Charter capital of a multi-member LLC is registered when establishing the company in Viet Nam. However, the amount of charter capital can be fluctuated throughout the course of business operation. Then the multi-member LLC shall implement procedures to increase, decrease charter capital in accordance with Viet Nam Law on Enterprises. Let’s find out this issue through the following situation: “Dear Lawyer! I would like to ask about in what cases a multi-member LLC may increase or decrease its charter capital? Then what procedures shall the company carry out? Thanks for answering me!”
Legal grounds
Viet Nam Law on Enterprises
What is a multiple-member limited liability company?
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.”
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 contributed capital (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 Certificate is 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.
To understand better about increasing, decreasing charter capital of a multi-member LLC, there are some terms we should notice, which are:
– “Business” or “business operation” means continuous execution of one, some or all stages including investment, manufacturing, sale or provision of services on the market for profit.
– “Charter capital” means the total value of assets that have been contributed or promised by the members/partners/owners when the limited liability company or partnership is established; or the total of nominal values of the sold or subscribed shares when a joint stock company is established.
Increasing, decreasing charter capital of a multi-member LLC in Viet Nam
A company may increase its charter capital in the following cases:
– Increase in the members’ capital contribution;
– Receipt of capital contribution from new members.
In case of increase in the members’ capital contribution, the increase will be distributed among the members in proportion to their holdings in the company. Members may transfer their right to contribute capital to other persons in accordance with Article 52 of Law on Enterprises. In case a member does not contribute or fully contribute that member’s share of additional capital as distributed, the remainder shall be divided among other members in proportion to their holdings in the company unless otherwise agreed by the members.
A company may decrease its charter capital in the following cases:
– The company returns part of the contributed capital to the members in proportion to their holdings in the company after the company has operated for at least 02 consecutive years from the enterprise registration date and the company is able to fully pay its debts and other liabilities after the return of capital;
– The company repurchases the members’ stakes as prescribed in Article 51 of Law on Enterprises;
– Charter capital is not fully and punctually contributed by the members as prescribed in Article 47 of Law on Enterprises.
In the case specified in Point c Clause 3 of this Article, within 10 days from the day on which the increase or decrease in charter capital is complete, the company shall send a written notification to the business registration authority. Such a notification shall contain the following information:
– The company’s name, EID number, headquarter address;
– The charter capital, the increase or decrease;
– Time and method of increase or decrease;
– Full names and signatures of the company’s legal representatives.
The notification mentioned in Clause 4 of Article 70 of Law on Enterprises shall be enclosed with the resolution or decision and the minutes of the meeting of the Board of Members and, in case of charter capital decrease specified in Point a and Point b Clause 3 of Article 69 of Law on Enterprises, the latest financial statement.
The business registration authority shall update information about the increase or decrease in charter capital within 03 working days from the day on which the notification is received.
Conditions for profit distribution
A company’s profit may only be distributed to its members after its tax liabilities and other financial obligations have been fulfilled as prescribed by law and it is able to fully pay its due debts and other liabilities after profit is distributed.
Recovery of returned capital or distributed profit
In case part of contributed capital is returned against the regulations of Clause 3 Article 68 of Law on Enterprises or profit is distributed to members against regulations of Article 69 of Law on Enterprises, the members shall return the money or assets they received from the company and are jointly responsible for the company’s debts and liabilities in proportion to the amount or assets that have not been returned until they are fully returned.
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Frequently asked questions
Multiple-member limited liability companies must not issue shares except for equitization
A company may increase its charter capital in the following cases:
– Increase in the members’ capital contribution;
– Receipt of capital contribution from new members.
In case of increase in the members’ capital contribution, the increase will be distributed among the members in proportion to their holdings in the company. Members may transfer their right to contribute capital to other persons in accordance with Article 52 of Law on Enterprises.
Conclusion: So the above is Increasing or decreasing charter capital of a multi-member LLC in Viet Nam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
