Scenario: a member contributes VND 5 billion to a newly formed two-member LLC; two months later, urgently needing cash, he asks the company to “return” VND 3 billion, promising to re-contribute later. The director agrees, thinking “it is his money, he can take it back.” This is one of the most dangerous mistakes in capital management: once contributed, the money is no longer the member’s personal asset — and withdrawing it within the first 90 days has no legal basis whatsoever.
The legal basis: lawful withdrawal must wait two years
The Law on Enterprises No. 59/2020/QH14 (effective 1 January 2021; amended by Law No. 76/2025/QH15, effective 1 July 2025) permits a company to reduce charter capital by returning contributions to members or shareholders only when two cumulative conditions are met: the company has conducted business continuously for at least two years from its enterprise registration date, and it can still fully pay all debts and other asset obligations after the return. This rule applies uniformly to multi-member LLCs (Point a, Clause 3, Article 68), single-member LLCs (Clause 3, Article 87 — returning capital to the owner) and joint stock companies (Point a, Clause 5, Article 112 — returning part of contributions to shareholders pro rata).
The direct consequence: during the first 90 days after establishment — indeed, during the first two years — there is no lawful “capital withdrawal” procedure in the form of the company returning contributions. Any money a member takes out of the company in this period, unless part of another lawful transaction (salaries, contract payments and the like), constitutes an unlawful withdrawal of capital.
Unlawful withdrawal: the legal consequences
First, liability for company obligations: a withdrawing member does not escape — Clause 4, Article 47 provides that members who have not contributed or have under-contributed remain liable in proportion to their committed portion for the company’s financial obligations arising before the company registers its charter capital change. Having taken the money out, the member is still “chased” for exactly that portion if the company becomes insolvent. Second, internal relations: the company may demand the member return the unlawfully withdrawn amount, since charter capital is a binding recorded commitment. Third, documentation and audit: a “money in, money straight back out” flow within 90 days is a textbook red flag leading auditors to record capital as not actually contributed and tax authorities to raise questions at inspection — a practice many FDI companies have experienced at finalisation. Fourth, administrative sanctions: withdrawals can entail misreporting charter capital versus reality, falling within administrative sanctions in the business registration domain under Decree No. 122/2021/ND-CP.
The lawful ways to recover contributed value
The law does not lock a member’s capital forever — it only locks the direct-withdrawal route. Three lawful routes exist. One is transferring the stake to another person under Article 52 (LLCs) or transferring shares (joint stock companies) — the buyer pays the member, the company loses no capital, only the stake’s owner changes. Two is requiring the company to repurchase the stake in cases prescribed by law, such as a member who voted against resolutions amending the charter or reorganising the company (Article 51); for joint stock companies, share repurchase at shareholder request or by company decision (Articles 132 and 133). Three is waiting until the two-year continuous-operation condition is met, then reducing charter capital by returning capital under Point a, Clause 3, Article 68 (or Clause 3, Article 87; Point a, Clause 5, Article 112). The common thread: every route requires a resolution of the competent body and registration of the change — a director’s verbal “approval” never suffices.
Practical action
If a member urgently needs cash in the early stage, consider alternatives instead of withdrawing capital: borrow from a bank against the member’s own collateral and on-lend to the company under a proper loan contract; or transfer part of the stake to a new investor to cash out. Never use “advance” or “member loan” bookkeeping to pull charter capital out — auditors and tax authorities see through such entries, and they do not change the unlawful-withdrawal nature of the act. Every transaction between the company and its members in the first two years should be reviewed by in-house counsel or a lawyer before execution.
Frequently asked questions
Can I withdraw part of the capital temporarily and re-contribute later?
No. The law recognises no “temporary withdrawal” of charter capital. Contributed money is company property; taking it out, even intending to return it, remains an unlawful withdrawal while the capital-reduction conditions are unmet, and it does not erase liability proportionate to the committed portion.
A member withdraws capital and the company then becomes insolvent — what happens?
That member remains liable in proportion to the committed capital portion for financial obligations arising before the company registers its charter capital change (Clause 4, Article 47). Creditors have grounds to demand the member return the unlawfully withdrawn portion to pay debts.
Is transferring a stake to a relative at a nominal price lawful?
Transferring a stake under Article 52 is a lawful exit route. The transaction must be genuine, however: an abnormally low transfer price may lead tax authorities to reassess the price and collect tax on the capital transfer. Value it at book value or by independent appraisal.
The company is newly formed and inactive — can it dissolve to recover capital?
Yes — dissolving the enterprise is a lawful procedure to terminate operations and distribute remaining assets after all debts are paid. But dissolution is time-consuming, requires full debt settlement, and is not a shortcut for a quick withdrawal. If the goal is only to recover part of the capital, transferring a portion of the stake is far simpler.
This article has been quality-reviewed by the FLAW AI Legal Council