Understanding contributed capital in a limited liability company with NPLaw

Contributed capital is a critical factor that determines the scale of operations and the financial liabilities of members in a limited liability company. However, many enterprises have difficulties during the capital contribution process, the transfer of capital contributions, or the handling of situations where members fail to contribute capital in full as committed. To clearly understand these issues as well as the relevant legal regulations, please refer to the detailed analysis provided in the article below.

Below, NPLAW respectfully invites our readers to explore such matters relating to contributed capital in a limited liability company.

I. Current situation of contributed capital in a limited liability company

At present, many limited liability companies face issues related to capital contribution, particularly late contributions or failure to contribute the full committed amount. Some enterprises register a high charter capital to enhance credibility, yet in reality lack sufficient financial capacity to fully contribute such capital within the statutory time limit. It may result in legal risks, including administrative sanctions or mandatory reduction of charter capital to the actual contributed amount.

In addition, capital contributions made in the form of assets rather than cash often give rise to disputes among members regarding asset valuation and valuation methods. In many cases, members wishing to withdraw their capital have difficulties due to the absence of clear internal mechanisms or the lack of purchasers for the contributed capital portion. These issues adversely affect financial transparency and the operational stability of limited liability companies.

II. Legal regulations on contributed capital in limited liability companies 

1. What is contributed capital in a limited liability company?

Pursuant to Clause 18, Article 4 of the Law on Enterprise 2020, capital contribution means the contribution of assets to form the charter capital of a company, including contributions made upon the establishment of a company or additional contributions to the charter capital of an already established company.

2. Regulations on the number of members contributing capital to establish the limited liability company

For a single-member limited liability company, according to Clause 1, Article 75 of the Law on Enterprise 2020, the charter capital at the time of enterprise registration is the total value of assets committed to be contributed by the company owner and recorded in the company charter.

For a limited liability company with two or more members, according to Clause 1, Article 47 of the Law on Enterprise 2020, the charter capital at the time of enterprise registration is the total value of capital contributions committed by the members and recorded in the company charter.

According to Clause 1, Article 46 of the Law on Enterprise 2020:

• A limited liability company with two or more members is an enterprise having from 02 to 50 members, which may be organizations or individuals. Accordingly, the minimum number of members of a limited liability company with two or more members is 02, and the maximum number is 50.

3. What types of assets may be used as contributed capital in a limited liability company?

Pursuant to Clause 1, Article 34 of the Law on Enterprises 2020, assets used for capital contribution to establish an enterprise may include Vietnamese Dong, freely convertible foreign currencies, gold, land use rights, intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese Dong.

III. Questions regarding contributed capital in limited liability companies

1. What is the statutory time limit for fully contributing capital in a limited liability company?

Pursuant to Clause 2, Article 47 of the Law on Enterprise 2020, the duration for contributing charter capital in a limited liability company with two or more members is as follows:

• Members must fully contribute and contribute the correct type of assets as committed at the time of enterprise registration within 90 days from the date of issuance of the Enterprise Registration Certificate. During such a period, members have rights and obligations corresponding to the committed capital contribution ratio. A member may only contribute capital using a type of asset different from the committed one if approved by more than 50% of the remaining members.

Note: Such a period does not include the time required for transportation or importation of contributed assets, or for completion of administrative procedures to transfer ownership of such assets.

2. May the owner transfer their contributed capital in the limited liability company?

The transfer of ownership in a single-member limited liability company is the sale of the company to another entity through the transfer of the company’s charter capital. According to Point h, Clause 1, Article 76 and Clauses 5 and 6, Article 77 of the Law on Enterprise 2020, the company owner has the right to transfer part or all of the charter capital to another organization or individual. However, the owner must ensure that all due debts and other property obligations have been fully settled before transferring the company.

3. What sanctions apply if capital is not fully contributed by the deadline and charter capital is not reduced?

If capital is not fully contributed within the prescribed duration, the company must register an adjustment of its charter capital to the actually contributed amount within 30 days from the last day of the capital contribution deadline, according to Clauses 2 and 3, Article 75 of the Law on Enterprise 2020. Failure to implement such adjustment may result in an administrative fine ranging from 30,000,000 VND to 50,000,000 VND in accordance with Point a, Clause 3, Article 46 of Decree No. 122/2021/ND-CP.

4. If a member disagrees with a resolution of the Members’ Council, may they transfer their contributed capital to another member?

Pursuant to Clause 1, Article 51 of the Law on Enterprise 2020, if a member does not approve a resolution of the Members’ Council, such member has the right to request the company to repurchase their capital contribution. If the company does not repurchase the capital contribution, the member has the right to freely transfer their capital contribution to another member or to a non-member.

5. How is a member handled if they fail to contribute capital as committed?

After the deadline prescribed in Clause 2, Article 47 of the Law on Enterprise 2020, if a member has not contributed capital or has not fully contributed the committed capital, the handling shall be as prescribed in Clause 3, Article 47 of the Law on Enterprise 2020:

• A member who fails to contribute any capital as committed automatically ceases to be a member of the company;
• A member who has not fully contributed the committed capital has rights corresponding only to the actually contributed capital portion;
• The unpaid capital portion shall be offered for sale according to a resolution or decision of the Members’ Council.

Accordingly, a member of a limited liability company with two or more members who fails to fully contribute charter capital within the committed period will not have their membership status revoked entirely if they have partially contributed capital; instead, their rights are limited to the contributed portion. The unpaid capital portion shall be offered for sale pursuant to the Members’ Council’s resolution, and the company must register an appropriate adjustment of its charter capital within the statutory time limit.

IV. Legal consulting services related to contributed capital in a limited liability company

In today’s complex legal environment, the use of professional legal consulting services is an optimal solution to ensure full compliance with legal regulations. Lawyers can provide advice on matters related to contributed capital in limited liability companies and propose the most effective legal solutions for clients.

Ngoc Phu Law Company Limited, with a team of experienced lawyers, is ready to assist clients with all issues relating to contributed capital in limited liability companies. We are committed to providing effective legal solutions and maximizing the protection of our clients’ lawful rights and interests.