There are 2 methods for members of a multi-member limited liability company (MMLLC) to withdraw capital: Negotiation and Jurisdiction.
1. Negotiation Method
The Enterprises Law 2020 (the Enterprises Law) stipulates the obligations of members of a limited liability company with 2 or more members: “… not to withdraw contributed capital from the company in any form, except for the case specified in Articles 51, 52, 53 and 68 of this Law”. Thus, members can only withdraw capital in the following cases:
(1) The company acquires the capital;
(2) Transfer of contributed capital;
(3) Withdraw capital by bringing contributed capital to repay debts;
(4) Withdrawal by donation;
(5) The company reduced its charter capital.
With different ways of withdrawing capital, the Enterprises Law also stipulates differently:
(1) The company acquires the capital
In case of withdrawal of capital by requesting the company to buy back the capital, it shall only be carried out if the members vote against the decision of the Members’ Council on the following issues:
- Amend and supplement the contents of the company’s charter related to the rights and obligations of members and the Members’ Council;
- Reorganize the company;
- Other cases specified in the company’s charter.
The request for the repurchase of the member’s contributed capital must be expressed in writing and sent to the company within 15 days from the date of adoption of the resolution and decision on the issue specified at Points a, b, and c above.
At the request of a member, if the price cannot be agreed upon, the company must repurchase the member’s contributed capital at the market price or the price set according to the principles specified in the company’s charter within 15 days from the date of receipt of the request. The payment is made only if, after the full payment of the acquired contributed capital, the company still pays all debts and other property obligations.
If the company does not repurchase the contributed capital, the member has the right to transfer his contributed capital to another member or another person who is not a member of the company.
(2) Transfer of contributions
If withdrawing capital by transferring capital to another person, the member must:
- Offer and sell such capital to the remaining member in proportion to the contributed capital of that member in the company under the same conditions;
- If such member does not buy or does not buy out within 30 days from the date of the offering, it may be transferred to a non-member.
(3) Withdraw capital by bringing contributed capital to repay debts
If the member uses the contributed capital to repay the debt (for real loans), the payee has the right to use that contributed capital in one of the following two ways:
- Become a member of the company if approved by the Members’ Council.
- If the Members’ Council does not approve the member creditor, the creditor must offer to sell and transfer such contributed capital in the same way as in the case of withdrawing capital by transferring to another person above.
(4) Withdraw funds by donating
Members have the right to donate part or all of their contributed capital in the company to others. In case the person who is given is believed to be a person of the same bloodline to the third generation, they are default members of the company. In case the gifted person is believed to be another person, they only become a member of the company when approved by the Members’ Council.
(5) The company reduces its charter capital
According to the decision of the Members’ Council, the company may reduce its charter capital in the following forms:
- Refund a part of contributed capital to members according to the proportion of their contributed capital in the charter capital of the company if they have been doing business continuously for 02 years or more from the date of registration of business establishment and ensure full payment of debts and other property obligations after being repaid to members;
- Acquisition of contributed capital as prescribed in Article 51 of the Enterprises Law;
- The charter capital is not paid in full and on time by the members as prescribed in Article 47 of the Enterprises Law.
2. Jurisdictional Methods
In principle, company members cannot rely on loss-making business results but require the withdrawal of capital, because investment is a matter of risk, profit, or loss. The grounds for requesting withdrawal of capital can only be based on the director’s self-interested and opaque activities (shown in the financial books) that are detrimental to the rights and interests of company members.
If the legal representative of the company is uncooperative, the member can initiate a lawsuit to the Economic Court, the Provincial People’s Court to be resolved to the withdrawal of capital. However, this is a laborious, time-consuming, and costly option. This option will initiate a lawsuit against the legal representative of the company for non-fulfillment of obligations related to the organization of the meeting of the Members’ Council, the implementation of annual financial statements; not transparent in the use of capital of the enterprise, from here will conduct a comprehensive examination of revenues and expenditures, financial statements in the years of operation.