Understanding Capital Transfer in a Limited Liability Company

In the world of business, owning a part of the charter capital of a limited liability company comes with numerous rights and responsibilities, as defined by the law and the company's charter. One crucial aspect of this ownership is the ability to transfer capital contributions. To provide clarity on this subject, NPLaw has compiled a comprehensive guide. Let's delve into the intricacies of transferring contributed capital in a limited liability company.

2. When to Transfer Contributed Capital in a Limited Liability Company

Transferring contributed capital in a limited liability company involves a member moving some or all of their rights and obligations related to their capital contribution to another member, individual, or organization that isn't a member. In cases where there are two or more members in the company, various situations allow for the transfer of contributed capital:

• Member Requests Buyback: Members can ask the company to repurchase their contributed capital.

• Internal Sale: Company members can offer to sell their contributed capital to other members proportionate to their initial contributions.

• Sale to Non-Members: If the remaining members do not purchase the capital within 30 days, the member can transfer it to individuals or organizations outside the company.

• Donation: Members can choose to donate part or all of their contributed capital to others.

• Debt Settlement: Contributed capital can be used by members to settle company debts.

For a one-member limited liability company, the process is simpler due to having a single owner. There are two scenarios:

• Partial Transfer: The member transfers a portion of their contributed capital to other individuals and organizations, which results in the company having more than one owner. In this case, the company must undergo procedures to convert to a limited liability company with two or more members or a joint-stock company.

• Full Transfer: If the member transfers all contributed capital to another entity, the company must change its owner.

3. Principles of Contributed Capital Transfer

According to Article 52 of the Law on Enterprises 2020, for two-member limited liability companies, members must adhere to strict procedures:

• They must offer for sale to other members under the same conditions and in proportion to contributed capital.
• If, after 30 days, no one purchases the contributed capital, the member can then transfer it to individuals or organizations outside the company.

This principle ensures liquidity for contributed capital while safeguarding the interests of members who no longer wish to be part of the company.

Additionally, the law provides flexibility in cases where members do not need to offer for sale to other members:

• When a member has the right to request the company to repurchase (as per Article 51 of the Law on Enterprises 2020), and if the company does not repurchase within 15 days of the request, the member can freely transfer the capital.

After a successful transfer, the company's charter capital remains unchanged, and the company proceeds to change or add members. However, if the transfer results in only one member, the company must change its enterprise type within 15 days and update the business registration details. Members transferring contributed capital must also be aware of their obligation to pay personal income tax in accordance with tax laws.

4. Procedures for Transferring Contributed Capital

To transfer contributed capital in a limited liability company, specific procedures must be followed, as outlined in Articles 52 and 53 of Decree no. 01/2021/ND-CP on enterprise registration:

Step 1: Preparing Dossiers

• Determine if the transferee is a Vietnamese or a foreigner, as this affects the eligibility for capital transfer.

Step 2: Submitting a Dossier of Transfer

• Prepare and submit the required documents for capital transfer.

Step 3: Obtaining the Receipt

• Upon receiving the enterprise registration dossier, the Business Registration Office will issue a receipt and verify the dossier's validity before granting an Enterprise Registration Certificate to the company.

5. Frequently Asked Questions About Contributed Capital Transfer

• What needs to be done to transfer contributed capital in a limited company?

  • When transferring contributed capital in a one-member limited liability company, you must determine whether it's a full or partial transfer. A full transfer requires procedures to change the company owner, while a partial transfer necessitates changing the company type.

• Does the transfer change the number of members contributing capital to a limited liability company?

  • The effect on the number of members depends on the extent of the transfer. In a one-member limited liability company, a full transfer won't alter the number of members, but a partial transfer will. Similarly, in a two-member limited liability company, adherence to strict procedures for offering to other members can affect the membership.

Understanding the intricacies of contributed capital transfer in a limited liability company is essential for members and company owners alike. Proper procedures and compliance with the law are crucial to ensure a smooth and legal transfer of capital.