) and the Company Charter.

Finally, the company needs to comply with the procedures for the registration of new members at the competent authorities in accordance with the Law.

To sum up, the admission of new members in a partnership is not merely an expansion of the business, but also a complex process that requires a clear understanding of business laws and regulations. To contribute to a sustainable development of the business environment, it is extremely important to comply with the laws and apply them flexibly, whilst creating a foundation for cooperation and development for all members of a partnership.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.