Conditions for the validity of capital contribution transfer agreements

A capital contribution transfer agreement is an important document confirming the sale and purchase between the transferor and the transferee. So, what are the conditions for the validity of capital contribution transfer agreements? In the following article, NPLaw provides information on the current regulations regarding capital contribution transfer agreements.

I. Understanding of capital contribution transfer agreements 

A capital contribution transfer agreement is a main document that confirms the sale and purchase between the transferor and the transferee. It serves as evidence of an individual’s capital contribution in a company and forms the basis for resolving disputes arising during the transfer process.

In principle, when a company member intends to transfer their capital contribution, the procedure requires offering it to other existing members of the company according to their proportional ownership. If, after 30 days, no member purchases it or purchases only part of it, the transfer may then be made to a non-member under the same terms.

II. Legal regulations on capital contribution transfer agreements

1. What is a capital contribution transfer agreement?

Capital contribution transfer refers to the process of transferring part or all of a member’s capital contributions invested in a company to another member. A capital contribution transfer agreement is a type of civil contract signed between the two parties, whereby the transferor transfers ownership of their capital contributions to the transferee.

2. Basic contents of the capital contribution transfer agreement

The valid capital contribution transfer agreement should include the following basic contents:

• Parties to the agreement
• Subject of the agreement
• Price and payment method
• Rights and obligations of the parties
• Effective date of the transfer
• Completion date of the transfer
• Liability for breach of contract
• Dispute resolution methods

3. Conditions for the validity of capital contribution transfer agreements 

According to Clause 1, Article 52 of the Law on Enterprise 2020, if the transferor wishes to transfer capital contribution to a non-company member, they must first offer it to existing members on the same terms, in proportion to their ownership. Within 30 days of the offer, if other members do not purchase or do not purchase all of such capital contributions, the transfer to a non-member may proceed under the same conditions offered to the existing members.

Thus, two main conditions for the legal capital contribution transfer are:

• The transfer must be offered first to the remaining members of the company.
• The terms offered to the non-member must be identical to those offered to the remaining members.

III. Questions on capital contribution transfer agreements

1. Effective date of the capital contribution transfer agreement

The agreement becomes effective at the date mutually agreed by the parties in the contract.

If no date is agreed upon, it becomes effective from the date of signing. Upon completion of the transfer, the agreement terminates.

2. Cases requiring approval of the General Meeting of Shareholders

Clause 3, Article 120 of the Law on Enterprise 2020 stipulates that the transfer of shares/capital contributions requires the approval of the General Meeting of Shareholders:

• Within 3 years from the issuance of the Enterprise Registration Certificate, the common shares of founding shareholders may be freely transferred to other founding shareholders, and may only be transferred to non-founding shareholders with the approval of the General Meeting of Shareholders. The transferring founding shareholder has no voting rights regarding the transfer of those shares.

3. Is the confirmation of the legal representative required for the agreement?

According to Point b, Clause 1, Article 52 of the Law on Enterprise 2020, for a mutil-member limited liability company, a member may transfer part or all of their capital contribution under the following condition:

• Offering to remaining members;
• If not purchased within 30 days, the transfer may proceed to a non-member.

Hence, it is only requested to obtain a written confirmation showing the 30-day offer to other members; the legal representative’s confirmation on the transfer agreement is not mandatory.

4. Are disputes over capital contribution transfer agreements in a mutil-member limited liability company considered civil disputes?

Clause 4, Article 30 of the Civil Procedure Code 2015 provides that the Court is competent authority to handle disputes related to business and commerce, as follows: 

• Disputes between a company and its members, disputes between a company and managers in a limited liability company or members of the Board of Directors, directors, general directors in a joint stock company, between members of a company with each other related to the establishment, operation, dissolution, merger, consolidation, division, separation, transfer of company assets, and conversion of the company's organizational form.

Therefore, disputes over capital contribution transfers between members in a mutil-member limited liability company are business/commercial disputes, not civil disputes.

IV. Legal advisory services on capital contribution transfer agreements

Ngoc Phu Law Company Limited provides reputable legal services on capital contribution transfer agreements. Our clients receive dedicated support from highly qualified and experienced lawyers and consultants. We provide guidance on procedures and solutions for issues regarding capital contribution transfer agreements.

For assistance to protect your rights and interests in a capital contribution transfer, contact NPLaw using the information below: