Capital contribution to establish multiple-member limited liability companies under Viet Nam law

Multiple-member limited liability company is one common types of enterprises in Viet Nam. Capital contribution to establish the company is very important to the survival and development of Multiple-member limited liability companies. Let’s find out this issue with lawyer X through the following scenario: “Dear Lawyer! I want to ask about Viet Nam’s legal regulations on capital contribution to establish a Multiple-member limited liability company. Is there anything I should notice? Thanks for answering me!”

Legal grounds

2020 Viet Nam Law on Enterprises

What are multiple-member limited liability companies?

The definition of an enterprise is specified in Clause 10, Article 4 of Law on Enterprise 2020, whereby: “Enterprise means an organization that has a proper name, assets, premises, is established or registered in accordance with law for business purposes.”

As can be seen, the enterprise has the following characteristics:

– Enterprise is an organization. Only an entity that is an organization can be considered an enterprise. Individuals who eventhough carry out business activities cannot be considered an enterprise.

– Has its own proper name, property, and premises. This feature shows the independence of an enterprise. The proper name helps enterprises to easily participate in transactions as well as distinguish them from other entities. Enterprise property is the physical basis for the enterprise to carry out production and business activities. Premises is a necessary element, is a place to perform some activities of the business.

– The enterprise is established or registered for establishment in accordance with the law. This shows that when an enterprise wants to operate in Vietnam, first of all, it must have the permission, recognition and management of the State without being set up or operating arbitrarily.

– The purpose of enterprise operation is for business purposes. Enterprise is a type of organization besides many other organizations that are regulated by law such as political organizations, social organizations, socio-political organizations, etc. This is an important characteristic to distinguish enterprise with other entities.  Enterprises mainly operate towards the purpose of making a profit, enriching themselves, the owner when investing in.

According to the Enterprise Law 2020, inheriting the previous legal regulations, currently enterprises include the following four types: private enterprises, partnerships, limited liability companies, joint-stock companies. Thus we can answer the question if  enterprise and company are the same? Enterprise has broader connotations than company. Company refers to types of enterprises  that are: Partnerships, Limited Liability Companies, Joint-Stock Companies. All types of companies are considered as enterprises. But not every type of enterprises is considered as a corporation, in particular private enterprise is not considered a company.

Limited liablity company comprises 2 types which are single-member limited liability company and Multiple-member limited liability company.

A multiple-member limited liability company is an enterprise which has characteristics as follows:

– A multiple-member limited liability company means an enterprise that has 02 – 50 members that are organizations or individuals. A member’s liability for the enterprise’s debts and other liabilities shall be equal to the amount of capital that member contributed to the enterprise, except for the cases specified in Clause 4 Article 47 of Law on Enterprises. The member’s stake (contributed capital) may only be transferred in accordance with Articles 51, 52 and 53 of Law on Enterprises.

– A multiple-member limited liability company has the status of a juridical person from the day on which the Enterprise Registration Certificateis issued.

– Multiple-member limited liability companies must not issue shares except for equitization.

– Multiple-member limited liability companies may issue bonds in accordance with Law on Enterprises and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of Law on Enterprises.

Capital contribution to establish the company and issuance of the certificate of capital contribution

The initially registered charter capital of a multiple-member limited liability company is the total capital contributed or promised by the members and shall be written in company’s charter.

The members shall contribute sufficient and correct assets as promised when applying for enterprise registration within 90 days from the issuance date of the Certificate of Enterprise Registration. The time needed to transport or import the contributed assets and for completing ownership transfer procedures will be added to this 90-day period.  During this period, the members shall have rights and obligations that are proportional to their promised contribution. The members may only contribute assets that are different from the promised ones if the change is approved by more than 50% of the remaining members.

In case a member fails to contribute or fully contribute capital as promised by the expiration of the period mentioned in Clause 2 of Article 46 of Law on Enterprises:

– The member that has not contributed capital at all is obviously no longer a member of the company;

– The member that has not fully contributed capital will have the rights that are proportional to the contributed capital;

– The right to contribute the missing capital will be sold under a resolution or decision of the Board of Members.

In the cases mentioned in Clause 3 of Article 42 of Law on Enterprises, the company shall register the change in charter capital and the members’ holdings within 30 days from the deadline for contributing capital specified in Clause 2 of this Article. The members who fail to contribute or fully contribute capital shall be responsible for the financial obligations incurred by the company during the period before the company registers the change in charter capital and the members’ holdings in proportion to their promised contributions.

In the cases specified in Clause 2 of Article 42 of Law on Enterprises, the capital contributor will become the company’s member from the day on which capital is fully contributed and information about the capital contributor prescribed Points b, c, dd Clause 2 Article 48 of Law on Enterprises has been fully recorded in the member register. On that day, the company shall issue the capital contribution certificate to the member.

The capital contribution certificate shall contain the following information:

– The company’s name, EID number, headquarter address;

– The company’s charter capital;

– Full name, signature, mailing address, nationality and legal document number if the member is an individual; EID number or legal document number, headquarters address if the member is an organization;

– The capital contributed and the member’s holding;

– The number and date of issuance of the certificate of capital contribution;

– Full names and signatures of the company’s legal representatives.

In case the Enterprise Registration Certificate is lost or damaged, the member will be reissued with another certificate following the procedures specified in the company’s charter.

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Frequently asked questions

Conclusion: So the above is Capital contribution to establish multiple-member limited liability companies under Viet Nam law. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com