Acquiring a Limited Liability Company (LLC) involves a complex process requiring investors to understand legal regulations and follow proper procedures thoroughly. Specifically, the transfer of capital contributions and changes in members within an LLC are crucial steps that anyone engaging in mergers and acquisitions (M&A) must be well-versed in.
1. Regulations on Capital Transfer in an LLC
Single-Member LLC: The sole owner of the company has the right to transfer the entire charter capital to another organization or individual. However, once the transfer is completed, the new owner must register the change in ownership and, if applicable, the legal representative with the business registration authority within 10 days. This step is essential to update the company’s information and ensure the legality of the transaction.
Multi-Member LLC: Members in the company have the right to transfer a part or the entirety of their capital contribution, but they must first offer it to the existing members according to their ownership ratios. Only if the existing members decline to purchase within 30 days can the capital be transferred to an outsider. This means that investors looking to acquire a multi-member LLC should be aware of the preemptive rights of existing members, which may prolong the M&A transaction process and require a well-thought-out negotiation strategy.
The transfer of capital contributions in an LLC in Vietnam requires investors to carry out thorough due diligence on the financial, legal, and operational aspects of the target company. Additionally, it is important to pay attention to any transfer restrictions outlined in the company’s charter and the requirements for registering changes with the competent state authorities.
2. Procedures for Changing Members in an LLC
The procedure for changing members in an LLC involves the following steps:
Step 1: Prepare Documentation
Depending on the type of LLC, the required documentation will vary:
- Single-Member LLC:
- Notice of transfer
- Owner’s decision
- Transfer contract
- Liquidation minutes/documents proving the transfer completion
- Notarized copy of the valid ID/Passport of the transferee
- Multi-Member LLC:
- Notice of transfer
- Minutes of the members’ council meeting regarding the transfer
- Decision of the members’ council
- List of members
- Transfer contract
- Liquidation minutes/documents proving the transfer completion
- Notarized copy of the valid ID/Passport of the transferee
Step 2: Submit Documentation to the Business Registration Office
The documentation must be submitted to the province’s Business Registration Office – Department of Planning and Investment, where the company’s headquarters are located. After submission, you will receive a receipt of the documentation. This step is crucial to update the information on the new member and remove the old member’s details from the company’s records.
Conclusion
The process of acquiring a Limited Liability Company (LLC) and carrying out capital transfer requires in-depth knowledge of legal regulations and procedural steps. To ensure a smooth transaction, investors must complete all the steps mentioned above and seek legal expert assistance if necessary.
- Harley Miller Law Firm “HMLF”
- Address: 14th floor, HM Town Building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
- Phone: +84 937215585
- Website: hmlf.vn
- Email: miller@hmlf.vn
