What are the penalties for deliberate contribution of assets with false value in Vietnam?

What are the penalties for deliberate contribution of assets with false value in Vietnam? (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. What are contributed assets?

According to Article 34 of the Law on Enterprises 2020, contributed assets are prescribed as follows:

- 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.

- 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. How to handle the consequences of cases of overvalued contributed assets in Vietnam

According to the provisions of Clauses 2 and 3, Article 36 of the Law on Enterprises 2020, in cases where assets contributed as capital are valued higher than the actual value of that asset at the time of capital contribution, it must be handled as follows:

(i) 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.

(ii) 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.

3. What are the penalties for deliberate contribution of assets with false value in Vietnam?

According to Point b, Clause 3, Article 46, Decree 122/2021/ND-CP, a fine ranging from VND 30,000,000 to VND 50,000,000 shall be imposed for any of the following violations:

- Failure to follow procedures for changing capital or changing members or founding shareholders as prescribed at the business registration authority upon expiry of the time limit for capital contribution and time limit for capital change because members or founding shareholders fail to fully contribute capital but there is not any member or founding shareholder that undertakes to contribute capital;

- Deliberate contribution of assets with false value.

Note: The above-mentioned fine is the fine for organizations. For the same administrative violation, the fine for individuals is equal to 1/2 (one-half) of the fine for organizations. (Clause 2, Article 4,Decree 122/2021/ND-CP)

4. What are the regulations on transfer of ownership of contributed assets in Vietnam?

According to Article 35 of the Law on Enterprises 2020, the transfer of ownership of contributed assets is prescribed as follows:

- 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.

- 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.

- The contribution is considered complete once the lawful ownership of the assets has been transferred to the company.

- Procedures for ownership transfer are exempt for assets serving business operation of the sole proprietorship’s owner.

- Payment for transfer of shares/stakes, receipt of dividends of remittance of profits by foreign investors shall be carried out through accounts in accordance with foreign exchange laws, except for payment in assets and cashless payment.

Nguyen Ngoc Que Anh

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