Under the current legislation, the transfer of contributed capital in a limited liability company with two or more members (“company”) requires the involvement of the company, as it is required to record the information of new members in the members' register and to carry out the business registration procedures with the competent authority at the same time. This requirement leads to many disputes between people who are not members of the company, but who are involved in the transfer of contributed capital with its members. In many disputes, the issue of the validity of the transfer of contributed capital is carefully considered by the court, as it significantly affects the rights and obligations of the parties. In this article, the author will mention some legal issues related to the validity of the transfer of contributed capital to non-members of the company, as seen from a dispute recently settled by the Ho Chi Minh City High People's Court. 
Transfer of contributed capital to a non-member party at a lower price
On 11 August 2023, the Ho Chi Minh City High People's Court issued Judgement No. 88/2023/KDTM-PT to resolve a dispute over the transfer of contributed capital between an existing member and a non-member purchaser. According to the case, Mr. Dinh H and Mrs. T mutually signed a contract to transfer Mrs. T's contributed capital of Company T in full, representing 45% of Company T's charter capital for VND 500 million. After the transaction was completed, Mr. Dinh H requested Company T, of which Ms. Thien H is the legal representative (Ms. Thien H is also the remaining member of Company T, holding 55% of the charter capital of Company T), to conduct business registration procedures to recognize Mr. Dinh H as a member of Company T. However, Company T refused to do so. However, Company T refused to do so, so Mr. Dinh H filed a lawsuit against Company T. In the first instance judgment, the court of first instance accepted all of Mr. Dinh H's claims, recognized Mr. Dinh H as a member of Company T and forced Company T to conduct business registration procedures. However, after Company T filed an appeal, the Court of Appeal ruled that the capital transfer transaction between Mr. Dinh H and Mrs. T was conducted in violation of the law, because before transferring the contributed capital to Mr. Dinh H for VND500 million, Mrs. T had offered to transfer her contributed capital to Mrs. Thien H, but at a higher price of VND1 billion. Therefore, the Court of Appeal did not accept Mr. Dinh H's claims at the first trial.
What are the conditions for a valid transfer of contributed capital?
Under Clause 1 Article 52 of the Law on Enterprises 2020 (corresponding to Clause 1 Article 53 of the Law on Enterprises 2014, which was applied to resolve the above dispute), before transferring the contributed capital of the company to a person who is not a member, the transferring member must first offer it to the remaining members of the company on the same terms and conditions in the proportion corresponding to their capital contribution in the company. If, within 30 days from the date of the offer, the remaining members of the company do not fully acquire the entire offered capital, the transferring member may transfer the contributed capital to the non-member party on the same terms offered to the remaining members.
Under the above provisions, two key conditions for a valid contributed capital transfer transaction are (i) the transferring member must offer the capital to the remaining members of the company, and (ii) the transferring member must transfer the contributed capital to the non-member party on the same terms as offered to the remaining members of the company.
The transferring member must offer the capital to the remaining members of the company.
As for the requirement to make an advance offer to the remaining members of the company, this can be considered a peculiarity of a limited liability company with two or more members. It is not completely capital-oriented like a joint stock company, a limited liability company with two or more members, although the members have limited liability, there is still a limit to the number of members of the company. As a result, the members of the company often know each other before the company is established and the needs of the existing members are used to decide on the entry of new members. In many cases, the remaining members of the company acquire in full the contributed capital of the transferring member, as they do not want other parties to be involved in their business. If the remaining members do not want to fully acquire the contributed capital, it will be transferred to non-member parties. The above provisions have demonstrated both the capital-oriented and member-oriented nature of the limited liability company with two or more members.
In the above dispute, both members of Company T are family members and prior to transferring the contributed capital to Mr. Dinh H on 07/12/2018, Ms. T had offered the contributed capital to Ms. Thien H on 22/11/2018 and Ms. Thien H rejected the offer due to financial shortage by a document dated 01/12/2018. The Court of Appeal assumed Ms. T had offered Ms. Thien H, and Ms. Thien H later rejected the offer, so Ms. T was entitled to transfer the capital to Mr. Dinh H.
However, both the Law on Enterprises 2020 and the Law on Enterprises 2014 are silent on whether the transferring member can transfer the contributed capital to the non-member party immediately after the rejection of the other members or must wait for the expiration of 30 days from the date of the offer. This is because there are cases where the remaining members refuse to accept the contributed capital but then (still within 30 days from the date of the offer) change their minds and request to accept the contributed capital offered. The argument of the Court of Appeal in the above case is that the transferring member has the right to transfer the capital to a person who is not a member of the company after the remaining member rejects the offer, without having to wait for the expiration of 30 days from the date of the offer. The author believes that this argument is reasonable because the 30-day period should be used only to limit the time for the remaining members of the company to decide whether to accept the offered contributed capital and to avoid wasting the time and other resources of the transferring members. Allowing the remaining members to change their minds within 30 days from the date of the offer may cause the transferring member to waste time or cause other damage if the transferring member has sought a buyer and transferred the capital after receiving a refusal to accept the contributed capital from the remaining member of the company. 
Ha Giang Provincial People's Court hears the first instance of a civil case - Photo: Phuong Thao (Source The People Court Magazine)
Conditions for the transfer of contributed capital to non-members
This condition is the key point that led to the discrepancies in the judgments of the above-mentioned court cases. As mentioned above, the Law on Enterprise stipulates that the transferring member is only entitled to transfer the contributed capital to non-members under the same conditions offered to the remaining members. In the above dispute, Mrs. T offered Mrs. Thien H all her contributed capital in Company T for VND1 billion but transferred the said capital to Mr. Dinh H for VND500 million. As the price is one of the conditions of the capital contribution transfer transaction in this case, it is clear that Mrs. T transferred the capital to Mr. Dinh H at a more favorable condition. In addition to the price, payment terms, deposit requirements, money retention, etc. can also be considered as transfer conditions.
Another issue that the Law on Enterprise is also silent on is whether the transferring member can offer the contributed capital to the non-member party on less favorable terms (e.g., higher price) compared to the terms offered to the remaining members. The existing law only requires the transferring member to transfer its contributed capital to a non-member party under the same conditions as those previously offered to the remaining members of the company, without mentioning the above issue. To solve the above problem, the author refers to a similar provision in the Law on Enterprises 2020 on private offering of shares of joint stock companies (Article 125 of the Law on Enterprises 2020). Accordingly, before offering shares to other parties (other than the existing shareholders of the joint stock company), the joint stock company must give priority to the existing shareholders in acquiring the shares. If these shares are not fully acquired, they will be offered to other parties on terms that are not more favorable than the terms offered to existing shareholders. Applying the same principle to the case of transfer of contributed capital, the author believes that the law requires the transfer of capital to non-member parties under the same conditions as the remaining members, to ensure the priority to acquire the transferred contributed capital of the remaining members of the company. The transfer of the transferred member's contributed capital to a party that is not a member of the company on terms that are less favorable than the terms offered for sale to the remaining members of the company does not affect the interests of the remaining members of the company at all. Therefore, the transfer of the contributed capital with less favorable conditions is valid in this case.
In conclusion, notwithstanding the clear provisions of the Company Law, the transfer of contributed capital to a non-member party often causes disputes among the company members due to the conditions of each member. From the point of view of the transferring party, it is necessary to pay attention to the two conditions analyzed in this article to ensure that the capital transfer transaction is considered valid, as a prerequisite for exercising the rights and obligations arising therefrom.
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