A member of a multiple-member limited liability company is permitted to freely transfer their entire capital contribution to a non-member?
Question:
I am currently a member holding 30% of the charter capital in a multiple-member limited liability company in Hanoi. Due to no longer wishing to continue the partnership, I plan to transfer my entire 30% capital contribution to a friend (who is not a member of the company) at an agreed price. Am I freely permitted to sign the agreement and transfer it immediately to this friend? If I fail to comply with the legal requirements, will the transaction be affected, and what procedures must the company perform after the transfer?
Answer:
Under the Law on Enterprises 2020, a member of a multiple-member limited liability company is not freely permitted to immediately transfer their capital contribution to an external third party without first complying strictly with the statutory pre-emptive rights of the remaining members.
1/ Regarding conditions and procedures for transferring capital contributions
Pursuant to Article 52 of the Law on Enterprises 2020, a member of a multiple-member limited liability company has the right to transfer part or all of their capital contribution to another party in accordance with the following rules:
- The member must first offer to sell such capital contribution to all other remaining members in proportion to their respective capital contribution ratios in the company under the same terms and conditions.
- The member may only transfer the capital contribution to a non-member under the same terms and conditions as offered to the remaining members if the remaining members do not purchase or do not fully purchase the offered capital within 30 days from the offering date.
Therefore, you are not freely permitted to execute a transfer contract with your friend right away. You are required to issue an offering notice to all remaining members of the company under the same conditions (including the price) that you intend to offer to your friend. Only after the 30-day period expires, if the remaining members refuse or fail to buy the entire offered portion, do you have the legal right to transfer that portion (or the remainder) to your friend under those identical terms.
2/ Legal consequences of violations and required post-transfer procedures:
- Validity of transaction: If you unilaterally transfer the capital contribution to an external party while bypassing the mandatory pre-emptive offer to existing members, the transfer agreement risks being declared null and void by a competent Court due to violation of statutory restrictions, and the transferee will not be recognized as a lawful member of the company.
- Post-transfer procedures: Upon completion of a lawful transfer (executing the transfer contract, completing payment obligations, and declaring/paying personal income tax as required by tax laws), the company is obligated to perform procedures to register the change of members with the Business Registration Office under the Department of Planning and Investment, issue a Capital Contribution Certificate, and update the Register of Members for the new member pursuant to Articles 48 and 52 of the Law on Enterprises 2020.
3/ Conclusion
You are not freely permitted to immediately transfer your 30% capital contribution to an external party. To ensure full legal compliance, you must first execute the 30-day pre-emptive offer procedure to all remaining members. If your company requires detailed legal advisory regarding the capital offering process, drafting Capital Transfer Agreements, tax filings, or updating enterprise registration information, please contact SB Law for timely support from our team of lawyers and experts.
