Notice when changing members of a Limited Liability Company

Change of limited company membership is the implementation of changes in the contents of business registration. In many cases, the company after establishment wants to change members but does not know how to do it. So what are the procedures for one-member limited liability companies and two-member limited liability companies and what should be noted when changing members? The following article will clarify and provide information related to the above issues.

Make changes in limited company members

Cases of changing members in limited liability companies (LLCs)

For Single-member LLCs:

If adding members to convert to a multi-member LLC:

In this case, the company will undergo procedures to change its business form from a single-member LLC to a multi-member LLC.

Regarding capital increase:

The company can concurrently increase its capital by either adding new members or having both existing and new members contribute additional capital. This scenario does not involve capital transfer, hence no requirement for reporting or paying personal income tax on capital transfer.

For transferring entire capital:

In the event of transferring the entire capital to a new member, the company needs to execute procedures for transferring the entire company; changing the legal representative, owner, and even changing the company name, address, capital, etc.

In this scenario, capital transfer occurs, so the company must report and pay personal income tax (if applicable) on the capital transfer.

Based on the provisions of Article 74 of the 2020 Enterprise Law and Article 53 of Decree No. 01/2021/ND-CP.

For Two-member LLCs:

Changes due to having 2 members:

If one member withdraws capital and there is no new member contributing additional capital, the company can be converted into a single-member LLC. This situation involves capital transfer, so the company must report and pay personal income tax (if applicable) on the capital transfer.

• In the case of changing members through internal capital transfer among existing members of the company:

Members holding capital in the company may transfer their shares to other members at a certain ratio while retaining a portion of the remaining capital in the company.

This scenario involves capital transfer, so the company must report and pay personal income tax (if applicable) on the capital transfer.

• In the case of changing a two-member LLC due to a new member contributing additional capital:

The company can concurrently increase its capital due to the addition of a new member or both old and new members contributing additional capital to the company.

This scenario does not involve capital transfer, so there is no requirement for reporting or paying personal income tax on capital transfer.

According to the provisions of Article 52 of Decree No. 01/2021/ND-CP. 

Procedure for changing of member in an LCC

Application Components:

For a single-member LLC, the application includes:

• A notification of replacement of owner of the single-member limited liability company (According to Appendix II-4 of Circular No. 01/2021/TT-BKHDT);
• Copies of legal documents of the transferee that is an individual or organizations If the company’s owner is a foreign organization, copies of legal documents of that organization must be legalized;
• The copy of the amended charter of the company;
• The contract for stake transfer or documents proving completion of the transfer;

• A written approval given by the investment registration authority for capital contribution or purchase of shares/stakes by foreign investors/foreign-invested business entities in case procedures for registration of capital contribution or purchase of shares/stakes must be followed in accordance with the Law on Investment,

Based on the content of Article 53, Clause 1 of Decree No. 01/2021/ND-CP.

Executing the documentation for changing members

For two – members LCCs, the application includes::

In case of admission of new members which leads to increase in the company’s charter capital, The following application need to be prepared:

• A notification of changes to enterprise registration information which is signed by the enterprise’s legal representative (Appendix II-1)
• The list of members of the multi-member limited liability company. The list must bear signatures of new members and members whose stakes are changed; signatures of members whose stakes are unchanged are optional; (Appendix I-6)
• The resolution or decision and copy of minutes of meeting of the Board of Members on admission of new members 
• Certifications of new members’ capital contribution; 
• Copies of legal documents of new members that are individuals, or copies of legal documents of new members that are organizations and copies of legal documents of their authorized representatives and letters of appointment of authorized representatives. If a member is a foreign organization, copies of legal documents of that organization must be legalized; (Appendix I-10)
• A written approval given by the investment registration authority for capital contribution or purchase of shares/stakes by foreign investors/foreign-invested business entities in case procedures for registration of capital contribution or purchase of shares/stakes must be followed in accordance with the Law on Investment. 

Based on the content in: Clause 1, Article 52 of Decree No. 01/2021/NĐ-CP.

In case of change of members due to transfer of stakes, the application must include the following documents: 

• A notification of changes to enterprise registration information which is signed by the enterprise’s legal representative (Appendix II-1)
• The list of members of the multi-member limited liability company. The list must bear signatures of new members and members whose stakes are changed; signatures of members whose stakes are unchanged are optional; (Appendix I-6.)
• The resolution or decision and copy of minutes of meeting of the Board of Members on admission of new members 
• Copies of legal documents of new members that are individuals, or copies of legal documents of new members that are organizations and copies of legal documents of their authorized representatives and letters of appointment of authorized representatives. If a member is a foreign organization, copies of legal documents of that organization must be legalized; (Appendix I-10)
• A written approval given by the investment registration authority for capital contribution or purchase of shares/stakes by foreign investors/foreign-invested business entities in case procedures for registration of capital contribution or purchase of shares/stakes must be followed in accordance with the Law on Investment

Based on the content in: Clause 2, Article 52 of Decree No. 01/2021/NĐ-CP:

In the case of transferring capital contributions to individuals who are not heirs, the dossier shall be prepared as in the case of admitting new members leading to an increase in charter capital as presented above (Clause b, Point 5, Article 52 of Decree No. 01/2021/NĐ-CP).

In the case of changing members due to inheritance, the following documents need to be prepared: 

• A notification of changes to enterprise registration information which is signed by the enterprise’s legal representative; (Appendix II-1.)
• The list of members of the multi-member limited liability company. The list must bear signatures of new members and members whose stakes are changed; signatures of members whose stakes are unchanged are optional; (Appendix I-6.)
• The copy of certificate of the inheritor’s lawful right to inheritance; 
• Copies of legal documents of the inheritor that is an individual, or copies of legal documents of the inheritor that is an organization and copies of legal documents of their authorized representatives and letters of appointment of authorized representatives. If a member is a foreign organization, copies of legal documents of that organization must be legalized. (Appendix I-10)

Based on the provisions in: Clause 3, Article 52 of Decree No. 01/2021/NĐ-CP. 

In case of change of members due to a member’s failure to contribute capital as prescribed in the Law on enterprises, the application shall include the following documents: 

• A notification of changes to enterprise registration information which is signed by the enterprise’s legal representative; (Appendix II-1)
• The list of remaining members of the company. The list must bear signatures of members whose stakes are changed; signatures of members whose stakes are unchanged are optional; (Appendix I-6.)
• Resolution, decision and copy of minutes of the Members’ Council meeting on the change of members due to failure to fulfill the capital contribution commitment.

Based on the provisions in: Clause 4, Article 52 of Decree No. 01/2021/NĐ-CP.

Procedures

Currently, the company can submit the application via the National Business Registration Portal.

Upon receiving the notification, the Business Registration Office shall give a confirmation slip to the enterprise, examine the validity of documents, and issue the enterprise registration certificate as prescribed.

Processing time:

Within 3-5 working days from the receipt of satisfactory application, the enterprise shall issue Enterprise registration certificate if the document is valid.

Note when performing the procedure for changing membership

Points to note when changing members of a limited liability company (LLC)

When performing the procedures to change company members, the content of the member change notification will vary depending on the specific case. If the member being changed is the legal representative of the business, then both procedures must be carried out simultaneously: Member Change and Legal Representative Change. According to Article 50 of Decree No. 01/2021/NĐ-CP, the documents required to carry out the procedure for changing the legal representative include:

• Notice of change of legal representative;
• Resolutions, decisions, and valid copies of the meeting minutes of the Board of Members regarding the change of the company’s legal representative;
• A copy of the individual’s legal papers, for the new legal representative;

Legal advisory services related to changing company members in a Limited Liability Company (LLC)

Based on the information provided above, our company also provides the following services to assist you and your business: 

• Consultation on the conditions for changing LLC members;
• Advice on the rights and obligations of members in the LLC during the process of changing members;
• Guidance on procedures and documentation for changing LLC;
• Consultation on issues related to LLC members after the change.

The procedures for changing company members in an LLC are specifically regulated by law. When carrying out these procedures, the person in charge must prepare a complete dossier. The business will have to submit the dossier at the National Business Registration Portal, and if the dossier is valid, the business will be issued a Certificate of Business Registration. If you have any further questions or require legal consultancy services for your business, please contact Long Phan at the hotline number 0906.735.386 for assistance. Thank you.