By Lawyer Le Phuong Thanh – UniLaw LLC

LAW FIRM PARTNERSHIP AGREEMENT – UNILAW

The foundation of any successful legal practice lies not just in the expertise of its advocates but in the strength of its internal governance. For law firms in Vietnam, whether domestic or international, the Partnership Agreement acts as the vital constitution that regulates relationships between practitioners, manages capital, and mitigates professional risks. This article provides a deep dive into the legal framework surrounding these agreements, supported by real-world case studies and detailed analysis of Vietnamese law.

Real-World Application: The Strategic Merger of Two International Law Firms

To understand the complexity of partnership structures, we must first look at a significant case involving two prominent legal entities in Vietnam. According to the sources, a major international law firm, which we will refer to as Firm A (originally Grünkorn & Partner), sought to strategically expand its market presence by merging with another established practice, Firm B (originally Michael Lorenz and Associates).

Firm A and Firm B were both established as foreign-invested law firms in Vietnam. The partners of both entities recognized that a merger would provide a more robust service offering to European businesses investing in Southeast Asia. The legal process required a comprehensive Merger Agreement and Merger Plan approved by the owners and partners of both firms.

The core legal challenge involved the termination of Firm B as a separate legal entity and the transfer of all its assets, rights, and obligations to Firm A. This inheritance included not only physical property and bank accounts but also professional liabilities, employment contracts, and ongoing legal service agreements with clients. Firm A had to apply for an amendment to its Establishment License and Operation Registration Certificate from the Ministry of Justice and the Department of Justice of Ho Chi Minh City to reflect the new structure.

The Result: The merger was successfully completed. Firm B ceased to exist, and Firm A became the surviving entity, maintaining all previous rights while expanding its human capital and client base. This case demonstrates that a well-drafted partnership and merger framework is essential for law firms to navigate the strict regulatory oversight of the Ministry of Justice while ensuring continuity for their clients.

Establishing the Legal Foundation: Law Firm Structures in Vietnam

In Vietnam, the form of a law firm is strictly regulated by the Law on Lawyers. Practitioners cannot simply operate as a standard partnership under the Law on Enterprises; they must follow specific professional requirements. According to the sources, specifically Article 34 of the Law on Lawyers, the legal forms are defined as follows:

“Article 34. Forms of law-practicing organizations:

1. Law-practicing organizations include:

a) Law offices;

b) Law firms.

2. Law offices are organized and operate in the form of a sole proprietorship. A law office is established by one lawyer who is its head and is liable for all obligations of the office with all his/her assets. The name of the law office shall include the phrase ‘Law Office’ followed by its proper name.

3. Law firms include partnership law firms and limited liability law firms. Members of law firms must be lawyers.

4. Partnership law firms are established by at least two lawyers. A partnership law firm does not have capital-contributing members.”

Explanatory Note: This law dictates that if you want a partnership structure, you must have at least two qualified lawyers. Unlike standard commercial partnerships, a law firm partnership cannot include “silent” or “passive” investors who are not certified lawyers, ensuring that professional accountability remains strictly with the practitioners.

Member Roles and Management Power in Law Firm Partnerships

The internal management of a law firm partnership is often vested in a Members’ Council. While the Law on Lawyers provides the professional framework, the Law on Enterprises provides the operational mechanics for partnership structures. According to the sources, Article 182 of the Law on Enterprises 2020 details the decision-making process:

“Article 182. Members’ Council:

1. The Members’ Council consists of all members. The Members’ Council elects a partnership member to be the Chairman of the Members’ Council, who concurrently acts as the Director or General Director of the company unless otherwise provided in the company’s Charter.

2. A partnership member has the right to request the convention of a meeting of the Members’ Council to discuss and decide on the company’s business affairs. The member requesting the meeting must prepare the agenda and materials for the meeting.

3. The Members’ Council has the right to decide all business affairs of the company. Unless otherwise provided by the company’s Charter, decisions on the following matters must be approved by at least three-fourths of the total number of partnership members:

a) Development orientation and strategy of the company;

b) Amendment of and supplement to the company’s Charter;

c) Admission of new members;

d) Approval of a partnership member’s withdrawal from the company or decision on expulsion of a member;

đ) Decision on investment projects;

e) Decision on borrowing and mobilizing capital in other forms, or lending with a value of 50% or more of the company’s charter capital…”

Explanatory Note: This article ensures that fundamental changes to the firm, such as admitting new partners or changing the firm’s strategy, require a supermajority. This prevents a simple majority from radically altering the professional nature of the partnership without broad consensus.

Rights and Professional Obligations of Partnership Members

Every partner in a law firm carries a dual burden: the commercial responsibility of a business owner and the ethical responsibility of a legal practitioner. Article 181 of the Law on Enterprises, as cited in the sources, outlines the rights of these members:

“Article 181. Rights and obligations of partnership members:

1. A partnership member has the following rights:

a) To attend meetings, discuss and vote on company issues; each partnership member has one vote or a different number of votes as provided in the company’s Charter;

b) To conduct business in the company’s business lines in the name of the company; negotiate and sign contracts, transactions or agreements with terms that such partnership member deems most beneficial to the company;

c) To use the company’s assets to conduct business in the company’s business lines…

đ) To request the company and other partnership members to provide information on the company’s business situation; check assets, accounting books and other documents of the company when necessary;

e) To be distributed with profits in proportion to his/her capital contribution or as agreed in the company’s Charter…”

Explanatory Note: Partners have the authority to act on behalf of the firm and bind the firm to contracts. Crucially, they have an absolute right to transparency, meaning they can inspect books and records at any time to ensure the firm is being managed ethically and profitably.

However, these rights are balanced by strict prohibitions to prevent conflicts of interest. According to the sources, Article 180 of the Law on Enterprises states:

“Article 180. Restrictions on rights of partnership members:

1. A partnership member may not be the owner of a sole proprietorship; may not be a partnership member of another partnership unless otherwise agreed by the remaining partnership members.

2. A partnership member may not, in his/her own name or in another person’s name, conduct business in the same business lines as those of the company for personal gain or to serve the interests of another organization or individual.

3. A partnership member may not transfer a part or the whole of his/her capital contribution in the company to another organization or individual without the consent of the remaining partnership members.”

Explanatory Note: This prevents a partner from competing against their own firm or “moonlighting” in a way that would compromise their loyalty to the partnership. It also ensures that the “personal” nature of a partnership is protected by requiring consent before a new partner can be introduced through a transfer of capital.

Financial Accountability and Unlimited Liability in Legal Partnerships

One of the most critical aspects of a partnership agreement is the allocation of liability. Unlike a standard Limited Liability Company (LLC), partnership members in a law firm often face unlimited personal liability for the firm’s debts. According to the sources, Article 181 of the Law on Enterprises further defines these obligations:

“Article 181. Rights and obligations of partnership members (continued):

2. A partnership member has the following obligations:

a) To manage and perform business activities in an honest, prudent and best manner to ensure the maximum lawful interests of the company;

b) To manage and perform business activities in accordance with the law, the company’s Charter and resolutions and decisions of the Members’ Council…

đ) To be jointly and severally liable for paying the remaining debts of the company if the company’s assets are insufficient to cover its debts;

e) To bear losses in proportion to his/her capital contribution in the company or as agreed in the company’s Charter in case the company business suffers losses…”

Explanatory Note: This “joint and several liability” means that if the law firm goes into debt or is sued for malpractice beyond its insurance coverage, the partners’ personal homes, savings, and assets can be used to satisfy those claims. This underscores why choosing partners in a law firm is a decision of the highest importance.

Admission and Expulsion: Managing the Partnership Ranks

A Law Firm Partnership Agreement must clearly outline the “on-boarding” and “off-boarding” of partners. The sources, specifically Article 185 and 186 of the Law on Enterprises, provide the default legal procedures for these transitions:

“Article 186. Admission of new members:

1. A company may admit more partnership members or capital-contributing members; the admission of new members of the company must be approved by the Members’ Council.

2. A partnership member or a capital-contributing member must pay fully his/her committed capital to the company within 15 days from the date of approval, unless otherwise decided by the Members’ Council.

3. A new partnership member must be jointly and severally liable with all his/her assets for the company’s debts and other property obligations, unless such member and the remaining members have another agreement.”

Explanatory Note: New partners are not only responsible for future debts but also for existing firm liabilities from the moment they join. This makes the due diligence of a firm’s financial health essential for any lawyer considering joining an established partnership.

Expulsion is the ultimate sanction for a disruptive or unethical partner. Article 185 of the Law on Enterprises states:

“Article 185. Termination of partnership member status:

…2. A partnership member may be expelled from the company in the following cases:

a) Being unable to contribute capital or failing to contribute capital as committed after the company has made the second request;

b) Violating the provisions of Article 180 of this Law;

c) Performing business activities dishonestly, imprudently or having other inappropriate acts causing serious damage to the interests of the company and other members;

d) Failing to correctly perform the obligations of a partnership member.”

Explanatory Note: Expulsion isn’t just for financial failure; it’s a tool to protect the firm’s reputation. If a partner acts “dishonestly” or “imprudently,” they can be forced out to save the partnership from further damage.

International Law Firms: Partnerships across Borders

For foreign law firms operating in Vietnam, the partnership structure must also align with Vietnam’s WTO commitments and specific provisions in the Law on Lawyers. According to the sources, specifically the WTO Schedule of Specific Commitments, the following applies to legal services:

“Foreign lawyers organizations are permitted to establish commercial presence in Viet Nam in the following forms:

* Branches of foreign lawyers organizations;

* Subsidiaries of foreign lawyers organizations;

* Foreign law firms;

* Partnerships between foreign lawyers organizations and Viet Nam’s law partnerships.”

Furthermore, Article 72 of the Law on Lawyers (amended) defines the foreign limited liability and partnership forms:

“Article 72. Foreign law firms:

1. A 100% foreign-owned limited liability law firm is a law-practicing organization established in Vietnam by one or more foreign law-practicing organizations.

2. A joint-venture limited liability law firm is a law-practicing organization jointly established by a foreign law-practicing organization and a Vietnamese law-practicing organization.

3. A partnership law firm is a law-practicing organization established by a foreign law-practicing organization and a Vietnamese partnership law firm.”

Explanatory Note: These provisions allow international firms like Baker & McKenzie or Grünkorn & Partner to partner with local firms. This “Joint Venture” or “Partnership” model is a powerful way to combine international expertise with deep local knowledge of the Vietnamese courts and administrative procedures.

Operational Limits: What Foreign Partners Cannot Do

While partnerships are encouraged, foreign partners must be aware of the “red lines” in Vietnamese law. According to the sources, Article 70 of the Law on Lawyers limits the scope of practice for foreign-invested firms:

“Article 70. Scope of practice of foreign law-practicing organizations:

Branches and foreign law firms practicing in Vietnam may provide legal consultancy and other legal services, but they may not send foreign and Vietnamese lawyers in their practicing organizations to participate in legal proceedings in the capacity of representatives, defenders or protectors of lawful rights and interests of litigants before Vietnamese Courts, or perform legal document and certification services related to Vietnamese law; they may send Vietnamese lawyers in their practicing organizations to provide consultancy on Vietnamese law.”

Explanatory Note: Even in a partnership, foreign lawyers cannot represent clients in Vietnamese courts. This remains a protected domain for Vietnamese-licensed advocates. Foreign-invested firms can only advise on Vietnamese law through their employed Vietnamese lawyers who have graduated from Vietnamese law colleges and met local practice requirements.

Compulsory Professional Indemnity Insurance

Given the unlimited liability of partners, the law mandates a safety net. Article 40 of the Law on Lawyers requires firms to protect their partners and clients through insurance:

“Article 40. Obligations of law-practicing organizations:

… 6. To pay compensation for damage caused by its lawyers to clients while performing legal consultancy, representation outside legal proceedings and other legal services.

7. To buy professional liability insurance for its lawyers in accordance with the law on insurance business.”

Explanatory Note: Professional indemnity insurance is not optional. It is a legal requirement that protects the personal assets of partners from being completely wiped out by a single mistake made by a colleague or employee of the firm.

The Impact of Marriage on Law Firm Partnerships

In Vietnam, the intersection of Marriage and Family Law and Partnership Law creates unique challenges. If a lawyer uses “common property” (assets acquired during marriage) to fund their capital contribution to a law firm, their spouse may have a claim or interest in that portion of the business. According to the sources, Article 36 of the Law on Marriage and Family 2014 states:

“Article 36. Common property put into business:

In case husband and wife agree that one side puts common property into business, this person has the right to perform by him/herself transactions related to that common property. This agreement must be made in writing.”

Explanatory Note: If a partner wants to avoid their spouse interfering in the firm’s management, they should have a written agreement stating that the partner has the sole right to manage those business assets. Without this, a divorce could lead to the forced liquidation of the partner’s interest in the firm to satisfy asset division.

Terminating the Partnership: Winding Up and Liquidation

Even the best partnerships may eventually end. The Law on Lawyers provides clear grounds for the termination of a practice. According to the sources, Article 47 details these scenarios:

“Article 47. Termination of operation of law-practicing organizations:

1. A law-practicing organization terminates its operation in the following cases:

a) Self-termination of operation;

b) Having its Operation Registration Certificate revoked;

c) The head of the law office, the Director of a single-member limited liability law firm, or all members of a partnership law firm, or all members of a multi-member limited liability law firm have their Lawyer’s Practice Certificates revoked;

d) The law firm is merged or consolidated;

đ) The head of the law office or the Director of a single-member limited liability law firm dies.”

Explanatory Note: A legal partnership is fragile. If all the partners lose their practice certificates (perhaps due to professional misconduct), the firm is legally required to close. This emphasizes that professional ethics are not just individual concerns but survival issues for the entire firm.

Succession Planning: What Happens When a Partner Dies?

In a partnership, the death of a member can be destabilizing. The Law on Enterprises provides a framework for handling such events, as cited in Article 181:

“Article 181. Rights and obligations of partnership members (continued):

… h) In case a partnership member dies, his/her heir is entitled to the value of assets at the company after deducting the debts and other property obligations within the responsibility of that member. The heir may become a partnership member if approved by the Members’ Council.”

Explanatory Note: Being an heir to a partner does not mean you automatically become a partner. You are entitled to the financial value of the deceased partner’s share, but you can only join the firm as a member if the other partners trust you and vote to admit you. This protects the professional integrity of the firm from unqualified outsiders.

Conclusion: The Value of a Professional Law Firm Partnership Agreement

A Law Firm Partnership Agreement in Vietnam is much more than a business contract; it is a shield against personal financial ruin and a framework for professional excellence. By navigating the strict requirements of the Law on Lawyers, leveraging the operational flexibility of the Law on Enterprises, and complying with WTO international standards, legal practitioners can build firms that are both commercially viable and professionally resilient.

At Unilaw, we understand that the strength of our practice comes from the clarity of our partnerships. Whether you are establishing a new local firm or expanding an international practice through a joint venture, ensuring that your Partnership Agreement is legally sound and ethically grounded is the first step toward long-term success in the Vietnamese legal market.