A partnership is a popular business model where two or more individuals join together to run a business, sharing profits, losses, and responsibilities. In this model, each general partner is jointly and severally liable for the company’s obligations, which makes trust and cooperation among partners essential. This article outlines the rights, obligations, and conditions for becoming a general partner in a partnership, as well as the legal framework governing these relationships under the 2020 Enterprise Law.
1. What is a General Partner?
A general partner is a co-owner of a partnership, and at least two members are required to form such a business. These members must use their personal assets to guarantee their responsibilities to the company and are jointly and severally liable for any debts or financial obligations arising from the company’s business activities.
2. Rights of General Partners
According to Article 181, Clause 1 of the 2020 Enterprise Law (No. 59/2020/QH14), the rights of general partners in a partnership are as follows:
2.1. Economic Rights
- Request the company to compensate for losses arising from business activities, provided the losses were not caused by the partner’s personal mistakes.
- Receive profits in proportion to their capital contribution or as agreed in the company’s charter.
- In case of company dissolution or bankruptcy, receive their share of remaining assets, according to their capital contribution, unless otherwise specified in the company’s charter.
- Other rights according to the Enterprise Law and company charter.
2.2. Management, Information, and Other Rights
- Participate in discussions, meetings, and voting on company matters. Each general partner has one vote, or more as specified by the company’s charter.
- Represent the company in business activities, negotiate and sign contracts, and make agreements that benefit the company.
- Use the company’s seal and assets for business purposes. If a partner advances their own money to carry out business, they can request reimbursement along with market interest on the amount advanced.
- Request information regarding the company’s business status, including inspecting assets, tax reports, accounting records, and other documents.
- If a general partner dies, their heirs are entitled to their share in the company after deducting any debts. The heirs may become a general partner if approved by the other members.
- Other rights under the Enterprise Law and the company charter.
Additionally, there are certain restrictions on the rights of general partners outlined in Article 180 of the 2020 Enterprise Law:
- A general partner must not be the owner of a sole proprietorship; must not be a general partner of another partnership unless it is accepted by the other general partners.
- General must not, in their own names or others’ names, do business in the same business lines as those of the partnership for personal gain or to serve the interests of another organization or individual.
- A general partner must not transfer part or all of his/her stake in the company to another organization or individual unless it is accepted by the other general partners.
3. Obligations of General Partners
According to Article 181 of the 2020 Enterprise Law, the obligations of general partners are as follows:
3.1. Management obligations
- Manage and operate the business carefully, honestly, and ensure the maximum legal benefits for the company.
- Ensure the company’s operations comply with the law, the company charter, and resolutions of the member council; any violations causing damage to the company require the partner to compensate for the loss.
3.2. Financial obligations
- Return any money or assets received on behalf of the company, and compensate for any losses caused by misappropriating company funds.
- Be jointly liable for the company’s debts if its assets are insufficient to cover them.
- Bear losses proportional to their capital contribution or as agreed in the company charter when the company incurs a loss.
3.3. Other obligations
- Do not use the company’s assets for personal gain or the benefit of other organizations or individuals.
- Provide accurate and honest monthly reports on the company’s business status and share information about their personal business activities when required.
- Fulfill other obligations as outlined in the Enterprise Law and the company charter.
4. Conditions to become a General Partner
To become a general partner in a partnership, individuals or organizations must meet the following conditions:
4.1. No prohibited business or management activities
Individuals or organizations wishing to become general partners must not fall under any of the prohibited categories specified in Clause 2, Article 17 of the 2020 Enterprise Law, including:
– State authorities, People’s armed forces using state-owned assets to establish enterprises to serve their own interests;
– Officials and public employees defined by the Law on Officials and the Law on Public Employees;
– Commissioned officers, non-commissioned officers, career military personnel, military workers and public employees in agencies and units of Vietnam People’s Army; commissioned officers, non-commissioned officers and police workers in police authorities and units, except for those designated and authorized representatives to manage state-owned stakes in enterprises or to manage state-owned enterprises;
– Executive officers and managers of state-owned enterprises prescribed in Point a Clause 1 Article 88 of this Law, except those who are designated as authorized representatives to manage state-owned stakes in other enterprises;
– Minors; people with limited legal capacity; incapacitated people; people having difficulties controlling their behaviors; organizations that are not juridical persons;
– People who are facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated, is not able to control his/her own behaviors, is banned by the court from holding certain positions or doing certain works; other cases prescribed by the Law on Bankruptcy and the Anti-corruption Law.
If requested by the business registration authority, the applicant shall submit the judicial records;
– Juridical persons that are banned from business operation or banned from certain fields as prescribed by the Criminal Code.
4.2. Contribute capital as agreed in the charter
General partners must contribute the agreed capital on time. If they fail to do so, they must compensate the company for any resulting damage. If a capital contributor fails to meet their commitment, the unpaid amount is considered a debt to the company, and the contributor may be expelled from the company by decision of the member council.
4.3. Meet industry-specific certification requirements
General partners must meet any relevant industry-specific certification requirements if the company engages in regulated business sectors. Given that general partners are expected to have a certain level of expertise and credibility, having the necessary professional certifications helps solidify the personal relationships within the partnership.
In conclusion, while a partnership offers several advantages, such as shared responsibility and the ability to pool resources and expertise, it also imposes significant obligations on its members. General partners must manage the business responsibly, comply with legal requirements, and ensure the company’s financial health. Understanding these rights and responsibilities is crucial for anyone considering entering into a partnership, ensuring a smooth and effective collaboration.
————————————
📞 CONTACT LEGAL CONSULTANT:
TLA Law is a leading law firm with a team of highly experienced lawyers specializing in criminal, civil, corporate, marriage and family law, and more. We are committed to providing comprehensive legal support and answering all your legal questions. If you have any further questions, please do not hesitate to contact us.
1. Lawyer Vu Thi Phuong Thanh, Manager of TLA Law LLC, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
2. Lawyer Tran My Le, Chairman of the Members’ Council, Ha Noi Bar Association
Email: tmle@tlalaw.vn.
-Nguyen Huong Huyen-