Viet Nam legal regulations on the capital of a single-member limited liability company

The single-member limited liability company is a common type of enterprise in Viet Nam. The capital of a single-member limited liability company is very important to the business operation of the company. Let’s find out this issue with Lawyer X through the following scenario: “Dear Lawyer! I would like to know about regulations on charter capital of a single-member limited company. How do I contribute capital to establish this type of company? Thanks for your consulting! “

Legal grounds

Viet Nam Law on Enterprises

What is a single-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.”

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 liability company comprises 2 types which are single-member limited liability companies and multi-member limited liability companies.

Single-member limited liability is an enterprise which has characteristics as follows:

– The owner of a single-member limited liability company is a single organization or individual

– Assets liability of the owner is limited liability, which means the owner shall be liable for all business operations of the enterprise to the extent of the charter capital of the company.

– A single-member limited liability company has the status of a juridical person.

– A single-member limited liability company must not issue shares except for equitization; but may issue bonds in accordance with laws

To understand better about the capital of a single-member limited liability company, 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.

Contributing capital to establish the company

 The initially registered charter capital of a single-member limited liability company is the total assets promised by the owner and shall be written in company’s charter.

 The owner shall contribute adequate 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 owner shall have rights and obligations that are proportional to the promised capital.

In the charter capital is not fully contributed by the deadline specified in Clause 2 of Article 75 of Law on Enterprises, the owner shall register the contributed capital as charter capital within 30 days from the deadline, in which case the owner shall be responsible for the financial obligations incurred by the company during the period before the change in charter capital is registered in proportion to the promised capital.

The owner’s liability for the company’s financial obligations and the damage caused by the failure to contribute or to fully and punctually contribute charter capital prescribed by this Article shall be equal to all of the owner’s assets.

Increasing, decreasing charter capital

A single-member limited liability company may increase its charter capital when its owner contributes capital or raises capital from other persons. The owner shall decide on the specific increase and the method.

In case of raising capital from other persons, the company shall be converted into a multiple-member limited liability company or joint stock company. To be specific:

– In case of conversion into a multiple-member limited liability company, a notification of change in enterprise registration information shall be submitted within 10 days from the day on which the change in charter capital is complete;

– In case of conversion into a joint stock company, follow the instructions in Article 202 of Law on Enterprises;

A single-member limited liability company may decrease its charter capital in the following cases:

– Part of the contributed capital is returned to the company’s owner 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;

– Charter capital is not fully and punctually contributed by the owner as prescribed in Article 75 of Law on Enterprises.

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Frequently asked questions

Conclusion: So the above is Viet Nam legal regulations on the capital of a single-member limited liability company. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com