The Members’ Council is a vital management body in a limited liability company with two or more members, holding decisive authority over the company’s strategic matters and business operations. The following article, presented by NPLaw, provides an overview of the legal issues related to the Members’ Council of a limited liability company
I. Overview of the Members’ Council of a Limited Liability Company
1. Definition of the Members’ Council
Members’ Council of a limited liability company is the highest decision-making body within the company, vested with the authority to decide on all matters concerning the organization, management, and operation of the company in accordance with the law and the company’s charter.
2. Importance of the Members’ Council
The Members’ Council plays a pivotal role in the governance and administration of a limited liability company. As the supreme body, it is responsible for approving development strategies, financial statements, decisions on profit distribution, and other essential business matters.
The Members’ Council also has the power to appoint or dismiss the Director, General Director, and to supervise the company’s management to ensure transparency and efficiency. Its significance lies not only in strategic decision-making but also in overseeing corporate governance and protecting the rights of contributing members.
II. Legal provisions on the Members’ Council of a Limited Liability Company
1. Role of the Members’ Council
In a limited liability company with two or more members, the Members’ Council serves as the core body directing and managing all business activities. It is authorized to decide on major matters such as approving business and financial plans, profit distribution, amendments to the company charter, capital increases or reductions, and the appointment or dismissal of the Director or General Director.
Furthermore, the Council performs supervisory and inspection functions to ensure compliance with the law and effective corporate performance. Through the Members’ Council, decisions are made democratically, transparently, and in alignment with the interests of the capital-contributing members.
2. Number of Members
Pursuant to Clause 1, Article 55 and Clause 1, Article 80 of the Law on Enterprise 2020:
- For limited liability companies with two or more members: the Members’ Council consists of all company members, including individuals and authorized representatives of organizational members.
- For single-member limited liability companies owned by an organization: the Members’ Council shall comprise three (03) to seven (07) members appointed and dismissed by the owner, with a term not exceeding five (05) years.
Accordingly, the number and composition of the Members’ Council depend on whether the company has one or multiple members.
3. Rights and obligations of the Members’ Council
According to Clause 2, Article 55 and Article 80 of the Law on Enterprise 2020, the Members’ Council shall have the following rights and obligations:
- Determining the company’s development orientation and annual business plans;
- Deciding on increases or decreases of charter capital, capital mobilization, and bond issuance;
- Approving investment projects, marketing strategies, and technology transfers;
- Approving contracts valued at 50% or more of total assets, or at a lower ratio as provided by the company’s charter;
- Electing and dismissing the Chairperson of the Members’ Council, the Director, General Director, Chief Accountant, and Controller;
- Deciding on salaries, bonuses, and other benefits for the management board;
- Approving financial statements, profit distribution, and loss-handling plans;
- Deciding on management structure, establishment of branches and subsidiaries;
- Amending and supplementing the company charter;
- Deciding on reorganization, dissolution, or request for bankruptcy of the company;
- Exercising other rights and performing other duties as prescribed by law and the company’s charter.
Thus, the Members’ Council is entrusted with extensive powers and responsibilities, ensuring effective governance and compliance within the framework of law and the company’s charter.
III. Common legal questions regarding the members’ council
1. Conditions for holding meetings
According to Article 58 and Clause 5, Article 80 of the Law on Enterprise 2020:
For limited liability companies with two or more members:
- First meeting: Valid if attending members represent at least 65% of charter capital (or a different rate as provided by the company charter);
- Second meeting: If the first fails to meet quorum, the second may be convened within 15 days and is valid when members representing at least 50% of charter capital attend;
- Third meeting: If the second still fails, the third may be held within 10 days regardless of the number of attending members or capital ratio;
- Members or authorized representatives must attend and vote;
- The procedures for meetings and voting are subject to the company charter;
- Meetings shall not last longer than 30 days from commencement.
For single-member limited liability companies owned by organizations:
- Meetings are valid when at least two-thirds of Members’ Council members attend;
- Unless otherwise provided by the charter, each member has one vote of equal value;
- The Council may also pass resolutions through written consultation.
Hence, the conditions for convening meetings depend on the company type, number of members, and ownership ratio. Compliance ensures the legality and validity of passed resolutions.
2. Circumstances for extraordinary meetings
The Members’ Council may hold extraordinary meetings under Article 57 of the Law on Enterprise 2020 in the following cases:
- At the request of the Chairperson of the Members’ Council;
- At the request of a member or group of members holding at least 10% of the charter capital (as prescribed in Clauses 2 and 3, Article 49);
- If the Chairperson fails to convene the meeting within 15 days of receiving a valid request, the member or group of members may convene the meeting themselves.
Accordingly, extraordinary meetings may be convened upon a legitimate request by the Chairperson or qualifying members.
3. Election procedures for the Members’ Council
Under Articles 57 and 58 of the Law on Enterprise 2020, the election process of the Members’ Council includes:
Step 1: Preparation and convening of the meeting
- Authorized convener: the Chairperson or member(s) holding at least 10% of charter capital;
- Meeting notice: sent in writing to all members.
Step 2: Conducting the meeting
- Valid when at least 65% of charter capital is represented.
Step 3: Nomination and candidacy
- Members may nominate or self-nominate;
- Procedures follow the company charter or the Members’ Council’s internal regulations.
Step 4: Voting process
- Forms of voting: Open voting, secret ballots, or other methods per the charter;
- Principle: Each member has votes proportional to their capital contribution.
Step 5: Minutes and resolutions
- Meeting minutes must be prepared and signed by the Chairperson and Secretary;
- The resolution on the Members’ Council election becomes effective when approved by a valid voting ratio.
4. Authority to decide on changes in members’ capital contributions
Pursuant to Point b, Clause 2, Article 55 of the Law on Enterprise 2020, the Members’ Council has the authority to decide on changes to members’ capital contribution ratios.
However, such changes must be approved by members at the legally required voting threshold and comply with capital increase or reduction procedures as prescribed by law.
IV. Legal consulting services related to the Members’ Council
The above article by NPLaw outlines legal provisions concerning the Members’ Council of limited liability companies. With an experienced team of lawyers and legal specialists, NPLaw is always ready to advise and support clients on all legal matters relating to the Members’ Council of limited liability companies. For assistance, please contact us via the details below.
