If a limited liability company with 2 or more members borrows capital from members with the value of what % of equity is considered a related transaction?

If a LLC with 2 or more members borrows capital from members with the value of what % of equity is considered an affiliated transaction?

A LLC with 2 or more members borrows capital from members with what % of capital The owner is considered an affiliated transaction, according to the provisions of Point l, Clause 2, Article 5 of Decree 132/2020/ND-CP as follows:

The parties have an affiliated relationship

…

2. The associated parties in Clause 1 of this Article are specifically stipulated as follows:

…

l) The enterprise has transactions of transfer or receipt of capital contribution of at least 25% of the enterprise’s owner’s capital contribution during the tax period; borrow or lend at least 10% of the owner’s capital contribution at the time of the transaction during the tax period with the individual who operates and controls the business or with an individual in a relationship as prescribed in point g of this clause.

Referring to Clause 24, Article 4 of the 2020 Enterprise Law, business managers are private enterprise managers and company managers, including private enterprise owners, general partners, Chairman of the Board of Members, members of the Board of Members, Company President, Chairman of the Board of Directors, members of the Board of Directors, Director or General Director. Director and individuals holding other management positions as prescribed in the company’s Charter.

From the above regulations, it can be seen that a LLC with 2 or more members that borrows capital from company members with a value of at least 10% of equity (calculated on each transaction of the company and the lending individual) at the time the transaction occurs in the tax period is considered an affiliated transaction.

For the case of your company borrowing money from many company members, do not add up the total of these loans to determine whether it reaches a ratio of 10% or more of equity at the time of the transaction in the tax period.

Therefore, in case your company borrows money from the above company members, a related transaction has not been formed.

In any case, a LLC with 2 or more members cannot issue shares, right?

Can a LLC with 2 or more members issue shares, according to the provisions of Article 46 of the Law on Enterprises 2020 as follows:

Limited liability companies with two or more members up

1. 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 debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise, except for the cases specified in Clause 4, Article 47 of this Law. Members’ capital contributions may only be transferred according to the provisions of Articles 51, 52 and 53 of this Law.

2. A limited liability company with two or more members has legal status from the date of issuance of the Business Registration Certificate.

3. A limited liability company with two or more members is not allowed to issue shares, except to convert into a joint stock company.

4. Limited liability companies with two or more members may issue bonds according to the provisions of this Law and other relevant laws; The issuance of individual bonds must comply with the provisions of Article 128 and Article 129 of this Law.

Accordingly, in principle, LLCs with 2 or more members are not allowed to issue shares.

However, the company can still issue shares in case of converting into a joint stock company.

If the Charter of a LLC with 2 or more members does not stipulate, who is the legal representative of the company?

The legal representative of a LLC with 2 or more members when the Charter of the company does not stipulate, according to Clause 3, Article 54 of the Law on Enterprises 2020 as follows:

Public management organizational structure ty

1. A limited liability company with two or more members has a Board of Members, Chairman of the Board of Members, Director or General Director.

2. Limited liability companies with two or more members that are state-owned enterprises as prescribed in Point b, Clause 1, Article 88 of this Law and subsidiaries of state-owned enterprises as prescribed in Clause 1, Article 88 of this Law must establish a Control Board; Other cases are decided by the company.

3. The company must have at least one legal representative who holds one of the following positions: Chairman of the Board of Members or Director or General Director. In case the company charter does not stipulate, the Chairman of the Board of Members is the legal representative of the company.

Thus, in cases where the Charter of a LLC with 2 or more members does not stipulate, the Chairman of the Board of Members is the legal representative of the company.