For the 51st capital contributing member in a limited liability company with two or more members, is the company type required to be converted?

According to legal regulations, how many types of businesses are divided into? Based on what to classify the type of enterprise?

According to the provisions of the Law on Enterprises 2020, enterprises are divided into the following types: limited liability companies, joint stock companies, partnerships, state-owned enterprises, private enterprises

To distinguish the type of company, it is necessary to rely on the following criteria: charter capital, capital contributing members, rights and obligations of each type.

First, a Limited Liability Company is divided into a single-member LLC and a limited liability company with two or more members.

– A limited liability company is an enterprise owned by an organization or an individual (hereinafter referred to as the company owner). The company owner is responsible for the company’s debts and other property obligations within the company’s charter capital.

– A limited liability company with two or more members is an enterprise with from 02 to 50 members who are organizations and individuals. Members are responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise.

– Second, a joint stock company is an enterprise in which:

+ charter capital is divided into equal parts called shares;

+ Shareholders can be organizations or individuals; The minimum number of shareholders is 03 and there is no limit to the maximum number;

+ Shareholders are only responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise;

+ Shareholders have the right to freely transfer their shares to others

– Third, a partnership is an enterprise in which:

+ There must be at least 02 members who are joint owners of the company, doing business together under a common name (hereinafter referred to as partnership members). In addition to general partners, the company may have additional capital contributing members;

+ A general partner must be an individual, responsible with all his or her assets for the company’s obligations;

+ Capital contributing members are organizations and individuals and are only responsible for the company’s debts within the amount of capital committed to contributing to the company.

– Fourth, a private enterprise is an enterprise owned by an individual who is responsible with all his or her assets for all activities of the enterprise.

+ Not allowed to contribute capital to establish or purchase shares or capital contributions in a partnership, limited liability company or joint stock company.

+ Not allowed to issue any type of securities.

+ Each individual is only entitled to establish one private enterprise. The owner of a private enterprise cannot simultaneously be the owner of a business household or a general partner of a partnership company.

– Fifth, state-owned enterprises are organized and managed in the form of limited liability companies and joint stock companies, including:

+ Enterprises with 100% charter capital held by the State;

+ Enterprises in which the State holds more than 50% of charter capital or total number of voting shares.

Conditions for establishing a limited liability company with two or more members and establishment registration documents

Pursuant to Clause 1, Article 46 of the Law on Enterprises 2020: A limited liability company with two or more members is an enterprise with from 02 to 50 members who are organizations and individuals.

Establishment registration documents include:

– Application for business registration. (content of application for business registration according to Article 23 of the Law on Enterprises 2020)

– Company charter. (charter content according to Article 24 of the Law on Enterprises 2020)

– List of members. (Article 25 of the Law on Enterprises 2020)

– Copies of the following documents:

+ Personal legal documents for members who are individuals or legal representatives;

+ Legal documents of the organization for members who are organizations and documents appointing authorized representatives; Legal documents of the individual for the authorized representative of the organizational member.

For members that are foreign organizations, copies of the organization’s legal documents must be consularly legalized;

+ Investment registration certificate for foreign investors according to the provisions of the Investment Law.

In what cases is a limited liability company with two or more members required to change its company type? So, in the case of a limited liability company with the 51st member, is it forced to change the type of company?

Pursuant to Clause 2, Article 202 of the Law on Enterprises 2020:

“Article 202. Conversion of limited liability company into joint stock company

…

a) Convert into a joint stock company without mobilizing other organizations or individuals to contribute capital, and without selling capital contributions to other organizations or individuals;

b) Convert into a joint stock company by mobilizing additional organizations and individuals to contribute capital;

c) Convert into a joint stock company by selling all or part of the capital contribution to one or several other organizations or individuals;

d) Combining the methods specified in Points a, b and c of this Clause and other methods.”

Within 10 days from the date the conversion is completed, the company must register for company conversion. Within 3 working days from the date of receipt of the conversion dossier, the Business Registration Authority will re-issue the Business Registration Certificate and update the company’s legal status on the National Business Registration Database.

So in this case the company must change the type of limited liability company with two or more members to a joint stock company.