Responsibility for debt repayment in case the enterprise has a loss greater than the charter capital for joint stock companies and limited liability companies

Responsibility for debt repayment in case the enterprise has losses greater than charter capital (joint stock companies and limited liability companies)?

1. How is the charter capital of a limited liability company with two or more members regulated?

Article 47 of the Law on Enterprises 2020 stipulates capital contribution to establish a company and issuance of capital contribution certificate as follows

– The charter capital of a limited liability company with two or more members when registering to establish a business is the total value of the capital contributions committed by the members and recorded in the company’s charter.

– Members must contribute capital to the company in full and with the right type of assets as committed when registering to establish a business within 90 days from the date of issuance of the Business Registration Certificate, excluding the time of transporting and importing assets to contribute capital, and carrying out administrative procedures to transfer asset ownership. During this period, members have rights and obligations corresponding to the committed capital contribution ratio. Company members can only contribute capital to the company with assets other than the committed assets if approved by more than 50% of the remaining members.

– After the time limit specified in Clause 2 of this Article, if there are still members who have not contributed capital or not fully contributed capital as committed, it will be handled as follows:

a) Members who have not contributed capital as committed are automatically no longer members of the company;

b) Members who have not fully contributed their committed capital have rights corresponding to their capital contributions;

c) The uncontributed capital of members is offered for sale according to the resolutions and decisions of the Board of Members.

– In case there are members who have not contributed capital or have not contributed the full amount of capital as committed, the company must register to change the charter capital, the capital contribution ratio of the members is equal to the amount of capital contributed within 30 days from the last day on which the capital contribution must be fully contributed as prescribed in Clause 2 of this Article. Members who have not yet contributed capital or have not contributed the full amount of committed capital must be responsible in proportion to the committed capital contribution ratio for the company’s financial obligations arising during the period before the date the company registers to change its charter capital and the member’s capital contribution ratio.

– Except for the case specified in Clause 2 of this Article, the capital contributor becomes a member of the company from the time the capital contribution is paid and the information about the capital contributor specified in Points b, c and dd, Clause 2, Article 48 of this Law is fully recorded in the member registration book. At the time of full capital contribution, the company must issue a capital contribution certificate to the member corresponding to the value of the contributed capital.

– The capital contribution certificate must include the following main contents:

a) Name, business code, and head office address of the company;

b) charter capital of the company;

c) Full name, contact address, nationality, legal document number of individual for individual members; name, business code or legal document number of the organization, head office address for organizational members;

d) Capital contribution and capital contribution ratio of members;

d) Number and date of issuance of capital contribution certificate;

e) Full name and signature of the company’s legal representative.

– In case the capital contribution certificate is lost, damaged or destroyed in another form, the member will be re-issued the capital contribution certificate by the company according to the order and procedures specified in the company’s Charter.

2. Responsibility for debt repayment in case the enterprise has losses greater than charter capital (joint stock companies and limited liability companies)?

According to the provisions of Article 46 of the Law on Enterprises 2020 as follows:

“Article 46. Limited liability company with two or more members

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 can 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 Articles 128 and 129 of this Law.”

In addition, Article 111 of the Law on Enterprises 2020 stipulates that joint stock companies are as follows:

– A joint stock company is an enterprise in which:

a) charter capital is divided into equal parts called shares;

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

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

d) Shareholders have the right to freely transfer their shares to others, except for the cases specified in Clause 3, Article 120 and Clause 1, Article 127 of this Law.

– A joint stock company has legal status from the date of issuance of the Business Registration Certificate.

– A joint stock company has the right to issue shares, bonds and other securities of the company.

According to the above regulations, for a limited liability company with two or more members or a joint stock company, capital contributing members or shareholders are only responsible to the extent of capital contributed to the enterprise. The debt beyond the capital contribution in the above case is no one’s responsibility.

3. How is the charter capital of a joint stock company regulated?

According to Article 112 of the Law on Enterprises 2020, the capital of joint stock companies is regulated as follows:

– The charter capital of a joint stock company is the total par value of all types of shares sold. The charter capital of a joint stock company when registering to establish a business is the total par value of all types of shares registered to buy and recorded in the company’s charter.

– Sold shares are shares authorized to be offered for sale that have been fully paid for by shareholders to the company. When registering to establish a business, sold shares are the total number of shares of all types registered to buy.

– Shares authorized to be offered for sale by a joint stock company are the total number of shares of all types that the General Meeting of Shareholders decides to offer for sale to raise capital. The number of shares a joint stock company is entitled to offer when registering to establish a business is the total number of shares of all types that the company will offer to raise capital, including shares that have been registered to buy and shares that have not been registered to buy.

– Unsold shares are shares that have the right to be offered for sale and have not yet been paid to the company. When registering to establish a business, unsold shares are the total number of shares of all types that have not been registered to buy.

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

a) According to the decision of the General Meeting of Shareholders, the company refunds a portion of capital contribution to shareholders in proportion to their share ownership in the company if the company has operated continuously for 02 years or more from the date of business registration and ensures full payment of debts and other property obligations after repaying shareholders;

b) The Company repurchases sold shares according to the provisions of Articles 132 and 133 of this Law;

c) charter capital is not paid in full and on time by shareholders according to the provisions of Article 113 of this Law.