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“Transferring Capital Contribution Shares: Conditions and Procedures”

If you're unsure about the process and requirements for transferring capital contributions in a limited liability company, look no further!

Administrator

4 September, 2024

The establishment of companies is on the rise, and with it, related activities such as capital contribution transfers in limited liability companies. We will guide you through the conditions and procedures for transferring capital contributions in an LLC in this article.

1Transferring Capital Contributions in a Multi-Member LLC

Transfer of capital contributions in a multi-member LLC must comply with legal procedures.

2Principles of Capital Contribution Transfer in a Multi-Member LLC

The 2014 Enterprise Law is the legal basis for transferring capital contributions in a multi-member LLC.

According to Article 53, Chapter III of the 2014 Enterprise Law, members of a multi-member LLC must follow these procedures:

Article 53. Transfer of Capital Contributions

– Except for cases mentioned in Article 52, Clause 5, and Clause 6 of Article 54 of this Law, members of a multi-member LLC have the right to transfer part or all of their capital contributions to others as follows:

The transfer must be offered to existing members in proportion to their capital contributions and under the same conditions.
Transfers to non-members are only allowed under the same conditions as mentioned in point a if the existing members do not purchase or do not fully purchase within 30 days from the offer date.

– The transferring member retains their rights and obligations corresponding to the related capital contributions until the buyer’s information (as specified in points b, c, and d, Clause 1, Article 49 of this Law) is fully recorded in the members’ register.

– If the transfer or change of capital contributions results in only one remaining member, the company must operate as a single-member LLC and simultaneously register the change of enterprise registration content within 15 days from the completion of the transfer.

Article 52. Buyback of Capital Contributions

– A member has the right to request the company to buy back their capital contributions if they have voted against a resolution of the Members’ Council on the following issues:

Amending and supplementing the company’s charter regarding the rights and obligations of members and the Members’ Council.
Reorganizing the company.
Other cases as prescribed in the company’s charter.

The buyback request must be in writing and sent to the company within 15 days from the date of passing the resolution mentioned in this Clause.

– Upon receiving the request from the member specified in Clause 1 of this Article, if the price cannot be agreed upon, the company must buy back the member’s capital contributions at market price or the price determined according to the company’s charter within 15 days from the date of receipt of the request. Payment can only be made if, after paying for the purchased capital contributions, the company can still pay all debts and other property obligations.

– If the company does not buy back the capital contributions as prescribed in Clause 2 of this Article, the member has the right to freely transfer their capital contributions to other members or non-members.

Article 54. Handling of Capital Contributions in Special Cases

– If a member is an individual who has died, the heir according to the will or the law of that member shall be a member of the company. If a member is an individual who has been declared missing by the court, the manager of that member’s property according to the civil law provisions shall be a member of the company.

– If a member is restricted or loses civil act capacity, their rights and obligations in the company shall be exercised through a guardian.

– The company shall buy back or transfer the capital contributions as prescribed in Articles 52 and 53 of this Law in the following cases:

The heir does not want to become a member.
The donee under Clause 5 of this Article is not approved by the Members’ Council to become a member.
The member organization has been dissolved or bankrupt.

– If there is no heir, or the heir refuses to accept the inheritance or is deprived of the right of inheritance, the capital contribution shall be settled according to the civil law provisions.

– A member has the right to donate part or all of their capital contributions to others.

If the donee is the spouse, parent, child, or relative up to the third degree of kinship, they shall become a member of the company. If the donee is another person, they shall become a member of the company only when approved by the Members’ Council.

– If a member uses their capital contribution to pay off debts, the recipient of the payment has the right to use that capital contribution in one of the following forms:

Become a member of the company if approved by the Members’ Council.
Offer to sell and transfer that capital contribution according to Article 53 of this Law.

3Procedures for Transferring Capital Contributions in a Multi-Member LLC

Proper documentation and procedures are crucial for transferring capital contributions in a multi-member LLC.

The following documents and procedures are related to the transfer of capital contributions in a multi-member LLC:

Notification of changes in the company’s capital contributors.
Written decisions and copies.
Minutes of the Members’ Council meeting on the transfer of capital contributions.
Transfer contract, confirming the completion of the transfer.
Documents of the transferee: A valid copy of the Business Registration Certificate or Enterprise Registration Certificate or decision on establishment: If the transferee is an organization.
If the transferor does not come to complete the transfer procedure in person, a valid copy of the authorized representative’s identification document is required.

4Transferring Capital Contributions in a Single-Member LLC

Single-member LLCs must follow the 2014 Enterprise Law for capital contribution transfers.

5Principles of Capital Contribution Transfer in a Single-Member LLC

Single-member LLCs must adhere to legal regulations when transferring capital contributions.

Single-member LLCs must follow the procedures prescribed in Chapter III, Section 2: Single-Member LLC of the 2014 Enterprise Law and Article 46 of Decree 78/2015/ND-CP. Here is a summary:

If a portion of the capital contribution is transferred to another individual or organization, the single-member LLC will have more than one owner. Therefore, it must change its business type to a multi-member LLC or a joint-stock company.
If the entire capital contribution is transferred to another individual or organization, the single-member LLC must change its owner.

6Procedures for Transferring Capital Contributions in a Single-Member LLC

Understanding and complying with the procedures for transferring capital contributions in a single-member LLC is essential.

The procedure for transferring capital contributions in a single-member LLC consists of two phases:

Phase 1 Transfer of Capital Contributions

When transferring capital contributions, the enterprise needs to prepare the following documents:

Notification, minutes of the meeting, and decision on changes.
Capital contribution transfer contract with signatures of the parties.
Documentation certifying the completion of the transfer, with confirmation from the company.
Minutes of liquidation of the transfer completion.

Phase 2 Conversion of Business Type

When converting the business type, you need to prepare the following documents:

If transferring a portion of the capital contribution:

Application for Enterprise Registration.
Application for Enterprise Conversion.
Application for registration of changes to enterprise registration content.
Notification of changes to enterprise registration content.
Decision of the owner on the conversion of the business type.
Charter of the converted company.
List of members of the converted company.
Valid copy of ID card (or passport) (for individuals).
Valid copy of the Business Registration Certificate/Enterprise Registration Certificate/Enterprise Registration Certificate for organizations.
Valid copy of the authorized representative’s identification document.
Corresponding power of attorney decision of the organization.
Capital contribution transfer contract and confirmation of completion of transfer.

If transferring the entire capital contribution:

Notification of change of company owner.
Valid copy of the new owner’s identification documents or legal entity.
Amended company charter.
Capital contribution transfer contract.

Through this article, we hope you understand the conditions for transferring capital contributions in an LLC. We wish you success in preparing the necessary documents and procedures!

Frequently asked questions

There are several conditions that must be met for this type of transfer. Firstly, the company must have operated for at least one year with a valid Certificate of Business Registration, and the land use right must be valid for at least one year as well. The company’s charter capital must also be fully paid up, and the land use right must be unencumbered and not subject to any legal disputes.

The procedures for this transfer are quite detailed and involve multiple steps. Firstly, the company must hold a meeting of the General Meeting of Shareholders to discuss and decide on the transfer. A decision must be made on the value of the land use right, and this value must be approved by the shareholders. The company must then prepare a list of documents, including a decision on the transfer, a list of shareholders, and a description of the land use right. These documents must be submitted to the business registration agency for approval.

There are tax implications for both the transferor and the transferee in this type of transaction. The transferor may be subject to tax on the transfer of the land use right, and the transferee may be subject to tax on the receipt of the contribution. It is important to seek professional advice to ensure compliance with all applicable tax regulations.

Yes, there are some restrictions to be aware of. For example, the transfer of shares must comply with the provisions of the company’s charter and the law. The shares must also be fully paid up, and the transfer must not result in a change in the company’s legal status or business lines.

To transfer capital contribution in the form of shares, the company must first obtain approval from the business registration agency. The company must then prepare a list of documents, including a decision on the transfer, a list of shareholders, and the share certificates. These documents must be submitted to the business registration agency, and the transfer will take effect once it is recorded in the enterprise registration certificate.