During operation and development, a business’s ownership structure rarely remains the same as when it was founded. Raising additional capital for business expansion, the withdrawal of founding shareholders, or internal restructuring all lead to fluctuations in key personnel. In such cases, the procedure to change company members is a mandatory requirement to legalize the new ownership ratio. The article below will provide you with a comprehensive and detailed overview of the process, required documents, and important legal considerations when changing capital-contributing members according to current legal regulations.
1. What is changing company members and when is it required?
1.1. Concept of changing company members under the 2020 Enterprise Law
Changing company members is an administrative procedure carried out at the business registration authority to record changes in the number, identity, or capital ownership ratio of contributing members in a company (primarily applicable to multi-member LLCs and partnerships). This change directly alters the contents recorded on the Enterprise Registration Certificate and the internal Register of Members.
1.2. Difference between an LLC and a Joint Stock Company (JSC)
It should be noted that the term “member” is typically used for LLCs, whereas JSCs use the term “shareholder”. For a JSC, the free transfer of shares among ordinary shareholders (after 3 years of establishment) does not require the procedure to change company members at the Department of Planning and Investment; it only requires updating the internal Register of Shareholders. However, for an LLC, any change in members, no matter how small, must be notified to the state authority.
1.3. Legal consequences of fluctuations in contributing members
Changing contributing personnel brings many important legal consequences. A new member will inherit the rights and obligations corresponding to their capital contribution ratio, including the right to profit distribution, voting rights, and the company’s debt repayment liability. Conversely, a person who transfers their entire capital will lose their membership status. If the change reduces the number of members to 1, the company is required to carry out procedures to convert its business type to a single-member LLC.
1.4. The importance of updating the Business License in a timely manner
According to regulations, enterprises are responsible for submitting a notification of changes to enterprise registration contents within 10 days from the date of the change. Delayed notification not only causes difficulties in signing major economic contracts or securing bank loans due to mismatched legal information, but the enterprise may also face administrative fines ranging from 10 to 15 million VND from management agencies.
2. Cases requiring the procedure for changing contributing members
2.1. Admitting new members to increase charter capital
This occurs when a company wants to expand its scale by raising capital from a new individual or organization. The company must simultaneously carry out two procedures: changing company members and adjusting to increase the charter capital. The admission of new members must be approved by the Members’ Council through a vote.
2.2. Transferring capital contributions among existing members
To ensure the “closed” nature of the LLC model, the Enterprise Law stipulates that when a member wants to sell their capital, they must first offer it to the remaining members in the company in proportion to their respective capital contributions. If existing members agree to buy, the capital transfer procedure takes place internally and only changes the ownership ratio on the license without increasing the number of members.
2.3. Transferring capital to individuals or organizations outside the company
Only when existing members do not buy—or do not buy all—the offered capital within 30 days can the selling member transfer that capital to an outsider under the same offering conditions. The participation of this new party requires the procedure to change contributing members to update their information on the national system.
2.4. Changing company members due to inheritance or gifting of assets
In the event that an individual company member passes away, their lawful heir (by will or by law) automatically becomes a company member. Similarly, a member has the right to gift a part or all of their capital contribution to another person. Both cases require a document confirming inheritance rights or a Gifting Contract to proceed with amending the license.
2.5. Handling members who fail to fulfill their committed capital contribution obligations
Upon establishment, members have 90 days to fully contribute their committed capital. If a member fails to contribute or contributes insufficiently, the un-contributed portion will be offered to other members or outsiders. The non-contributing member will automatically lose their membership status. The company must proceed to change company members and adjust to decrease the charter capital corresponding to the un-contributed amount if there are no buyers.
3. Necessary legal documents for changing company members
3.1. Notification of changes to enterprise registration contents (Standard Form)
The most important document in the dossier is the Notification of changes to enterprise registration contents (Form Appendix II-1 issued with Circular 01/2021/TT-BKHĐT). This must be signed by the company’s legal representative, clearly stating the enterprise’s information, the withdrawing member’s information, the new member’s information, and the new charter capital structure after the change.
3.2. Meeting Minutes and Decision of the Members’ Council
Changing company members is a major issue, thus requiring the Members’ Council’s Meeting Minutes (recording the meeting proceedings) and a Decision of the Members’ Council approving this change. Both documents must have the full signatures of the attending members (representing at least 65% of the total charter capital) to ensure legality.
3.3. Capital Contribution Transfer Contract and Liquidation Record
If the change arises from a capital transfer, the dossier submitted to the Department of Planning and Investment must include the Capital Contribution Transfer Contract signed between the seller and the buyer. Attached to this should be the Contract Liquidation Record or documents proving that the transfer payment has been completed (such as a bank payment order) to prove the transaction actually occurred.
3.4. Personal/organizational authentication documents of the new member
To record the new member’s information on the system, the company must submit valid notarized copies of the following documents:
- If the new member is an individual: Identity Card/Citizen Identification Card or a valid Passport.
- If the new member is an organization: Enterprise Registration Certificate (or equivalent) along with a power of attorney and the ID/Passport of the person authorized by that organization to manage the capital contribution in the company.
3.5. Specific regulations when the new member is a foreign investor
In special cases, if the capital transferee or the new contributing member is an individual or organization of foreign nationality, the company cannot immediately perform the procedure to change contributing members. The foreign investor must first carry out the procedure to “Apply for approval to purchase shares/capital contributions” at the Department of Planning and Investment. Only upon receiving this written approval is the company permitted to submit the dossier for changing members.
4. Procedure execution sequence and full-service support
Step 1: Draft and sign internal company documents
Before working with state authorities, the enterprise needs to prepare a complete set of documents as guided in Section 3. The drafting of minutes and contracts requires strict legal wording to avoid future disputes. All relevant members, especially the legal representative, must directly sign and affix the company’s red seal to the documents.
Step 2: Submit the application online via the National Portal
Currently, most provinces and cities have applied online enterprise registration submission. The legal representative or an authorized person will scan the paper dossier (PDF format) and upload it to the National Business Registration Portal (dangkykinhdoanh.gov.vn). The submission process requires authentication using a public Digital Signature or a Business Registration Account.
Step 3: Document appraisal at the Department of Planning and Investment
After receiving the electronic dossier, the Business Registration Office will issue a Receipt and conduct an appraisal. The review period for validity is 03 working days. If complete and valid, the specialist will approve it. If there are errors, the state authority will send a written notice requesting the enterprise to amend, supplement, and resubmit.
Step 4: Receive the Certificate and publish information
When the application is approved, the submitter will bring the Receipt and the paper dossier (if cross-checking is required) to the One-Stop Shop to receive the new Enterprise Registration Certificate. Immediately thereafter, the company must pay a fee to publish the information regarding the change on the National Portal within 30 days.
Step 5: Update the members register and tax procedures (PIT)
Getting a new license is not the final step. The company must update the internal Register of Members and issue new Capital Contribution Certificates. Most importantly, if the change arises from a capital transfer, the transferring individual is legally required to declare and pay Personal Income Tax (PIT) at the managing tax authority within 10 days, regardless of whether the transaction resulted in a profit or loss.
Changing company members is an important link in corporate governance and the development orientation of an enterprise. Mastering the procedures for changing contributing members not only helps the company comply with the law but also protects the legitimate rights of investors.
If you feel the process of preparing a transfer contract or tax declaration is too complex, let our professional legal services accompany you. With a team of experienced experts, we commit to completing your application quickly, accurately, and with absolute confidentiality.
If you have any questions, please contact our Hotline at (028) 3820 1213 or email us at [email protected] for prompt consultation and support. With an experienced team, Service thanhlap.wacontre.com is always ready to serve customers in the most enthusiastic and efficient manner. (For Japanese customers, please contact Hotline: (050) 5534 5505).
