CONSEQUENCES OF CONTRIBUTED CAPITAL TRANSFER IN LIMITED LIABILITY COMPANY

Contributed capital transfer is an activity that often takes place during the operation and development of a multiple-member limited liability company when there are changes in members or fluctuations in the capital structure. Procedures for contributed capital transfer in multiple-member limited liability company are not too complicated, however, to properly and fully comply with the requirements of the law, some issues need to be noted.

Principles for contributed capital transfer in multiple-member limited liability company

In principle, when a member of a multiple-member limited liability company wants to transfer his or her capital contribution, he or she must first make an offer to sell that capital contribution to the remaining members in proportion to their capital contribution in the company. The Law on Enterprise strictly regulates this issue to avoid management rights falling into the hands of outsiders and dispersing the right to coordinate and manage the company.

In case the remaining members in the company do not have demand to buy or buy but not all of that contributed capital, the member who wants to transfer is allowed to sell it to the outside. The law opens this opportunity to ensure the liquidity of capital contributions as well as protect the rights of members when they no longer want to continue with the company.

Exceptions to the rule of contributed capital transfer in multiple-member limited liability company

Members of multiple-member limited liability company who want to transfer their contributed capital must comply with the principles mentioned above. However, the Law on Enterprise still provides exceptions for special cases.

In case a member does not agree with the decision of the Board of Members on issues directly related to his or her rights and obligations or issues related to the company charter, that member has the right to request the company buys back its contributed capital. This is completely understandable because the company charter is the agreement of the members, the “constitution” of the enterprise. If members do not agree with the changes in the “corporate constitution” – formed from the decision of the Board of Members, contributing members have the right to “withdraw capital” through transfer.

If the company does not agree to buy back that contributed capital, members have the right to freely transfer it, that is, they have the right to sell the contributed capital to people who want to invest in the company.