Transfer of contributed capital in a limited company and things need to know

An entity needs to own a part of the charter capital of a limited liability company to become a member, then this entity will have a lot of rights and obligations prescribed by law and the company’s charter. The right to dispose of the capital contribution of members in a limited company is one of them. To help members and owners of limited companies better understand the right to transfer their contributed capital, NPLaw has related articles to refer, as follows:

When to transfer contributed capital in a limited liability company

Transfer of contributed capital in a limited liability company is the act of a company member transferring part or all of the rights and obligations corresponding to his/her capital contribution in the company to another member or other individual or organization that is not a member.

For the transfer of contributed capital in a two-member limited liability company specified in Articles 51, 52, 53 of the Law on Enterprises 2020, members of a limited liability company with two or more members have the right to transfer part or all of their contributed capital to others in the following cases:

• Members request the company to buy back their contributed capital.
• Company members offer to sell contributed capital to the remaining members in proportion to their contributed capital in the company;
• Transferring the same conditions of offering for the remaining members to the individual, is not members if the remaining members of the company do not buy or do not buy all within 30 days from the date of offering;
• Members donate part or all of their contributed capital in the company to others;
• Members use contributed capital to pay debts.

Besides, the transfer of capital in a one-member limited liability company is simpler than in a limited liability company with two or more members due to having a single owner. The transfer of contributed capital in a one-member limited liability company only exits in 02 cases:

• Members of a one-member limited liability company transfer a part of the contributed capital to other individuals and organizations, at this time the company has more than 1 owner, so it must carry out procedures to convert the type of enterprise to: Limited liability company with two or more members; Joint stock company.
• If a member of a one-member limited liability company transfers all contributed capital to another individual or organization, the company must change the owner.

Principles of transfer of contributed capital in a limited liability company

Pursuant to Article 52 of the Law on Enterprises 2020 on the principle that members of a two-member limited liability company need to carry out strict procedures as follows: Must offer for sale to other members of the company under the same conditions and according to the proportion of contributed capital. If from the date of the offering for sale 30 days no one buys or does not buy all, the member can transfer it to individuals or organizations that are not members.

Therefore, compared with the transfer of capital in a limited company with a joint stock company, it is limited to transferring capital to non-members in a limited company. This regulation creates this opportunity to ensure the liquidity of the contributed capital as well as protect the interests of members who no longer want to continue with the company.

On the other hand, the law is also very flexible and pliable when providing for additional cases where members do not need to offer for sale to the rest of the company but can freely transfer, which are: In case the member has the right to request the company to repurchase in accordance with the provisions of Article 51 of the Law on Enterprises 2020 that the member has requested the company to repurchase, If the company does not repurchase within 15 days from the date of request, the member has the right to transfer free capital.

After the transfer completes the charter capital of the company unchanged, the company proceeds to change/add members. In case the transfer leads to only one member, within 15 days of completing the transfer, the company must change the type of enterprise and register to change the contents of business registration. For individuals transferring contributed capital, it is necessary to pay attention to paying personal income tax in accordance with the provisions of tax law.

Procedures for transferring contributed capital in a limited liability company

Pursuant to Articles 52 and 53 of Decree no. 01/2021/ND-CP on enterprise registration, procedures and dossiers of transfer of contributed capital in limited liability companies: 

Step 1: Preparing dossiers

Identifying whether the transferee is a Vietnamese (Vietnamese company) or a foreigner (a company with foreign elements).

Note: In case the transferee is a foreigner or an enterprise with foreign elements, it is necessary to consider whether the business lines can transfer capital to foreigners and how much is the maximum percentage allowed to transfer.

Step 2: Submitting a dossier of transfer of contributed capital

In order to transfer contributed capital and shares in a one-member limited liability company and a two-member limited liability company, it is necessary to prepare documents according to the following table:

Submitting the Business Registration Office of the Department of Planning and Investment of the province/city where the enterprise is headquarter.

Step 3: Obtaining the receipt

Pursuant to Clause 8, Article 52, Clause 6, Article 53 of Decree no. 01/2021/ND-CP, after receiving the enterprise registration dossier, the Business Registration Office shall issue a receipt, check the validity of the dossier and issue an Enterprise Registration Certificate to the enterprise.

Frequently asked questions about the transfer of contributed capital in a limited liability company

What needs to be done to transfer contributed capital in a limited company?

• When transferring contributed capital in a one-member limited liability company, it should be identified whether it is a all or partial transfer. At that time, if the all transfer is made, the procedures for transferring contributed capital must be carried out, including the procedure for changing the company owner. If transferring a part, it is only necessary to carry out procedures to change the type of company.

• When transferring contributed capital in a two-member limited liability company, it must comply with the principle of strict procedures: It must be offered to other members of the company under the same conditions and according to the proportion of contributed capital. If from the date of offering for sale for 30 days, no one buys or does not buy all, the new member can transfer to individuals and organizations that are not members.

Does the transfer change the number of members contributing capital to a limited liability company?

Depending on whether you transfer in all or in part, it will affect the number of members. For example, a one-member limited liability company if fully transferred will not affect the number of members, if partially transferred will affect the number of members and the type of business.

How do you want to transfer a part of the contributed capital to another individual?

If a part of the contributed capital is transferred to another individual:

• Members of a one-member limited liability company transfer a part of the contributed capital to other individuals and organizations, at this time the company has more than 1 owner, so it must carry out procedures to convert the type of enterprise to: Limited liability company with two or more members; Joint stock company.
• Transfer of contributed capital in a two-member limited liability company but the charter capital of the company has not changed, in case the company’s members are not changed, procedures for changing the ratio of contributed capital should be carried out. If the transfer or change of the contributed capital of the members results in only one member remaining in the company, the company must organize its activities according to the type of one-member limited liability company and at the same time register to change the contents of the enterprise registration within 15 days, from the date of completion of the transfer. The transfer of contributed capital leads to a change of members, the company must notify the change of company members.

Is the transfer of contributed capital in a limited liability company subject to tax?

Pursuant to Article 2 of Circular 111/2013 / TT-BTC stipulating taxable income as follows:

“Article 2. Taxable income

...

4. Income from capital transfer

Income from capital transfers is personal income received including:

a) Income from the transfer of contributed capital in limited liability companies (including one-member limited liability companies), partnerships, business cooperation contracts, cooperatives, people's credit funds, economic organizations and other organizations.

...”

In addition, Article 11 of Circular no. 111/2013/TT-BTC stipulates tax calculations for income from capital transfer.

Then the additional income from the transfer of contributed capital is subject to PIT (if the transferor is an individual) or corporate income tax (if the transferor is an organization)

Taxable income from capital transfers is determined:

Tax payable = 20% x Taxable Income

Within 10 days from the date of completion of the transfer, the individual transferring the contributed capital must submit a PIT return to the Tax Department (where the enterprise is administered).

Situation of capital transfer in a limited company

A wants to transfer part of his contributed capital in a limited company with two or more members to B who is A’s younger brother, but B is not currently a member of the company. Therefore, this transfer must be offered to members of A’s company first. If within 30 days from the date of offering, the remaining members of the company do not buy or do not buy all, A will be transferred to B with the same conditions for offering to the remaining members of the company according to Clause 1, Article 52 of the Law on Enterprises 2020.

Above is NPLaw’s answer related to the transfer of contributed capital in a limited liability company in accordance with current law. NPLaw with a team of professional lawyers will help clients carry out procedures related to the transfer of contributed capital in the shortest limited company with commensurate costs and support to solve arising problems in the best way. If clients need advice or find out more information, please send to email: legal@nplaw.vn or contact directly: 0931449968. NPLaw will contact you as soon as required.