Capital contributions to a company in cash are still practiced today; however, such a method is not specifically or thoroughly guided, which easily leads to confusion during the contribution process. Through this article, NPLaw would like to provide clients with some legal information related to contributing capital to a company in cash.
I. Actual situation of capital contributions to a company in cash
In principle, the law does not restrict capital contributions to a company in cash. In practice, for many years, members and shareholders have contributed capital in cash as a way to establish the company’s cash flow. Given the Government’s policy to promote non-cash payments in the economy, it can be predicted that regulations on capital contributions to enterprises will also aim to minimize the use of cash in the future, even for individuals, to enhance transparency, reduce risks, and align with the development trend of electronic payments.
II. Legal provisions on capital contributions to a company in cash
1. Is contributing capital to a company in cash permitted by Law?
According to Article 6 of Decree No. 222/2013/ND-CP on cash payments of enterprises, it is stipulated that:
- Enterprises shall not make cash payments in transactions involving capital contributions and the purchase, sale or transfer of capital contributions in enterprises.
- Enterprises that are not credit institutions shall not use cash in lending and borrowing transactions with one another.
Based on these provisions, enterprises are not allowed to use cash when contributing capital, and purchasing, selling or transferring capital contributions in enterprises. However, these regulations do not mandatorily apply to individuals when contributing capital to enterprises.
In addition, Article 3 of Circular No. 09/2015/TT-BTC stipulates:
- Enterprises shall not use cash (banknotes or coins issued by the State Bank of Vietnam) for payment when conducting transactions involving capital contributions and the purchase, sale or transfer of capital contributions in other enterprises.
Thus, while enterprises are prohibited from contributing capital in cash, individuals may still contribute capital to companies in cash.
2. Regulations on the time limit for capital contributions to a company in cash
According to Clause 2, Article 47; Clause 2, Article 75; and Clause 1, Article 113 of the Law on Enterprise 2020, the time limit for contributing charter capital for multiple-member limited liability companies, single-member limited liability companies, and joint stock companies is within 90 days from the date of issuance of the Enterprise Registration Certificate, or within another shorter period specified in the joint stock company’s charter or in the stock subscription agreement.
Thus, the typical time limit for contributing capital in cash is 90 days from the date of issuance of the Enterprise Registration Certificate.
3. Procedures for capital contributions to a company in cash
1. Components of the dossier for contributing capital to a company in Vietnam
Step 1: The dossier is submitted to the Department of Planning and Investment where the economic organization’s head office is located to implement procedures for registering the capital contribution, and purchasing stocks or contributed capital. The dossier includes:
- Application for registration of capital contribution, and purchase of stocks or contributed capital;
- Minutes of agreement on capital contribution, and purchase of stocks or contributed capital;
- Power of attorney in case a third party is authorized to implement capital contribution registration procedures (if any);
- Certified copy of passport and relevant legal documents of foreign investors (if any).
Step 2: After obtaining approval from the Investment Division – Department of Planning and Investment regarding the acceptance of the capital contribution, the entity opens an investment capital account (if required by investment Laws), then proceeds with the capital contribution.
Step 3: The company implements procedures to change shareholders or members on the Enterprise Registration Certificate according to the law at the Business Registration Office – Department of Planning and Investment.
III. Questions about capital contributions to a company in cash
1. Is there a fine for not contributing the full capital amount in cash within the prescribed time limit?
According to Article 46 of Decree No. 122/2021/ND-CP, the fine level for failing to contribute sufficient charter capital within the prescribed time limit is:
- A fine from 30,000,000 VND to 50,000,000 VND shall be imposed for any of the following violations:
+ Failing to implement procedures for adjusting capital or changing founding members or shareholders at the business registration authority after the capital contribution period has ended and after the adjustment period for members or founding shareholders who failed to contribute sufficient capital without the capital contribution commitment;
+ Intentionally mispricing assets contributed as capital.
- Remedial measures:
+ Compelled to change contributing members, stock purchasers, or capital contributors for violations specified at Point b, Clause 2 of this Article;
+ Compelled to implement procedures for adjusting capital or changing founding members or shareholders for violations specified at Point a, Clause 3 of this Article;
+ Compelled to register for enterprise establishment for violations specified at Point a, Clause 4 of this Article.
Thus, if the capital contribution in cash is not fully made within the prescribed time, the enterprise may be administratively sanctioned as above.
2. Must capital contributions to a company in cash be made in Vietnamese dong?
According to Article 34 of the Law on Enterprise 2020 on assets contributed as capital:
- Assets contributed as capital include Vietnamese dong, freely convertible foreign currencies, gold, land use rights, intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese dong.
Thus, under current regulations, cash capital contributions must be in Vietnamese dong, with no provisions permitting contributions in other currencies.
3. Is it possible to extend the time limit to make capital contributions to a company in cash?
According to Clause 4, Article 47; Clause 3, Article 75; and Point d, Clause 3, Article 113 of the Law on Enterprise 2020, from the end of the statutory period for contributing capital to the company, the contributor may still extend the time to make the capital contribution by an additional 30 days from the final due date for full contribution.
Thus, the time limit for making capital contributions in cash may be extended.
4. Must the origin of cash capital contributions be proven?
According to Clause 2, Article 34 of the Law on Enterprise 2020:
- Only individuals and organizations that are lawful owners or have lawful use rights over the assets specified in Clause 1 of this Article may use such assets to contribute capital as prescribed by law.
Accordingly, in principle, the law does not directly require the origin of the cash contributed as capital to be proven. However, based on the above provision, the cash must be legally owned to be used as capital contribution to the company. Therefore, to ensure smooth and lawful contributions, contributors may consider proving lawful ownership, even though this is not mandatory.
5. Can the company return capital contributions made in cash?
According to Point a, Clause 3 and Clause 4, Article 68; Point a, Clause 3, Article 87; and Point a, Clause 5, Article 112 of the Law on Enterprise 2020, the General Meeting of Shareholders or the Members’ Council has the right to decide on returning capital contributions to members or shareholders. In addition, current law does not restrict the form of decreasing charter capital by returning in cash.
Thus, if the conditions for decreasing charter capital are met and the General Meeting of Shareholders or the Members’ Council decides, the enterprise may return capital contributions in cash.
IV. Legal consultancy services related to capital contributions to a company in cash
NPLaw provides consulting services on capital contributions in cash and other legal matters such as enterprise law, intellectual property, labor, consulting and assisting with procedures for obtaining sub-licenses, etc. Clients are invited to contact NPLaw’s legal consultants for detailed advice on issues related to capital contributions to a company in cash via the information below:
