Conditions, procedures, and timing for capital withdrawal through the company’s return of capital contribution to the owner
The return of contributed capital by a company to its owner is one of the methods through which the owner of a single-member limited liability company may withdraw capital. So, what are the conditions and procedures for returning contributed capital to the owner in such a company, and when may the owner withdraw capital through this method? The following article will address these issues.
Illustration
1. Conditions for returning contributed capital to the owner in a single-member limited liability company
Pursuant to Point a, Clause 3, Article 87 of the Law on Enterprises 2020, a single-member limited liability company may reduce its charter capital when both of the following conditions are satisfied: (i) the company has operated for at least 02 consecutive years from the enterprise registration date, and (ii) the company is able to fully pay its debts and other liabilities after the return of capital to the company’s owner.
2. When may the owner of a single-member limited liability company withdraw capital if the company returns part of the contributed capital, and when must the company register a reduction in charter capital?
Pursuant to Clause 2, Article 30 of the Law on Enterprise 2020: “The enterprise is responsible for registering changes to the contents of its Enterprise Registration Certificate within 10 days from the day on which the change occurs.”
However, the substantive law does not specify what constitutes the “day on which the change occurs” in cases where a single-member limited liability company reduces its charter capital by returning part of the contributed capital to its owner. To determine this, it is reasonable to apply by analogy the provision for multiple-member limited liability companies under Clause 4, Article 68 of the Law on Enterprise 2020, which provides that: “… within 10 days from the day on which the increase or decrease in charter capital has been fully paid, the company shall send a written notification of the increase or decrease in charter capital to the business registration authority.”
Accordingly, the “day on which the change occurs” in the case of a single-member limited liability company reducing its charter capital should be understood as the date on which the companycompletes the payment of the returned capital to the owner.
Thus, the owner may withdraw capital at the time the company has fully completed the payment of the returned amount, and within 10 days from that date, the company must submit an application for registration of the change in charter capital to the business registration authority.
3. Conclusion
From the above analysis, it can be concluded that:
3.1. If a single-member limited liability company has operated continuously for at least 02 years from the date of issuance of its Certificate of Enterprise Registration, and is able to fully satisfy all debts and other financial obligations after returning part of the contributed capital to its owner, the owner is entitled to withdraw capital through the company’s partial return of contributed capital.
3.2. The time when the owner is considered to have legally withdrawn capital is when the company executes the return of the contributed capital to the owner, pursuant to the owner’s resolution and before the company submits the application for registration of the charter capital reduction to the business registration authority. After the repayment is completed, the company is obliged to register the reduction of charter capital within 10 days from the date of payment completion, in order to ensure compliance with the prevailing legal regulations.
For any inquiries or legal assistance regarding the procedures for registration of changes to enterprise registration information and other related legal services, please contact CBI Law Firm for professional support.
