Capital Contribution Using Land Use Rights

Thu Ky Luat would like to address your queries as follows:

Vietnamese law permits capital contribution using the value of land use rights (based on Clause 1, Article 35 of the Enterprise Law 2014). Specifically, "Assets contributed as capital may include Vietnamese Dong, freely convertible foreign currency, gold, value of land use rights, value of intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese Dong."

In addition, Point a, Clause 1, Article 36 of the Enterprise Law 2014 also stipulates: "For assets with registered ownership rights or land use rights value, the capital contributor must complete the procedures for transferring the ownership of such assets or land use rights to the company at the competent state agency."

Simultaneously, the Land Law 2013 also stipulates as follows: "The transfer of land use rights is the transfer of land use rights from one person to another through forms such as conversion, transfer, inheritance, giving of land use rights, and capital contribution using land use rights."

Thus, it can be understood that the land use rights used for capital contribution must be transferred from the contributor to the company. At that time, the contributed land use rights become the company's asset, and the contributor becomes the owner of the company. The recipient of the capital contribution will be issued a Land Use Rights Certificate. The party receiving the capital contribution will have the rights of a typical land user, such as when the State allocates land, leases land with a one-time lease payment or transfers the land use rights.

Besides the regulations on capital contribution, land use rights transfer, and licensing, the Government of Vietnam has also issued Decree 43/2014/ND-CP guiding the implementation of the Land Law 2013. This decree stipulates that capital contribution using land use rights terminates in the following cases:

- The term of capital contribution using land use rights expires;- One party or the parties make a request based on the agreement in the capital contribution contract;- Land is recovered according to the provisions of the Land Law;- The party contributing capital with land use rights in the business cooperation contract or joint-venture enterprise is declared bankrupt or dissolved;- The individual participating in the capital contribution contract dies; is declared dead; loses or has limited civil act capacity; is prohibited from working in the field of business cooperation which the capital contribution contract requires that individual to perform;- The legal entity participating in the capital contribution contract ceases to operate which the capital contribution contract requires that legal entity to perform.

From here, it can be seen that your company may receive capital contribution in the form of land use rights from individuals or organizations. The contributor is responsible for completing the procedures to transfer those land use rights to the company's assets, and capital contribution using land use rights may also be terminated if it falls into one of the aforementioned cases.

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