Regulations on the Increase and Decrease of Charter Capital for One-Member Limited Liability Companies from 2021

Does changing charter capital entail company type conversion? - Illustrated image.

Article 87 of the Enterprise Law 2020 stipulates that a single-member limited liability company (LLC) may increase its charter capital through capital contributions from its owner or by mobilizing additional capital contributions from others. The company owner decides on the method and the amount of capital increase.

In cases of increasing the charter capital by mobilizing additional contributions from others, the company must be managed according to the model of a multi-member LLC or a joint-stock company. The company management shall be conducted as follows:

- For managing according to the model of a multi-member LLC, the company must notify changes to its business registration within 10 days from the completion date of the charter capital change;

- For conversion into a joint-stock company, it can proceed according to the following methods:- Conversion into a joint-stock company without mobilizing additional organizational or individual capital contributions, and without selling capital contributions to other organizations or individuals;- Conversion into a joint-stock company by mobilizing additional organizational or individual capital contributions;- Conversion into a joint-stock company by selling all or part of the capital contributions to one or several other organizations or individuals;- Combining the methods prescribed in points a, b, and c of this clause and other methods.

This process must comply with the regulations of the Enterprise Law 2020.

Additionally, Clause 3, Article 87 of the Enterprise Law 2020 stipulates that a single-member LLC may reduce its charter capital in the following cases:

- Returning part of the capital contribution to the company owner if the company has been continuously operating for more than 02 years since the date of business registration and ensures the payment of all debts and other financial obligations after returning the capital contribution to the company owner;- The charter capital is not fully and timely paid by the company owner according to the capital contribution regulations for establishing the company in accordance with the Enterprise Law 2020.

Detailed regulations are specified in the Enterprise Law 2020, effective January 1, 2021.

Le Vy

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