Capital contribution in a joint stock company refers to the total amount of capital contributed by shareholders for the purpose of establishing and operating the enterprise. Timely and full capital contribution is a critical obligation of shareholders to ensure the company has sufficient resources for sustainable operation. In the following article, NPLaw provides an in-depth legal analysis on issues related to capital contribution in joint stock companies.
I. Current status of capital contribution in joint stock companies
In Vietnam, the current state of capital contribution in joint stock companies reveals numerous legal and practical concerns. Some shareholders commit to capital contributions but fail to implement them in full or on time, thereby negatively affecting the company’s financial capacity and operations. Additionally, many companies raise capital without sufficient transparency, especially in the valuation of contributed assets.
Moreover, enterprises are facing difficulties in issuing additional shares to increase charter capital due to economic uncertainties and declining investor confidence. Addressing these issues requires tighter regulatory oversight and enhanced accountability from shareholders to ensure the sustainable growth of joint stock companies.
II. Legal provisions on capital contribution in joint stock companies
1. What is capital contribution in a joint stock company?
Capital contribution in a joint stock company refers to the assets contributed by shareholders at the time of establishment or during the operation of the company, forming its charter capital. Such a capital is divided into shares, and each shareholder holds a number of shares corresponding to the proportion of capital they have contributed.
2. What are the legal requirements on the number of shareholders?
According to Point b, Clause 1, Article 111 of the Law on Enterprise 2020, a joint stock company must have at least three shareholders and is not subject to any maximum limit. Shareholders may be individuals or organizations, and they are entitled to own shares and participate in company management in proportion to their capital contribution.
Thus, a joint stock company must have a minimum of three shareholders upon incorporation, with no upper limit on the number of shareholders.
3. What types of capital contributions are recognized?
Pursuant to Clauses 1 and 2, Article 114 of the Law on Enterprise 2020, capital contributions in a joint stock company are made in the form of:
- Common shares;
- Preferred shares.
Therefore, the company’s capital is primarily constituted by common and preferred shares, subject to the company’s decision and relevant legal provisions.
4. How can charter capital be increased during company operation?
According to Article 123 of the Law on Enterprise 2020 regarding share offerings, a joint stock company may increase its charter capital by issuing additional shares through:
- Offering shares to existing shareholders;
- Offering private shares;
- Public offerings.
Once the offering is completed, the company must register a change in charter capital within 10 days from the closing date of the offering.
Thus, a joint stock company may increase its capital by offering shares to current shareholders, private investors, or the general public, following applicable legal procedures.
III. Questions regarding capital contribution in joint stock companies
1. What is the maximum time limit for capital transfer?
Under Clause 3, Article 120 of the Law on Enterprise 2020, within 3 years from the date the company receives its Enterprise Registration Certificate, founding shareholders may only freely transfer their common shares to other founding shareholders. Transfers to non-founding shareholders require approval from the General Meeting of Shareholders. In such cases, the transferring shareholder is not entitled to vote on the resolution regarding the transfer.
Therefore, the maximum period for free transfer of founding shares is three years from the date of issuance of the Enterprise Registration Certificate.
2. Can capital contribution be transferred during operation?
Shareholders are permitted to transfer their shares during the company’s operation in accordance with the Law on Enterprise 2020. As previously stated, within the first three years, founding shareholders can only transfer shares freely among themselves. Transfers to external parties must be approved by the General Meeting of Shareholders.
Accordingly, share transfers are allowed but must adhere to legal procedures and conditions set forth by the law.
3. What are the fines for failure to contribute full capital without adjusting charter capital?
According to Clauses 3 and 5, Article 46 of Decree No. 122/2021/ND-CP, if shareholders fail to contribute the committed capital within the specified time frame and the company does not implement procedures to reduce its charter capital accordingly, it shall be subject to an administrative fine ranging from 30,000,000 VND to 50,000,000 VND. Additionally, the company must register for charter capital adjustment to reflect the actual amount contributed. Failure to comply may result in legal risks and affect business operations.
Hence, companies that fail to contribute capital and do not adjust charter capital accordingly may face both monetary fines and legal consequences.
4. Is capital contribution required to be made in cash or via bank transfer?
According to Article 3 of Circular No. 09/2015/TT-BTC, enterprises are prohibited from using cash for capital contributions, purchases, or transfers of contributed capital. Such transactions must be made via cheque, payment order, bank transfer, or other non-cash payment methods recognized by law. However, contributions made by individuals to an enterprise, or loans between enterprises and individuals, are not required to be made via bank transfer.
In short, capital contributions between enterprises must be made through non-cash methods, such as bank transfers.
5. When must shareholders complete their capital contributions?
Pursuant to Clause 1, Article 113 of the Law on Enterprise 2020, shareholders must fully pay for their subscribed shares within 90 days from the date the Enterprise Registration Certificate is issued, unless a shorter period is provided by the company's charter or the share subscription agreement.
If capital is contributed in the form of assets, the time for transportation, import procedures, and transfer of ownership shall not be counted toward the 90-day period. The Board of Directors is responsible for overseeing and urging shareholders to fulfill their capital contribution obligations on time.
Accordingly, shareholders must complete their capital contributions within 90 days of the company's registration, except in cases where a shorter period is agreed upon or specified in the company's charter. Administrative processing time for asset-based contributions is excluded from this timeline.
6. What happens if a shareholder fails to contribute the committed capital?
Under Clauses 3 and 4, Article 113 of the Law on Enterprise 2020, If shareholders do not contribute enough capital as committed, they will be handled as follows:
- A shareholder who fails to pay for their subscribed shares loses shareholder status and may not transfer the right to purchase those shares;
- If only part of the shares is paid for, rights are limited to the number of shares actually paid;
- Unpaid shares are considered unsold shares and may be offered for sale by the Board of Directors;
- Within 30 days, the company must register to adjust its charter capital and update shareholder information;
- Shareholders who fail to fulfill their capital obligations remain liable for any financial obligations incurred prior to the adjustment;
- The Board of Directors and the legal representative shall be jointly liable for failure to comply with these provisions if such failure causes damage to the company.
In summary, shareholders who do not fulfill their capital commitments may lose rights or shareholder status, and the unpaid shares may be reassigned. The company is required to adjust charter capital accordingly and update shareholder information. Non-complying shareholders and company officers may be held financially and legally liable.
IV. Legal consultancy services on capital contribution in joint stock companies
The above article is presented by NPLaw on the topic of capital contribution in joint stock companies. With a team of experienced legal professionals, NPLaw is committed to supporting and advising clients on all legal matters relating to corporate capital contribution. For legal assistance, please contact:
