5 things to know about contributed assets to establish an enterprises under Vietnam's Law on Enterprise 2020

5 things to know about contributed assets to establish an enterprises under Vietnam's Law on Enterprise 2020 (Artwork)

1. What are contributed assets?

According to Article 34 of Vietnam's Law on Enterprise 2020, contributed assets include VND, convertible foreign currencies, gold, land use right (LUR), intellectual property rights, technologies, technical secrets, other assets that can be converted into VND.

In particular, only the individual or organization that has the lawful right to ownership or right to use the asset mentioned in Clause 1 of this Article may contribute it as capital as prescribed by law.

2. Organizations and individuals have the right to contribute capital to establish an enterprise

According to Clause 3, Article 17 of Vietnam's Law on Enterprise 2020, organizations and individuals have the right to contribute capital, buy shares and stakes of joint stock companies, limited liability companies and partnerships in accordance with this Law, except:

• State authorities, People’s armed forces contributing state-owned assets to enterprises to serve their own interests;

• The entities that are not allowed to contribute capital to enterprises prescribed by the Law on Officials, the Law on Public Employees, and Anti-corruption Law.

Note: The act of serving one’s own interests means the use of incomes from business operation, capital contribution, acquisition of shares/stakes for any of the following purposes:

- Any kind of distribution to some or all of the persons:

• Officials and public employees defined by the Law on Officials and the Law on Public Employees;

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  Commissioned officers, non-commissioned officers, career military personnel, military workers and public employees in agencies and units of Vietnam People’s Army; commissioned officers, non-commissioned officers and police workers in police authorities and units, except for those designated and authorized representatives to manage state-owned stakes in enterprises or to manage state-owned enterprises;

   

- Inclusion in the operating budget of the organization/unit against state budget laws;

- Establishment or contribution to an internal fund of the organization/unit.

3. Transfer of ownership of contributed assets

According to Article 35 of Vietnam's Law on Enterprise 2020, transfer of contributed assets by members of a limited liability company, partners of a partnership, shareholders of a joint stock company shall comply with the following regulations:

• For assets whose ownership have been registered and LURs, the capital contributor shall follow procedures for transfer the ownership of such assets or the LUR to the company as prescribed by law. This transfer is exempt from registration fee;

• Contribution of assets whose ownership is not registered shall be recorded in writing unless the contribution is made by wire transfer.

Note: The record on transfer of contributed assets shall contain the following information:

• The company’s name and headquarters address;

• Full name, mailing address, legal document number of the contributor that is an individual; legal document number of the contributor that is an organization;

• Types and quantities of contributed assets; total value of contributed assets and the ratio of this value to the company’s charter capital;

• Date of transfer; signatures of the contributor or the contributor’s authorized representative and the company’s legal representative.

4. Valuation of contributed assets

According to Article 36 of Vietnam's Law on Enterprise 2020, contributed assets that are not VND, convertible foreign currencies or gold shall be valued by members/partners/shareholders or a valuation organization and expressed as VND.

Note: Assets contributed upon establishment of an enterprise shall be valued by members/partners/founding shareholders by consensus or by a valuation organization. In the latter case, the value of contributed assets must be accepted by more than 50% of the members/partners/founding shareholders.

In case a contributed asset is valued at a value higher than its actual value at contribution time (overvalued), the members/partners/founding shareholders shall jointly contribute an amount equal to the difference and are jointly responsible for the damage caused by the overvaluation.

In particular, assets contributed during the operation shall be valued by the owner or the Board of Members/Partners (for limited liability companies and partnerships) or the Board of Directors (for joint stock companies) and the contributor or by a valuation organization. In the latter case, the value shall be accepted by the contributor and the owner, the Board of Members/Partners/Directors.

In case a contributed asset is overvalued, the contributor, the owner and members of the Board of Members/Partners/Director shall jointly contribute an amount equal to the difference and are jointly responsible for the damage caused by the overvaluation.

5. Time limit for capital contribution

According to Article 47 of Vietnam's Law on Enterprise 2020, the members shall contribute sufficient and correct assets as promised when applying for enterprise registration within 90 days from the issuance date of the Certificate of Enterprise Registration, excluding the time needed to transport or import the contributed assets and for completing ownership transfer procedures. During this period, the members shall have rights and obligations that are proportional to their promised contribution. The members may only contribute assets that are different from the promised ones if the change is approved by more than 50% of the remaining members.

Note: In case a member fails to contribute or fully contribute capital as promised by the expiration of the period mentioned above:

• The member that has not contributed capital at all is obviously no longer a member of the company;

• The member that has not fully contributed capital will have the rights that are proportional to the contributed capital;

• The right to contribute the missing capital will be sold under a resolution or decision of the Board of Members.

If the member has not contributed capital or has not fully contributed capital, the company shall register the change in charter capital and the members’ holdings within 30 days from the deadline for contributing capital according to the regulations The members who fail to contribute or fully contribute capital shall be responsible for the financial obligations incurred by the company during the period before the company registers the change in charter capital and the members’ holdings in proportion to their promised contributions.

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