Participating in contributing capital to establish a limited liability company with 2 or more members but the company is losing business Can I withdraw capital from the company if I have a loss?

Do members of a limited liability company with 2 or more members have the right to withdraw capital contributions from the company?

Pursuant to Clause 2, Article 50 of the Law on Enterprises 2020 (amended by Clause 2, Article 7 of the Law amending the Law on Public Investment, the Law on Investment in the form of public-private partnerships, the Investment Law, the Housing Law, the Law on Bidding, the Electricity Law, the Law on Enterprises, the Law on Special Consumption Tax and the Law on Civil Judgment Enforcement 2022) regulations on the obligations of Members of a Limited Liability Company with 2 or more members:

“Article 50. Obligations of company members

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2. Do not withdraw contributed capital from the company in any form, except for the cases specified in Articles 51, 52, 53 and 68 of this Law.”

According to the provisions of law, members of a limited liability company with 2 or more members are obliged not to withdraw contributed capital from the company in any form, except for some cases that will be stated below.

In what cases can a member of a LLC with 2 or more members withdraw capital contribution from the Company?

Case 1: Request the Company to buy back the capital contribution

According to the provisions of Article 51 of the Law on Enterprises 2020 as follows:

“Article 51. Redemption of capital contributions

1. A member has the right to request the company to buy back his/her capital contribution if that member has voted against the resolutions and decisions of the Board of Members on the following issues:

a) Amending and supplementing contents in the company charter related to the rights and obligations of members and the Board of members;

b) Reorganize the company;

c) Other cases as prescribed in the company’s Charter.

2. The request to buy back the capital contribution must be in writing and sent to the company within 15 days from the date of passing the resolution or decision specified in Clause 1 of this Article.

3. Within 15 days from the date of receiving the member’s request specified in Clause 1 of this Article, the company must buy back that member’s capital contribution at the market price or the price determined according to the principles specified in the company’s Charter, unless the two parties can agree on the price. Payment will only be made if, after fully paying for the repurchased capital contribution, the company still pays all debts and other property obligations.

4. In case the company cannot pay the capital contribution required to be repurchased according to the provisions of Clause 3 of this Article, that member has the right to freely transfer his capital contribution to another member or person who is not a member of the company.”

In cases where Members have voted against a resolution or decision of the Board of Members on the issue:

– Amending and supplementing contents in the Company’s Charter related to the rights and obligations of members and the Board of Members;

– Reorganize the company;

– Other cases as prescribed in the company’s Charter.

Then that member has the right to request the company to buy back his/her capital contribution. The order and method of implementation comply with the above legal regulations.

Case 2: Transfer of capital contribution

According to the provisions of Article 52 of the Law on Enterprises 2020 as follows:

“Article 52. Transfer of capital contribution

1. Except for the cases specified in Clause 4, Article 51, Clause 6 and Clause 7, Article 53 of this Law, members of a limited liability company with two or more members have the right to transfer part or all of their capital contribution to others according to the following provisions:

a) Offer to sell that capital contribution to the remaining members in proportion to their capital contribution in the company with the same offering conditions;

b) Transfer with the same offering conditions for the remaining members specified in Point a of this Clause to non-members if the remaining members of the company do not buy or do not buy all within 30 days from the date of offering.

2. The transferring member still has rights and obligations towards the company corresponding to the relevant capital contribution until information about the buyer specified in Points b, c and dd, Clause 2, Article 48 of this Law is fully recorded in the member registration book.

3. In case of transfer or change of capital contributions of members resulting in only one member of the company remaining, the company must organize management in the form of a one-member limited liability company and register to change the business registration content within 15 days from the date of completion of the transfer.”

Enterprise law stipulates that except for the following cases:

– Members have the right to freely transfer their capital contributions to other members or people who are not members of the company;

– Members donate part or all of their capital contribution in the company to others;

– Members use capital contributions to repay debt.

Members of a limited liability company with two or more members have the right to transfer part or all of their capital contribution to others according to the following regulations:

a) Offer to sell that capital contribution to the remaining members in proportion to their capital contribution in the company with the same offering conditions;

b) Transfer with the same offering conditions for the remaining members to non-members if the remaining members of the company do not buy or do not buy all within 30 days from the date of offering sold.

Case 3: Capital is refunded by the Company according to the conditions prescribed by law

According to the provisions of Point a, Clause 3, Article 68 of the Law on Enterprises 2020 as follows:

“Article 68. Increase and decrease in charter capital

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3. The company may reduce its charter capital in the following cases:

a) Refund a portion of capital contribution to members according to the proportion of their capital contribution in the company’s charter capital if it has operated continuously for 02 years or more from the date of enterprise registration and ensures full payment of debts and other property obligations after repayment to members;”

According to the above regulations, a member of a limited liability company with 2 or more members can withdraw capital by requesting the Company to return a portion of his/her capital contribution in proportion to his/her capital contribution in the company’s charter capital if:

– The company has been in continuous business operation for 02 years or more from the date of business establishment registration;

– The Company guarantees payment of all debts and other property obligations after repaying Members.

Pursuant to legal regulations, members of a limited liability company with 2 or more members can withdraw capital from the company in the following forms:

– Request the company to buy back capital contributions;

– Transfer of contributed capital;

– Have capital refunded by the company according to the conditions specified in Point a, Clause 3, Article 68 of the Enterprise Law 2014.

Thus, in your case, you can request a Limited Liability Company with 2 or more members to return your capital in the Company in the form prescribed in Article 68 of the Law on Enterprises 2020 when the Company has operated continuously for 2 years, ensuring full payment of debts and property obligations when refunded to you.

What are the consequences of a Member of a Limited Liability Company with 2 or more members withdrawing capital contribution from the Company?

One of the most common legal consequences after a member withdraws capital is a change in the Company’s charter capital. According to the provisions of Article 68 of the Law on Enterprises 2020, within 10 days from the date the increase or decrease in charter capital has been paid, the company must notify the Business Registration Authority in writing of the increase or decrease in charter capital. The notice must include the following main contents:

– Name, head office address, business code;

– charter capital, increased or decreased capital amount;

– Latest financial report in case of charter capital reduction;

– Resolutions, decisions and meeting minutes of the Board of Members;

– Time and form of capital increase or decrease;

– Full name, signature of the legal representative of the enterprise.

The business registration authority updates information about the increase or decrease in charter capital within 03 working days from the date of receipt of the notice.