Limited Liability Company with Two or More Members May Still Issue Shares
Limited Liability Company with Two or More Members Still Allowed to Issue Shares
According to the legal provisions on enterprises, under what circumstances can a limited liability company with two or more members issue shares? And at what point does this type of company gain legal status?
Response: Pursuant to Clauses 2 and 3 of Article 46 of the Law on Enterprises 2020, the regulation regarding limited liability companies with two or more members is as follows:
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- A limited liability company with two or more members gains legal status from the date of issuance of the Enterprise Registration Certificate.
- A limited liability company with two or more members is not permitted to issue shares, except in the case of conversion into a joint-stock company.
Thus, according to the above regulations, a limited liability company with two or more members gains legal status from the date of issuance of the Enterprise Registration Certificate and is not allowed to issue shares. There is only one case in which it is allowed to issue shares, which is for the purpose of conversion into a joint-stock company.
Is a Company with Shares Required to Have Preferred Shares?
Question: According to current legal provisions, is a company with shares required to have preferred shares? Hope to receive a response soon.
Response: Pursuant to Clauses 1 and 2 of Article 114 of the Law on Enterprises 2020, the regulation states:
Article 114. Types of Shares
A joint-stock company must have common shares. The owners of common shares are common shareholders.
In addition to common shares, a joint-stock company may have preferred shares. Owners of preferred shares are called preferred shareholders. Preferred shares include the following types:
a) Dividend preferred shares;
b) Redeemable preferred shares;
c) Voting preferred shares;
d) Other types of preferred shares as stipulated in the company's charter and the law on securities.
Thus, according to the above regulations, a joint-stock company is required to have common shares. Preferred shares are not mandatory. The company has the discretion to opt for this type of share or not.
Under What Circumstances Can a Single-Member Limited Liability Company Issue Shares?
Question: According to current legal provisions, under what circumstances can a single-member limited liability company issue shares? Hope to receive a response soon.
Response: Pursuant to Clause 4 of Article 74 of the Law on Enterprises 2020, the regulation states:
- A single-member limited liability company is an enterprise owned by an organization or an individual (hereinafter referred to as the company owner). The company owner is responsible for the company's debts and other property obligations within the limit of the company's charter capital.
- A single-member limited liability company gains legal status from the date of issuance of the Enterprise Registration Certificate.
- A single-member limited liability company is not allowed to issue shares, except in the case of conversion into a joint-stock company.
- A single-member limited liability company is allowed to issue bonds in accordance with this Law and other relevant legal provisions; the issuance of private bonds is regulated by Articles 128 and 129 of this Law.
Thus, according to the above regulations, a single-member limited liability company is permitted to issue shares when it is converting into a joint-stock company.
Sincerely.
