In the operation of corporate groups and corporations, the transfer of assets from subsidiaries to the parent company constitutes an important transaction, often arising from the need for restructuring, resource reallocation, or optimization of asset utilization. This article provides a detailed analysis of the current legal framework governing the transfer of assets to parent companies.

I. Current situation relating to the transfer of assets to the parent company

In recent years, the parent–subsidiary company model has become increasingly common in Vietnam, particularly among economic groups, equitized state-owned enterprises, and FDI enterprises. The transfer of assets from subsidiaries to parent companies takes place in various forms, including:

  • Transfer of ownership of fixed assets (factories, machinery, vehicles, etc.);
  • Transfer of land use rights and real estate;
  • Transfer of intangible assets (intellectual property rights, trademarks, technical know-how, etc.);
  • Internal reallocation for the purposes of business operations or capital restructuring.

However, in practice, such transfers often encounter several issues:

  • Lack of consistency in legal mechanisms: Enterprises often face confusion in applying sectoral laws (Enterprise Law, Law on Management and Use of State Capital, Land Law, Tax Laws, etc.). In certain cases, confusion between “asset transfer” and “internal reallocation” leads to procedural errors and non-compliance.
  • Risks concerning valuation and financial obligations: Many asset transfers are not valued at market price or fail to involve independent valuation organizations, resulting in disputes among related parties. Tax obligations (including corporate income tax, VAT, registration fees, etc.) are not always fully assessed, leading to risks of retroactive collection or penalties for late payment.
  • Transparency and supervision concerns: In state-owned enterprises or enterprises with state capital, non-transparent transfers may result in the loss of capital and assets. Competent authorities sometimes lack detailed guidelines, leading to inconsistent practices among enterprises.
  • Impact on strategy and business operations: Transfers conducted at inappropriate times or without adequate impact assessment may affect cash flow, project timelines, and the competitiveness of the enterprise.

The foregoing demonstrates that although transfers of assets to parent companies are lawful and necessary, failure to comply with applicable regulations and procedures exposes enterprises to significant legal, financial, and governance risks.

II. Legal framework governing the transfer of assets to the parent company

1. Definition of the transfer of assets to the parent company

Pursuant to Clause 1, Article 195 of the Law on Enterprises 2020, a company is deemed a parent company of another company if it falls under one of the following cases: 

  • Holds more than 50% of the charter capital or the total number of ordinary shares of that company;
  • Has the right, directly or indirectly, to decide the appointment of a majority or all members of the Board of Directors, the Director, or the General Director of such company;
  • Has the right to decide on the amendment or supplementation of the charter of that company.

The transfer of assets to the parent company is understood as an activity in which the subsidiary sells, reallocates, or transfers ownership or usage rights over assets (including both tangible and intangible assets) to the parent company, in compliance with legal provisions and the company’s charter.

Forms of transfer may include:

  • Transfer (sale) of assets under a contract;
  • Internal reallocation of assets (without a sale price, merely changing the managing entity);
  • Contribution of assets as capital from subsidiary to parent company;
  • Liquidation of assets for repurchase by the parent company.

2. Circumstances necessitating the transfer of assets to the parent company

Transfers typically arise in the following situations:

  • Organizational or capital restructuring: The parent company centralizes assets for unified management or joint projects;
  • Optimization of asset utilization: Assets are transferred from inefficient units to those with greater exploitation capacity for effective exploitation;
  • Dissolution or downsizing of subsidiaries: The parent company takes over part or all of the  subsidiary’s assets;
  • Preservation of group capital and ownership:To prevent the risk of asset loss or dissipation of assets within the member entities.
  • Implementation of regulatory requirements or owner’s decisions (particularly in enterprises with state capital).

3. Procedures for transferring assets to the parent company under current law

The procedures for transferring assets differ depending on the type of asset, form of transfer, and nature of the enterprise, but generally consist of the following key steps:

  • Step 1 – Adoption of Internal Resolution
  • The Members’ Council/Board of Directors or the owner of the subsidiary issues a resolution/approval of the transfer, based on the company’s charter and agreements between parent and subsidiary.
  • In enterprises with state capital, compliance with Decree No. 91/2015/ND-CP (as amended by Decree No. 140/2020/ND-CP) on the management and use of state capital and assets at enterprises is required.
  • Step 2 – Asset Valuation
  • Engage an independent valuation organization or establish an internal valuation council (if permitted).
  • The transfer value must adhere to market principles, except in internal reallocations without sale price.
  • Step 3 – Execution of Contract or Internal Transfer Record
  • If it is a sale: Concluding a purchase and sale contract specifying value, payment method, and transfer date of ownership.
  • If it is an internal reallocation: Preparing a handover/transfer record stating asset condition, value, rights and obligations after transfer.
  • Step 4 – Fulfilment of Legal Procedures
  • Register of changes in ownership or usage rights with competent state authorities (for registrable assets such as land use rights, vehicles, etc.).
  • Declaration and payment of applicable taxes, fees, and charges in accordance with the law (including VAT, CIT, registration fees, etc.).
  • Step 5 – Accounting and Record-Keeping
  • Both the parent company and the subsidiary must account in accordance with accounting standards, fully reflecting asset value and related financial obligations.
  • Maintain complete legal records, contracts, handover records, and payment documents for audit and inspection purposes.

Compliance with these steps helps enterprises minimize legal risks and ensure transparency in group capital and asset management.

III. Questions on the transfer of assets to the parent company

1. What should be noted when transferring assets to the parent company?

  • Strictly complying with applicable laws and the company’s charter to avoid violations relating to the management and use of capital and assets;
  • Clearly defining the purpose and form of transfer (sale, reallocation, capital contribution, etc.) in order to apply the appropriate procedures;
  • Conducting objective and transparent valuation, especially for high-value assets or state-owned assets;
  • Properly fulfilling tax obligations to avoid retroactive collection or penalties;
  • Preparing complete documents for accounting, auditing, and inspection purposes.

2. Is it necessary to prepare a handover record when transferring assets to the parent company?

Whether by sale or internal reallocation, enterprises should prepare a handover or transfer record in order to:

  • Confirm asset condition, quantity, and value at the time of transfer;
  • Serve as the basis for accounting records and tax declarations;
  • Reduce risks of future disputes relating to ownership or asset condition.

3. Can fixed assets under construction (e.g., projects, works under development) be transferred to the parent company?

It is possible to transfer fixed assets that are still under construction or in process (e.g., ongoing projects or construction works) to the parent company; however, the following issues should be noted:

  • Re-assessing the value of completed portions, including work-in-progress costs and related financial obligations;
  • Executing a contract or transfer record specifying completed and remaining portions to be carried out by the parent company;
  • Fulfilling legal procedures relating to land use rights, construction permits, and contractor agreements if affected by the transfer.

4. Are there limitations on the types of assets permitted to be transferred to the parent company?

Generally, the law does not impose broad restrictions, but attention must be paid to:

  • State-owned assets, which must comply with regulations on state capital and asset management (Decree No. 91/2015/ND-CP, Decree No. 140/2020/ND-CP);
  • Land use rights, which must comply with the 2024 Land Law, the 2023 Real Estate Business Law, and be subject to competent authority approval where required;
  • Prohibited or restricted assets from trading (weapons, narcotics, antiques, etc.) which may not be transferred.

IV. Legal advisory services on the transfer of assets to the parent company

Transfers of assets between parent and subsidiary companies require knowledge spanning multiple areas of law (corporate, investment, land, taxation, accounting, etc.). To avoid risks, enterprises should seek professional legal advisory services, including:

  • Advising on the appropriate form of transfer (sale, internal reallocation, capital contribution, etc.);
  • Drafting and reviewing contracts, handover records, and legal documents;
  • Assisting with asset valuation procedures and liaison with valuation organizations;
  • Advising on tax obligations and tax planning;
  • Representing enterprises before competent authorities to register changes of ownership or usage rights;
  • Resolving disputes arising from asset transfers.

For legal advisory services concerning transfers of assets to parent companies, please contact NPLaw for direct consultation and guidance.