Legal regulations on single-member limited liability company

1. What is a single-member limited company?

According to regulation at Article 74 of the Law on Enterprises 2020, a single-member limited liability company is regulated as follows:

• A single-member limited liability company is an enterprise owned by a single organization or individual (hereinafter referred to as “owner”). The owner’s liability for the company’s debts and other liabilities shall be equal to the company’s charter capital.

• A single-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

• A single-member limited liability company must not issue shares except for equitization.

• Single-member limited liability companies may issue bonds in accordance with this Law and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of Law of Enterprises 2020.

2. Features of a single-member limited liability company

Firstly, a single-member limited liability company owned by an individual or an organization. Company owners include/are domestic and foreign investors who fully meet the provisions of law on civil law capacity, civil act capacity and business act capacity. 

Secondly, the company has legal status from the time of issuance of the business registration certificate. From that time, the company exercises its rights and obligations as a trader in accordance with the legal regulation.

Thirdly, the company owner is responsible for the company's debts and other property obligations to the extent of the company's charter capital (limited liability). This is one difference from the sole proprietorship's liability regime (unlimited liability).

Fourthly, the company owner can be able to transfer part or all of his/her contributed capital to another person. The transfer of contributed capital of the company owner must comply with certain conditions. In case the company owner transfers part of the charter capital to another organization or individual, it may change the company model.

Fifthly, the single-member limited liability company is not allowed to issue shares. It shows that the entry of outsiders into the company is more limited compared to a joint stock company. However, a single-member limited liability company may be able to issue bonds to raise capital when fully meeting the regulations of law, the company's charter and it is also based on the needs of the company.

A single-member limited liability company owned by an organization shall apply one of the two models below:

• A company with a President and the Director/General Director.

• A company with a Board of Members and the Director/General Director.

A single-member limited liability company owned by an individual shall have a President and a Director/General Director.

The President may concurrently hold the position of Director/General Director or hire another person as the Director/General Director.

Rights and obligations of the Director/General Director shall be specified in the company’s charter and the employment contract.

Note: Unless otherwise provided in the company's charter, the President of the Partner Assembly or the company's president shall be the legal representative of the company. The rights and obligations of the Board of Members, the company's president, the director/general director, and the controller are specified in Article 81, Article 84 of the Law on Enterprises 2020.