Member vs. Company Disputes in Vietnamese LLCs: A Golden Share of Problems 💥

Etymology Corner 🔍

The word "dispute" comes from the Latin "disputare," which combines "dis" (apart) and "putare" (to reckon, consider) – literally meaning "to think differently." And when company members and their LLC think differently about profit distribution... well, that's when the legal fireworks begin! 💥

When Company Members and LLCs Don't See Eye to Eye 👁️👁️

Hello, legal enthusiasts! 👋 Today we're diving into the fascinating world of disputes between members and their Limited Liability Companies in Vietnam. Specifically, we'll examine a high-profile case that reached the Ho Chi Minh City High Court in April 2024, which perfectly illustrates how these corporate family feuds play out in the legal arena. Let's get our business hats on! 🎩

The Case in a Nutshell 🥜

Imagine this scenario: A profitable company decides to withhold dividends from just one member while distributing them to others. Money problems? Corporate revenge? Let's find out what happened in this corporate soap opera! 🍿

The key players:

• Kim Gold (plaintiff): A 33% shareholder in ABC LLC
• ABC LLC (defendant): A multi-member limited liability company
• Van Blake: Chairman of the Members' Council holding 40% shares
• Henry Ha: Legal representative of ABC LLC

The dispute centered around ABC LLC's refusal to distribute profits to Kim Gold for five months (September 2022 to January 2023) despite distributing them to other members, with the company claiming various debts and financial obligations as justification.

First Instance Judgment: Victory for the Shareholder! 👨‍⚖️

In August 2023, the Dong Nai Provincial Court ruled in favor of Kim Gold, ordering:

• ABC LLC to pay Kim Gold 1.32 billion VND in withheld profits
• Recognition that the company had violated the agreement made during the March 10, 2020 Members' Council meeting

The court rejected ABC LLC's arguments that its outstanding debts justified withholding profits from this specific member while distributing them to others.

The Appeal: Both Sides Unhappy! 📣

Both parties appealed the first instance judgment:

• Kim Gold wanted more money, requesting an additional month's profit (February 2023) for a total of 1.584 billion VND
• ABC LLC wanted the entire judgment overturned, arguing that its substantial debts legally prevented profit distribution

The Final Verdict: Status Quo Wins! ⚖️

On April 11, 2024, the Ho Chi Minh City High Court upheld the original judgment, finding:

• The March 10, 2020 Members' Council meeting minutes showed all members agreed to distribute profits
• ABC LLC couldn't selectively withhold profits from just one member while paying others
• Kim Gold's request for additional months' profits was improper as it exceeded the original claim
• Despite ABC LLC's debt situation, the selective withholding of profits from only certain members was discriminatory

The verdict: The Ho Chi Minh City High Court maintained the first instance judgment, ordering ABC LLC to pay Kim Gold 1.32 billion VND in profits.

 Member vs. LLC Disputes in Vietnam 📊

What Is a Member vs. LLC Dispute? 🤔

According to Article 30.4 of Vietnam's 2015 Civil Procedure Code, these are disputes between a company and its members concerning:

• Company formation (capital contributions, founding documents)
• Operations (management, profit distribution, information access)
• Structural changes (mergers, divisions, conversions)
• Asset transfers
• Dissolution or liquidation

For multi-member LLCs specifically (governed by Article 46.1 of the 2020 Enterprise Law), these companies have 2-50 members who are liable only to the extent of their capital contributions.

Key Legal Principles from the Case 📝

1. Equal treatment of members: Companies cannot selectively distribute profits to some members while withholding from others without legitimate legal basis.
2. Members' Council decisions: Properly documented decisions of the Members' Council regarding profit distribution are binding, even if not formalized as a Resolution.
3. Debt limitations: While companies with substantial debts may have restrictions on profit distribution, these must be applied equally to all members.
4. Procedural limits: Parties cannot expand their claims during appeals beyond what was originally requested.

Real-Life Examples of Member-LLC Disputes 🏢

1. The Silent Treatment 🤫 Mr. Tran, a 15% owner of a food processing LLC, was denied access to financial records for three years while other members received regular reports. The court ordered full disclosure and damages for the information blackout.
2. The Undervalued Exit 💸 Ms. Nguyen wanted to sell her 25% stake in a tech company, but the company offered only 40% of market value. The court appointed an independent appraiser and ordered a fair-market buyout.
3. The Expanding Scope 📏 A construction company member sued for his share of profits from 2021, then tried to expand his claim to include 2022 profits during the proceedings. Like in our featured case, the court limited recovery to the original claim period.

Did You Know? 🤔

• Multi-member LLCs in Vietnam must hold at least one Members' Council meeting annually, regardless of whether there are pressing issues to discuss! 📅
• A member holding just 10% of an LLC's capital can request a special Members' Council meeting! 🗣️
• Written resolutions require a higher approval threshold (65%) than in-person meeting decisions (normally 51%)! ✍️
• Members who don't attend meetings for two consecutive years without valid reasons can lose their voting rights! 😲
• Unlike shareholders in public companies, LLC members typically have preemptive rights when other members sell their stakes! 🛒

The Natural Law Comparison: Corporate Beehives 🐝

The relationship between company members and their LLC mirrors bee colonies in fascinating ways:

• Resource allocation: Just as worker bees expect their share of honey, company members expect their share of profits
• Decision-making: Queen bees (like chairpersons) have influence but still need colony consensus for major decisions
• Contribution expectations: All bees must contribute to the hive's success, just as all members must fulfill capital obligations
• Expulsion mechanisms: Both beehives and LLCs have ways to remove non-contributing or disruptive members

The key difference? Bees rarely sue each other over honey distribution! They've evolved more efficient dispute resolution mechanisms than our legal system! 🍯

Tips for Avoiding Member-LLC Disputes 💡

1. Draft comprehensive corporate documents: Ensure your company charter, members' agreements, and internal regulations clearly address profit distribution, information rights, and exit procedures.
2. Document all major decisions: Keep detailed minutes of all Members' Council meetings and convert important decisions into formal Resolutions.
3. Maintain transparent financials: Regular, clear financial reporting to all members can prevent suspicion and information-based disputes.
4. Establish valuation methods in advance: Agree how company and share values will be calculated for transfers or buyouts before disputes arise.
5. Create a dispute resolution ladder: Include multi-step dispute resolution procedures starting with negotiation, then mediation, before resorting to courts.
6. Apply rules consistently: As seen in the Kim Gold case, selective application of rules to different members is a recipe for legal challenges.

Test Your Knowledge: Member-LLC Dispute Quiz! 📝

1. According to Vietnam's Enterprise Law, how many members can a multi-member LLC have? a) 1-20 b) 2-30 c) 2-50 d) 3-100
2. What percentage of capital contribution allows a member to request a special Members' Council meeting? a) 5% b) 10% c) 25% d) 33%
3. In the Kim Gold case, what was the court's position on selective profit distribution? a) It's permitted if most members agree b) It's never permitted under any circumstances c) It's allowed if the company has outstanding debts d) It's not permitted without equal treatment of all members
4. What document proved crucial to Kim Gold's victory in court? a) The Company Charter b) The Enterprise Registration Certificate c) The Members' Council meeting minutes d) The annual financial statement

(Answers: 1-c, 2-b, 3-d, 4-c)

The Takeaway: Clear Rules Make Happy Business Partners! 📋

The Kim Gold vs. ABC LLC case teaches us that consistency and transparency are crucial in company governance. When companies make agreements about profit distribution, they must apply them equally to all members or risk costly legal battles.

As Vietnam's business landscape continues to mature, properly documenting company decisions and treating all members according to agreed rules will prevent unnecessary disputes and keep companies focused on business rather than courtroom drama.

Call to Action 🗣️

Have you experienced a dispute between members and your LLC in Vietnam? What strategies worked (or didn't work) in resolving it? Share your experience in the comments below! Your insights might help other business owners navigate similar challenges!

⚖️ Real legal case: the judgment number  14/2024/KDTM-PT, issued on  April 11, 2024📜(Source: congbobanan.gov.vn)

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🚨 Fun But Serious: A Brief Legal Disclaimer 🚨

Hey there, legal explorer! 🕵️‍♂️ Before you go...

• This article is like a map, not a teleporter 🗺️ It'll guide you, but won't zap your problems away!
• Each legal journey is unique 🦄 Your mileage may vary!
• For real-world quests, seek a professional legal wizard 🧙‍♂️ (May we suggest Thay Diep & Associates Law Firm?)

Remember: Reading this doesn't make you a lawyer, just like watching "The Wolf of Wall Street" doesn't make you a stockbroker! 📈😉

Support Your Legal Ninja's Coffee Fund! ☕

Enjoyed Ngọc Prinny's witty legal wisdom? Help keep this ninja caffeinated! Every article is powered by:

• Hours of research 📚
• Legal expertise spanning 10+ years ⚖️
• Creative storytelling 📝
• And lots of coffee! ☕

If my posts have helped you navigate Vietnam's corporate legal labyrinth, consider treating me to a coffee! Your support helps keep the legal puns flowing and the knowledge growing. 🌱

If you're reading this in the evening, may your dreams be free of corporate disputes and full of profitable ventures! 😴 If you're reading this in the morning, may your day be as clear as a well-drafted company charter! ☀️ And if you're reading this during your lunch break, I hope your business partnerships are more nourishing than your meal! 🍜

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Spill the Beans, Spread the Love, & Brighten My Day! ☕️⚖️🌟

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#VietnamLLC #CorporateDisputes #ProfitDistribution #EnterpriseLaw #BusinessLitigation #MemberRights #VietnameseLaw

Stock Transfer Showdown: When Dollar-Denominated Deals Go to Court

Etymology: "Share" 📈

The word "share" comes from Old English "scearu" meaning "division" or "portion cut off." By the 16th century, it evolved to describe a portion of ownership in commercial ventures, particularly in shipping expeditions where investors would each take a "share" of the risk and reward. Fast forward to today, and shares (or stocks) represent fractional ownership in modern companies—though as our case shows, the drama around them hasn't changed much! 🧩

The Epic Battle Over Stock Transfers: A Nutshell Explanation 🥜

When business deals go bad, they often end up in courtrooms rather than boardrooms. In this riveting case from Vietnam, two parties battled over share transfers valued in US dollars, raising fascinating questions about contract law, evidence, and statute of limitations! 🧑‍⚖️

Let's break down this dollar-denominated dispute, shall we? 💵

The Players in Our Corporate Drama 🎭

• The Sellers: Mr. Paul Hong and Ms. Tranny Hong - founding shareholders of Company D3
• The Buyer: Company D2 - eager to acquire shares in Company D3
• The Background Company: Company D3 - the company whose shares were being transferred

The Chronology: How It All Unfolded ⏰

2008: Our sellers owned significant shares in Company D3:

• Mr. Hong: 348 shares (36.44% of the company)
• Ms. Hong: 145 shares (15.18% of the company)

October 6, 2008: The parties signed an initial agreement where the sellers would transfer shares to Company D2 in three phases:

• Phase 1: 638 shares for $2,532,304.17
• Phase 2: 31 shares for $2,618,390.16
• Phase 3: 256 shares for $160,000

October 7, 2008: A revised agreement was signed, changing the Phase 2 price to $1,290,716.57.

December 29, 2008: A formal transfer contract was executed:

• Mr. Hong transferred 248 shares
• Ms. Hong transferred 104 shares
• Total contract price: $1,886,016

2009-2010: Money was transferred, but disagreements arose about payment amounts and terms.

August 11, 2010: The Hongs filed a lawsuit claiming Company D2 had not followed the original agreement regarding the share price.

The Legal Battle: Claims and Counterclaims ⚔️

The Hongs demanded:

1. Cancellation of all agreements from October 6, 2008, and December 29, 2008
2. Restoration of their shareholder status in Company D3 (back to 36.44% and 15.18%)
3. Payment of $346,438 for "service fees" related to helping Company D2 acquire shares from other shareholders

Company D2 responded by:

1. Asserting that it had fully paid according to the contract
2. Claiming there was no service fee agreement
3. Arguing that some claims were past the statute of limitations

First Instance Judgment: The Initial Verdict 🔨

The Ho Chi Minh City Court ruled:

1. Dismissed the service fee claim and the request to cancel the October 7, 2008 agreement due to expired statute of limitations
2. Rejected the request to cancel the October 6, 2008 agreement and December 29, 2008 contract
3. Denied the request to restore the sellers' shareholder status

Appellate Court Decision: The Final Word ⚖️

The Appellate Court upheld the lower court's decision, finding:

1. The statute of limitations had not expired for the main contract cancellation request
2. The buyer had fully paid the contract amount of $1,886,016
3. There was no evidence to support the sellers' claim that a different price ($7,938 per share) was agreed upon
4. The service fee claim was time-barred as it was raised over 13 years after the alleged agreement

Real-Life Example: When Share Transfers Go Wrong 🏠🚗

Consider the case of Alex, who sold 30% of his tech startup to an investor in 2020 for $1 million, with a verbal side agreement that the investor would provide business connections. When these connections never materialized, Alex wanted to cancel the sale. But without written evidence of this side obligation, he faced the same difficulty as the Hongs – proving what was verbally agreed upon versus what was written in the contract! 📝

Did You Know? 🤔

• USD agreements in Vietnam: While contracts in Vietnam should generally be in Vietnamese Dong, foreign currency agreements are permitted for certain international transactions, as long as payment is actually made in VND through banks! 💱
• Statute of limitations: In Vietnam, commercial disputes typically have a 2-year statute of limitations, but this can be "reset" if the other party acknowledges the obligation! ⏱️
• Share transfer rules: Vietnamese law requires company approval and registration of share transfers with business registration authorities for the transfer to be legally complete. 📋

Tips for Successful Share Transfers 💡

1. Get everything in writing - verbal agreements about price or terms are extremely difficult to prove later
2. Use clear, consistent language in all documents - avoid having multiple agreements with different terms
3. Specify currency conversion methods if using USD or other foreign currencies
4. Document all payments thoroughly with banking records
5. Comply with corporate and securities laws for registration and disclosure
6. Consider using escrow for large transactions to ensure all conditions are met

Nature's Own "Ownership Transfers" 🌿

Just as humans transfer company shares, nature has its own ownership transfer systems:

• Territorial animals like wolves and lions transfer "ownership" of land through physical contests and marking. The difference? Their transfers have no paperwork, just teeth and claws! 🐺
• Beehives automatically "transfer ownership" to a new queen when the old one dies or leaves—a much smoother succession than many human companies experience! 🐝
• Hermit crabs form "exchange chains" where multiple crabs upgrade to larger shells in sequence—a remarkably orderly process without lawyers! 🦀

Unlike these natural systems, human share transfers need careful documentation and legal frameworks to avoid costly disputes like the one we've examined! 📄

Test Your Knowledge! 📝

1. What was the main reason the court rejected the Hongs' request to cancel the share transfer?
2. What is the statute of limitations for commercial disputes in Vietnam?
3. Was the use of USD in the contracts legal according to the court?
4. What evidence would the Hongs have needed to win their case?
5. What type of claims were dismissed due to statute of limitations?

(See answers at the bottom of this post!)

Your Turn: Share Your Thoughts! 🗣️

Have you experienced difficulties with business contracts or share transfers? What precautions do you take to ensure all parties understand and follow agreements? Share your experiences in the comments below!

Remember: Clear contracts make for happy shareholders and empty courtrooms! 💼

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Keywords: #ShareTransferDispute #ContractLaw #StockTransfer #BusinessLitigation #CommercialLaw #VietnamLegalSystem #DollarDenominatedContracts #StatuteOfLimitations #CorporateDisputes #ShareholderRights

⚖️ Real legal case: the judgment number  04/2025/KDTM-PT, issued on  Jan 21, 2025📜(Source: congbobanan.gov.vn)

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🚨 Fun But Serious: A Brief Legal Disclaimer 🚨

Hey there, stock market explorer! 🕵️‍♂️ Before you go...

• This article is like a prospectus, not a guaranteed return 📊 It'll inform you, but won't solve your share transfer disputes!
• Each business transaction is unique 🦄 Your contract drama may play out differently!
• For real-world stock disputes, seek a professional legal wizard 🧙‍♂️ (May we suggest Thay Diep & Associates Law Firm?)

Remember: Reading this doesn't make you a corporate lawyer, just like playing Monopoly doesn't make you a real estate tycoon! 🏢😉

#LegalInfo #NotLegalAdvice #ConsultAPro

Support Your Legal Ninja's Coffee Fund! ☕

Enjoyed Ngọc Prinny's witty legal wisdom on share transfers? Help keep this ninja caffeinated! Every article is powered by:

• Hours of corporate case research 📚
• Legal expertise spanning 10+ years of business disputes ⚖️
• Creative explanation of complex contract principles 📝
• And lots of coffee to decipher court judgments! ☕

If my posts have helped you navigate Vietnam's corporate legal labyrinth, consider treating me to a coffee! Your support helps keep the legal puns flowing and the knowledge growing. 🌱

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If you're reading this in the evening, may your dreams be free of contract disputes and full of successful business ventures! 😴 If you're starting your day with this article, may your morning be as promising as a rising stock chart and your day filled with clearly written agreements! ☀️ And if you're somewhere in between, remember that like a good contract, good information is clear, valuable, and worth investing your time in! 📈✨

Spill the Beans, Spread the Love, & Brighten My Day! ☕️⚖️🌟

• Local Support (VND): Local Bank QR Code:📱

 

• International Support (USD via PayPal): 💸 PayPal: @NgocPrinny 

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Quiz Answers:

1. The court found that Company D2 had fully paid according to the contract terms, and there was no evidence of a different agreed price.
2. Two years.
3. Yes, because actual payments were made in VND converted through banks.
4. Written evidence of the alleged $7,938 per share price agreement.
5. The service fee claim and the request to cancel the October 7, 2008 agreement.