In business activities, the right to request a refund of contributed capital is an important matter to ensure the rights and interests of the involved parties. To exercise this right, the individual or organization concerned must comply with certain legal procedures to ensure transparency and legality in the refund process. Below, NPLaw invites you to explore the legal issues related to capital refund requests.
I. Understanding on requests for capital refund
1. What is a request for capital refund?
A capital refund request refers to a member or shareholder in an enterprise requesting the company to return the contributed capital or repurchase the shares they have invested in. However, such a refund is not always permissible and must comply with the provisions of the law and the financial condition of the company.
2. Why make a request for capital refund?
A capital refund request is made when a member/shareholder wishes to withdraw capital from the company for various reasons. Firstly, some shareholders or capital-contributing members may no longer want to continue investing due to poor business performance, prolonged losses, or lack of profitability.
Additionally, personal financial restructuring needs are a common reason. Shareholders or members may need to withdraw capital to invest in other fields, resolve financial difficulties, or simply change their investment strategy. However, a refund request must comply with legal regulations, ensuring that the company is able to meet its other financial obligations before returning capital to members/shareholders.
II. Legal regulations on requests for capital refund
1. Conditions for implementing a request for capital refund
According to Clause 3 Article 68, Clause 3 Article 87, and Clause 5 Article 112 of the Law on Enterprise 2020, to refund contributed capital to members or owners, a company must satisfy the following two conditions:
- The company must have operated continuously for at least 2 years from the date of enterprise registration;
- The company must ensure it can pay all debts and other property obligations after refunding the contributed capital.
Thus, the company is only allowed to refund capital after operating continuously for two years and ensuring it can pay all debts and other obligations.
2. Legal procedures related to a request for capital refund
The legal procedures related to capital refund requests under the Law on Enterprises 2020 depend on the type of enterprise and the reason for the refund:
For multi-member limited liability companies:
- A member wishing the company to repurchase their capital contribution must send a written request to the Members' Council;
- The company must repurchase the capital contribution within 30 days from the date of receiving the request (Clause 3 Article 68);
- If the company does not repurchase, the member has the right to transfer their capital contribution to another person.
For single-member limited liability companies:
- The owner cannot directly withdraw capital but may transfer their capital contribution;
- This is done through a capital transfer contract and updating the owner change with the Business Registration Office (Clause 5 Article 77).
For joint-stock companies:
- A shareholder requesting the company to repurchase shares must send a written request within 10 days from the date the General Meeting of Shareholders adopts a resolution they oppose (Clause 2 Article 119);
- The company must repurchase the shares within 90 days; otherwise, the shareholder may transfer the shares to another person.
For partnerships:
- A general partner wishing to withdraw capital must notify in writing and obtain approval from the Members' Council;
- The refund can only be made after settling related financial obligations (Clause 2 Article 185).
3. Dossier components for a request for capital refund
The dossier components for making a capital refund request include:
- A written request for capital refund by the owner, member, or shareholder, stating the reasons and legal basis;
- Meeting minutes and resolutions of the Members' Council (for multi-member limited liability companies) or the General Meeting of Shareholders (for joint-stock companies) approving the refund;
- The latest financial statements proving that the company can pay debts and other financial obligations;
- Capital contribution contracts, the company’s charter, or related agreements serving as the basis for considering the refund request;
- Personal documents of the requesting party (ID card/Citizen ID/Passport) and documents proving their status as member/shareholder.
III. Questions on requests for capital refund
1. Who has the right to make a request for capital refund?
According to Articles 68, 77, 119, and 185 of the Law on Enterprise 2020, the right to make a capital refund request is stipulated as follows:
- Members of the company in a multi-member limited liability company;
- The owner of a single-member limited liability company;
- Shareholders in a joint-stock company;
- General partners in a partnership.
Thus, under the Law on Enterprise 2020, company members, owners, shareholders, or general partners have the right to request a refund of contributed capital depending on the type of enterprise and the status of each individual in the company.
2. When can a request for capital refund be made?
Under the Law on Enterprise 2020, a capital refund request may be made in specific cases:
- For multi-member limited liability companies and joint-stock companies, members have the right to request the company or another person to repurchase their capital contribution/shares (Clause 3 Article 68 and Clause 2 Article 119).
- For partnerships, a member may withdraw capital if approved by the Members' Council under Clause 2 Article 185.
- For single-member limited liability companies, the owner may withdraw capital by transferring it to another individual or organization under Clause 5 Article 77.
Thus, the right to request a capital refund in an enterprise depends on the type of company and the specific conditions stipulated by law.
3. What should parties do in case of disputes over requests for capital refund?
When disputes arise over a capital refund request, the parties should review the company’s charter, capital contribution contracts, or related agreements to determine their rights and obligations. They may then hold meetings to agree on a solution to avoid prolonged disputes. If reconciliation fails, the parties may file a lawsuit with a competent court or bring the matter to commercial arbitration if there is an arbitration agreement. Choosing an appropriate dispute resolution method will effectively protect the parties' rights in accordance with the law.
4. Are requests for capital refund limited by a statute of limitations?
Under the Law on Enterprise 2020, there is no specific provision on the statute of limitations for capital refund requests. This means the law does not impose a time limit for owners, members, or shareholders to request a capital refund. However, to safeguard their interests, parties should still make such requests within a reasonable time.
5. Will a request for capital refund be accepted if the company is experiencing financial difficulties?
If a company is facing financial difficulties or losses, refunding capital to members/shareholders must comply with the enterprise law regulations. Depending on the type of company, different withdrawal provisions apply:
- Multi-member limited liability companies and joint-stock companies: When the company is incurring losses, members/shareholders cannot directly withdraw capital but may only transfer their capital contributions/shares to others under Articles 51 and 127 of the Law on Enterprise. Repayment of contributed capital/shares is only carried out when the company ensures it can pay all debts and other obligations as stipulated in Article 68.
- Partnerships: A general partner may only withdraw capital with the approval of the Members' Council, and only at the end of the financial year after the financial statements have been approved under Article 185. Contributing partners are free to transfer their capital contributions to others at any time without needing approval from the Members' Council.
- Single-member limited liability companies: Under Clause 5 Article 77, the owner may only withdraw capital by transferring part or all of their charter capital to another organization or individual. If the owner withdraws capital by other means, they and relevant parties will be jointly liable for the company's debts and property obligations.
Thus, if a company is in financial distress, members/shareholders cannot directly withdraw capital except by transferring their capital contributions/shares to others. Requests for the company to repurchase contributed capital/shares may only be fulfilled if the legal conditions or company charter allow it, and the company ensures payment of all debts and obligations before returning capital to members/shareholders.
IV. Legal consulting services related to capital refund requests
Above is NPLaw’s article on capital refund requests. With a team of experienced lawyers and legal experts, NPLaw is always ready to accompany, advise, and support clients on legal matters related to capital refund requests. For assistance with other legal issues, please contact NPLaw using the information below:
