FORMS OF CAPITAL MOBILIZATION OF LIMITED LIABILITY COMPANIES WITH TWO OR MORE MEMBERS CAN APPLY

Legal grounds

Law on Enterprise 2020;

Decree 01/2021/ND-CP.

1. Overview of limited liability companies with two or more members

A limited liability company (“LLC”) with two or more members is an enterprise owned by organization or individual with the number of members from 02 members and not exceeding 50 members. A LLC with two or more members has legal status. Company members are liable for debts and other property obligations of the company to the extent of the amount of capital contributed to the company. A LLC with two or more members may not issue shares, except in the case of conversion into a joint-stock company. A LLC with two or more members may issue bonds by the provisions of the Law on Enterprise 2020 (Article 46 Law on Enterprise 2020).

2. Forms of capital mobilization of a LLC with two or more members

The model of a LLC with two or more members is not an excellent model to raise capital, especially if large capital from the society is needed. However, the Law on Enterprises 2020 still creates ways for LLCs with two or more members to mobilize capital for enterprises, because capital mobilization is an important activity, ensuring financial resources of enterprises, thereby serving the needs of production and business.

According to the provisions of the Law on Enterprise 2020, there are many ways for a LLC with two or more members to raise capital, including:

2.1. Increase the charter capital of the enterprise (clause 1, clause 2 Article 68 of the Law on Enterprises 2020)

- Contributed capital is the source of capital to be able to maintain operations. Capital mobilization means the mobilization of assets to form the company's charter capital, including capital mobilization to the establishment of the company or additional mobilization to the charter capital of an already established company.

- Increasing the company's charter capital is the fastest way to supplement capital from the owners and members of the company. LLCs with two or more members increase their charter capital in two ways: (i) increase the contributed capital of company members; (ii) receive a capital mobilization from new members. To do this, the company sends the application for change of business registration contents about the increase of charter capital or the increase of contributed capital to the Business Registration Office where the company is headquartered, the Business Registration Office which updates information within 03 working days from the date of receiving the notice. (Clause 6 Article 68 of the Law on Enterprise 2020, Article 51 of Decree 01/2021/ND-CP).

2.2. Issuance of bonds (clause 4 Article 46, Article 128, Article 129 of the Law on Enterprise 2020)

- LLCs with two or more members are allowed to issue bonds. The private placement of bonds must comply with the provisions of the enterprise law.

- A bond is a certificate of a debt obligation by the issuer that is obligated to pay the bondholder for a specified amount. For a specified period, with a specified return. The issuer can be an enterprise or a governmental organization such as the government and the State Treasury. Buyers of the Company's bonds may be individuals or businesses or governments. Bondholders are considered creditors of the Company.

2.3. Raising capital in other forms

- A LLC with two or more members has legal status, can fully borrow capital, and be responsible for transactions with the lender with its assets.

- Loans from commercial banks and other credit institutions are loans with many different interest rates and loan terms, a form of credit that has been very popular for a long time because of its flexibility and accessibility, solve financial problems immediately when the business needs. However, when accessing capital from the credit, the Enterprise must ensure the company's healthy and stable financial position and have a feasible plan to use capital and collateral for that loan.

ADK & Co Vietnam Lawyers Law Firm