In an LLC, a member wanting to sell capital to an outsider may not freely start with the outsider: the law places the remaining members first in line — they are offered that capital first, in exact proportion to their own stakes, within a defined period. This is the pre-emptive right under Article 52 of the Law on Enterprises 59/2020/QH14, and it is the most common reason capital sales in LLCs are challenged after completion. This article serves both sides of the right: the seller wanting a valid external sale, and the remaining member wanting their pre-emption respected in substance, not just in form.
1. The pre-emption mechanism: internal offer first, 30 days, pro rata
Article 52 of the Law on Enterprises 2020 sets the mandatory sequence: a member intending to transfer a capital contribution must offer that capital to the remaining members of the company in proportion to their capital contributions in the company. Each remaining member may buy the portion corresponding to their ratio of the total capital offered — no member may block the entire offered block if another member also wants their share. The period for remaining members to exercise pre-emption is 30 days from the offer date. During this period the seller may not yet transfer to an outsider; the remaining members in turn confirm buying all of their offered portion, part of it, or none. After the 30 days expire (or earlier when every member has replied in writing), the unbought remainder becomes the portion freely saleable outside. Two accompanying conditions make the external sale valid: the terms of the outside sale may not be more favourable than the terms offered to in-company members (the same capital sold outside cheaper than the internal offer price is the classic violation sign), and the entire offer process must be evidenced — a written offer notice stating the capital amount, price and terms, delivered to each remaining member with proof of receipt, their reply documents, and minutes confirming the offer outcome at expiry. The company charter may prescribe a different pre-emption mechanism (longer/shorter, a second offer round) — in which case the charter is the first document to read, because Article 52 opens the way for charter provisions to differ.
2. After the pre-emption period: to whom, at what price
When pre-emption has run its course without the whole capital being bought, the seller may transfer the remainder to any non-member — individual or organisation, domestic or foreign investor (with a foreign investor, the deal adds the capital acquisition approval layers and the ICA money channel of every foreign-element capital transfer). On price: the only statutory limit is that the terms may not be more favourable than those offered internally — understood in the protective direction for remaining members: the seller may not offer internally at a high, hard-to-accept price/terms and then turn around and sell outside cheaper and easier. An outside price equal to or above the offered price, with equivalent or stricter payment terms, is the safe zone. A common real situation: a remaining member who did not buy in the pre-emption round later complains on seeing an outsider buy “cheap” — that complaint stands only if the external price/terms were truly more favourable than what they were offered; if the internal offer was at a true market price and they declined it themselves, the later outside sale is fully valid and their pre-emption over that capital has ended. Conversely, a seller wanting to change the deal terms fundamentally after the offer round (a deep price cut, extra bundled benefits) must run a fresh pre-emption round on the new terms — the old high-price offer may not be used as a “licence” to sell outside at a low price.
3. Selling in breach of pre-emption: can the contract be voided?
This is the topic’s heaviest legal question, and the honest answer is: a capital sale bypassing a remaining member’s pre-emption is a transaction at risk of being declared void at the request of the member whose right was infringed, together with a damages claim. The reasoning: the Article 52 pre-emptive right is a right established by law for the remaining member; a transfer executed by deliberately stripping a third party of that statutory right may be assessed by a court under the regime of civil transactions void for violating a legal prohibition/infringing another’s lawful rights under the Civil Code 91/2015, and Vietnamese dispute practice records claims to void capital contribution transfers for bypassing the Article 52 offer sequence, as well as damages claims where voiding is no longer feasible (for example the capital has passed through several hands). The outside buyer is not safe either: a buyer who knew or must have known of the bypassed pre-emption will struggle to be protected as a bona fide purchaser. The practical consequences for all three sides are clear: for the seller — evidence of a properly sequenced pre-emptive offer is the transaction’s most valuable legal asset, to be archived like the contract itself; for the remaining member — the pre-emptive right lives only 30 days from a valid offer, and keeping it requires acting within the period (confirming purchase in writing, being ready to pay), silence past the deadline loses the right over that capital; for the outside buyer — due diligence on the seller’s pre-emption offer file is a mandatory diligence item before paying, because buying capital with an infringed pre-emption is buying a latent lawsuit.
4. Distinguishing joint stock companies and similar easily-confused rights
The statutory pre-emptive right in Article 52 exists only in an LLC. In a joint stock company, shares are freely transferable under Article 127 of the Law on Enterprises 2020, and the law sets no statutory pre-emptive right for existing shareholders when a shareholder sells shares to an outsider — pre-emption in a joint stock company exists only if the charter or a shareholders’ agreement creates it (and then its source is the contract/charter, with enforcement also per the contract/charter, including for unlisted company shares). The transfer pre-emption must also be distinguished from two easily confused rights: existing shareholders’ pre-emptive right to newly issued shares when a joint stock company increases capital (Article 124 of the Law on Enterprises — a right over newly issued shares, not over shares being transferred), and the right to request the company to repurchase in an LLC under Article 51 where a member objects to a company decision (an exit mechanism against adverse decisions, not a right to block another’s transaction). These three rights differ in holder, object and duration; using the wrong concept in an offer notice or a complaint is a common error that weakens a dispute file from its very first line. In short: in an LLC, the valid path to an external capital sale always passes through the 30-day pre-emption gate of Article 52 — pass through that gate properly and the deal stands firm; shortcut past it and the deal carries voidness risk for its entire life.
I want to sell capital to an outsider — do the remaining members have a preemptive right to buy first?
Yes, in an LLC: Article 52 of the Law on Enterprises 59/2020/QH14 requires the transferring member to first offer the capital to the remaining members in proportion to their capital contributions before selling outside (unless the charter prescribes a different mechanism). In a joint stock company there is no such statutory pre-emption — shares are freely transferable under Article 127, and pre-emption exists only if the charter or a shareholders’ agreement creates it.
How long do the remaining members have to decide whether to buy?
30 days from the valid offer date under Article 52 of the Law on Enterprises 2020. During this period the seller may not yet transfer to an outsider; each remaining member confirms buying their pro-rata portion, part of it, or none. After the 30 days (or when every member has replied in writing), the unbought portion may be sold outside. The charter may prescribe a different period and mechanism — in which case the charter applies.
If they do not buy, to whom may I sell, and is the price limited?
The remainder may be sold to any non-member (including a foreign investor, with the procedural layers of a foreign-element transaction). The only limit: the external sale terms may not be more favourable than the terms offered to in-company members — selling outside cheaper/easier than the internal offer price is a breach. Wanting to change the terms fundamentally (a deep price cut, added benefits), the seller must run a fresh pre-emption round on the new terms.
If a sale breaches the preemptive right, can the contract be declared void?
There is that risk: the member whose pre-emption was bypassed may ask a court to declare the transfer void under the regime of civil transactions violating a legal prohibition/infringing a third party’s statutory right (Civil Code 91/2015), and/or claim damages; Vietnamese dispute practice records such claims for capital contribution transfers bypassing the Article 52 offer sequence. An outside buyer who knew or must have known of the breach also struggles to be protected as a bona fide purchaser — so the pre-emption offer file is a mandatory due diligence item for the buyer.
