Things to consider when changing managers and auditors of a limited company
2023/04/29
- Certified Public Accountant (US)
- Masaya Sakai
1. The Concept of Administrators and Auditors
1.1. Administrators
In Article 4, Paragraph 24 of the 2020 Corporate Law, the administrators of a company are defined. Specifically, “company administrators” refers to those who manage private enterprises or companies, including private business owners, general partners, chairpersons of members’ meetings, members of members’ meetings, company chairpersons, chairpersons of the board of directors, directors, presidents/general managers, and other individuals holding administrative positions as stipulated in the company bylaws. Company administrators hold the following positions in accordance with the provisions of the Corporate Law.
・The legal representative of a company is an individual who represents the company and has the authority to exercise rights and obligations arising from the company’s transactions. They usually hold positions such as chairman of the company, chairman of the general meeting of employees, president, or general manager. In addition to the aforementioned positions, the company can select other roles as legal representatives, which must be specified in the company articles of incorporation.
・The delegated representative of the company’s owners or employees in the organization is an individual who, having received a written delegation, exercises rights and obligations in the name of the respective owner or employee. Furthermore, the statutory representative may also serve concurrently as a delegated representative.
The summary of company managers is as follows:
| Single-member limited liability company(LLC) (any model) | LLC with two or more members |
| Company chairman, president/general manager | Chairman of the members’ meeting, member of the members’ meeting, president/general manager |
| Chairman of the members’ meeting, member of the members’ meeting, president/general manager |
1.2.Auditor
In corporate law, the concept of an auditor is not specifically defined, but an auditor is understood to be a person who has the duty to supervise and audit the company’s business activities, the general meeting of shareholders, the chairman of the company, the president, and other managers regarding their rights and obligations. However, it is possible to appoint an auditor or establish an audit committee in response to the company’s requirements.
2. Authority to decide on changes to managers and auditors
2.1. Single-Member Limited Liability Company
A single-member limited liability company is a company owned by one organization or one individual (hereinafter “company owner”). According to Article 76, Paragraph 1, Item c of the 2020 Enterprise Law, the rights of the company owner are as follows.
c) To decide the company’s management organizational structure, and to appoint, dismiss, or remove the company’s managers and auditors.
Article 81, Paragraph 1 of the 2020 Enterprise Law stipulates as follows.
“1. The chairman of the company, appointed by the company owners, exercises each right of the company owners and fulfills obligations in the name of the company owners… Therefore, the company owners have the right to appoint, dismiss, or remove the aforementioned managers and auditors.”
2.2. Limited Liability Company with Two or More Members
A limited liability company with two or more members consists of 2 to fewer than 50 members who can be individuals or organizations. The general meeting of members is the company’s highest decision-making body and consists of all company members, including delegated representatives. The authority of the general meeting of members is stipulated as follows in Article 55, Paragraph 2 of the Corporate Law.
“dd) Appointment, dismissal, and removal of the chairman of the general meeting of members. Decide on the appointment, dismissal, and removal of the president or general president, the head of the accounting department, auditors, and other managers stipulated in the company’s articles of incorporation, as well as the conclusion and termination of contracts.”
Therefore, the general meeting of members has the authority to decide on the appointment, dismissal, and removal of the company’s managers and auditors.
3. Required Procedures
Although there are differences in the management models of the two limited liability companies, the procedures required for changing administrators and auditors are the same. The details are as follows.
3.1. Internal Procedures
When changing administrators and auditors, the company must carry out internal procedures as follows depending on the form of the limited liability company.
| Single-Member Limited Liability Company | Multi-Member Limited Liability Company | Points to Note |
| The owner of the company issues a decision document for the change. | Issue a resolution document for the change by the general meeting of members. | Because the content of the decision is not prescribed by law, it can be understood as an internal document created by the company. The company should include details such as the appointment date (if any) and the job title. |
3.2. Procedures with the Competent Authorities
a. Business Registration Authority (Business Registration Department of the Planning and Investment Bureau)
Regarding auditors, under the current corporate law, notification of changes to the business registration authority is no longer required. Therefore, when changes occur, only internal procedures need to be carried out, and it is necessary to issue a decision document for dismissal or appointment. Regarding administrators, the company needs to carry out the procedures for changes in business registration with the business registration authority. Additionally, attention must be paid to the term of office and number of appointments of administrators and auditors as stipulated by corporate law.
| Single-member limited liability company | Multi-member limited liability company | ||||||||
| Chairman of the company | Chairman of the members’ meeting | Members of the members’ meeting | President / General manager | Auditor (if any) | Chairman of the members’ meeting | Members of the members’ meeting | President / General manager | Auditor (if any) | |
| Term of Office | No regulations | Within 5 years | No regulations | Within 5 years | No regulations | Within 5 years | |||
| Number of Appointments | Unlimited | No regulations | Unlimited | Unlimited | |||||
For positions that do not have clear regulations on the number of appointments, if the company owner or the general meeting of members wishes to reappoint at the expiration of the first term, no procedures with the competent authorities are required, and only internal procedures are needed.
b. Labor organizations (Labor Injuries and Social Affairs Bureau or Industrial Park Management Committee)
In the case of foreign workers serving as administrators or auditors, it is necessary to carry out procedures related to labor, such as applying for a work permit if applicable, in addition to the procedures for business registration. The details are as follows.
(i) In the case of new appointments
– Without a work permit: Apply for a work permit in accordance with the provisions of Articles 9 and 11 of Government Decree No. 152/NDCP. If you hold a work permit before being appointed to and serving in another position: you must apply for a work permit as a special case stipulated in Article 9 and Paragraph 9 of Article 11 of Government Decree 152/ND-CP. In this case, it is necessary to pay attention to the conditions for the work permit, such as possessing appropriate practical experience.
In addition, depending on the new position of the foreign worker, documents such as the appointment letter and the labor contract need to be redrafted.
(ii) When dismissing the predecessor and appointing a successor:
if the predecessor’s work permit is available, it should be returned, and similar to case (i), a work permit for the successor should be applied for.
Conclusion
The above summarizes the points to note when changing managers and auditors in a limited company. The company is encouraged to use this report to ensure that activities are carried out in compliance with regulations.
This article was translated with Yarakuzen.
