The following article analyzes the current demand for capital contribution in private enterprises, clarifies the applicable legal framework, and provides detailed explanations of common concerns such as forms of capital contribution, contribution timing, valuation of contributed assets, and the rights of private enterprise owners.
I. Current demand for capital contribution in private enterprises
At present, the demand for capital contribution in private enterprises is increasingly growing, reflecting the potential development of Vietnam’s private economic sector.
Many individuals and organizations seek to participate in investment and business cooperation through capital contribution in order to share risks, optimize resources, and expand operational scale. Such a trend is prevalent across various sectors such as services, manufacturing, trade, and real estate, demonstrating the flexibility and strong attractiveness of the private enterprise model.
II. Legal regulations on capital contribution in private enterprises
1. What are the legal regulations on capital contribution in private enterprises?
Under current Vietnamese law, a private enterprise is an enterprise owned by a single individual who takes unlimited liability with all of their personal assets for all activities of the enterprise. Accordingly, a private enterprise does not have separate legal personality and is not permitted to raise capital or receive capital contributions from other individuals or organizations in the form of joint ownership.
Specifically:
- The owner of a private enterprise is not permitted to issue any type of securities, nor to share ownership rights of the enterprise with others.
- Capital contribution in a private enterprise is not legally recognized in the traditional sense as applied to limited liability companies or joint-stock companies.
In summary, pursuant to the Law on Enterprise 2020, a private enterprise has no capital contribution mechanism and is solely owned and operated by one individual. If multiple investors wish to participate jointly, the appropriate business forms are a limited liability company or a joint-stock company.
2. May an individual contribute capital to multiple private enterprises?
Pursuant to Article 188 of the Law on Enterprise 2020, provisions on private enterprises are as follows:
- A private enterprise is an enterprise owned by one individual who is personally liable with all of his or her assets for all activities of the enterprise.
- A private enterprise is not permitted to issue any type of securities.
- Each individual is entitled to establish only one private enterprise. The owner of a private enterprise may not concurrently be the owner of a household business or a general partner of a partnership.
- A private enterprise is not permitted to contribute capital to establish, or to purchase shares or capital contributions in, a partnership, a limited liability company, or a joint-stock company.
Accordingly, a private enterprise is owned by only one individual, and each individual may establish only one private enterprise nationwide. It means that:
- An individual may not contribute capital to another person’s private enterprise in the form of co-ownership or investment.
- An individual may not concurrently contribute capital to or own multiple private enterprises.
The reason is that a private enterprise does not have legal personality, and the owner takes unlimited liability with all of their personal assets. To ensure transparency and to avoid risks relating to asset liability, the law does not permit an individual to concurrently contribute capital to multiple private enterprises.
If an individual wishes to invest in multiple enterprises, they should consider the limited liability company or joint-stock company model, where capital contribution is expressly permitted and better protected by law.
3. May a private enterprise contribute capital to establish a company?
Pursuant to Article 188 of the Law on Enterprise 2020 on private enterprises:
- A private enterprise is owned by one individual and has unlimited liability with all of the owner’s assets for all activities of the enterprise.
- A private enterprise is not subject to issue any type of securities.
- Each individual may establish only one private enterprise. The owner of a private enterprise may not concurrently be the owner of a household business or a general partner of a partnership.
- A private enterprise is not permitted to contribute capital to establish others, or to purchase shares or capital contributions in a partnership, a limited liability company, or a joint-stock company.
Accordingly, a private enterprise is not permitted to contribute capital to establish another company. Under the Law on Enterprise 2020, a private enterprise does not have legal personality, and its assets are inseparable from the owner’s personal assets. Therefore:
- A private enterprise cannot become a capital-contributing member or shareholder of a limited liability company or a joint-stock company.
- All rights and obligations relating to investment capital belong to the private enterprise owner as an individual, not to the private enterprise itself.
Thus, a private enterprise is not permitted to contribute capital to establish another partnership, limited liability company, or joint-stock company. If investment in another company is desired, the private enterprise owner must contribute capital in their personal capacity rather than in the name of the private enterprise.
III. Certain questions related to capital contribution in private enterprises
1. Is there any regulation on minimum capital for a private enterprise?
Pursuant to Article 189 of the Law on Enterprise 2020, the investment capital of a private enterprise owner is regulated as follows:
- The investment capital of a private enterprise owner is self-registered by the owner. The owner must accurately register the total investment capital, clearly stating the amounts in Vietnamese Dong, freely convertible foreign currency, gold, and other assets; for assets, the type, quantity, and remaining value of each asset must be specified.
- All capital and assets, including borrowed capital and leased assets used in business operations, must be fully recorded in the enterprise’s accounting books and financial statements in accordance with law.
- During operation, the private enterprise owner has the right to increase or decrease their investment capital. Any increase or decrease must be fully recorded in accounting books. Where the investment capital is reduced to a level lower than the registered capital, such reduction may only be made after registration with the business registration authority.
Accordingly, there is no statutory minimum capital requirement for a private enterprise. Instead, the private enterprise owner registers the investment capital based on their financial capacity.
2. May land use rights be used as capital contribution in a private enterprise?
Pursuant to Clause 1, Article 34 of the Law on Enterprise 2020:
- Assets used for capital contribution 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.
- Only individuals or organizations that are lawful owners or lawful users of the assets specified in Clause 1 of this Article have the right to use such assets for capital contribution in accordance with law.
Accordingly, land use rights may be used as capital contribution in a private enterprise.
3. What is the statutory time for capital contribution in a private enterprise?
Under current law, a private enterprise is not subject to a capital contribution deadline as applicable to other types of enterprises. The private enterprise owner must contribute the full amount of registered capital at the time of establishment.
Specifically, pursuant to Article 189 of the Law on Enterprise 2020, the investment capital of a private enterprise owner is self-registered and must be accurately declared, including capital in Vietnamese Dong, freely convertible foreign currency, gold, and other assets. For assets, the type, quantity, and remaining value must be clearly stated.
Thus, although the law does not prescribe a specific capital contribution deadline, it requires the owner to fully contribute the registered capital upon establishment. Such a requirement ensures the owner’s ability to take unlimited liability for obligations arising from the enterprise’s business activities.
4. Is valuation required when contributing assets as capital to a private enterprise?
Pursuant to Clause 1, Article 34 of the Law on Enterprise 2020, assets used for capital contribution 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.
In addition, pursuant to Clause 1, Article 36 of the Law on Enterprise 2020 on valuation of contributed assets:
- Assets used for capital contribution other than Vietnamese Dong, freely convertible foreign currencies, and gold must be valued by founding members, founding shareholders, or professional valuation organizations, and expressed in Vietnamese Dong.
Accordingly, assets contributed as capital may include various types of property. If the contributed asset is not Vietnamese Dong, freely convertible foreign currency, or gold, it must be valued and converted into Vietnamese Dong.
Therefore, valuation is not mandatory for all types of contributed assets. Only assets other than Vietnamese Dong, freely convertible foreign currency, and gold are required to be valued in Vietnamese Dong. Proper valuation is essential to ensure legality and to mitigate risks for related parties.
5. May a private enterprise owner mobilize additional capital contributions from others?
Private enterprise owners may not mobilize additional capital contributions from others to invest in their private enterprises, as such a business form allows only one owner. All capital and financial activities must be conducted solely by the private enterprise owner. There can be no co-investors as in a joint-stock company or a limited liability company.
Pursuant to Article 183 of the Law on Enterprise 2020, the private enterprise owner is the sole owner and manager of all enterprise capital. External capital mobilization from parties other than the owner is not permitted under the private enterprise model.
Accordingly, the private enterprise owner may not raise capital from others or share ownership interests through capital contribution. If capital mobilization from multiple parties is desired, the owner must convert to another business form, such as a limited liability company or a joint-stock company.
IV. Legal advisory services related to capital contribution in private enterprises
NP Law’s legal advisory services on capital contribution in private enterprises assist individuals and organizations in understanding applicable legal regulations, permitted forms of capital contribution, conditions, and the rights and obligations of contributors, as well as related legal procedures. We support clients in dossier preparation, review of capital contribution agreements, risk prevention, and ensuring that capital contribution transactions are conducted transparently, lawfully, and effectively.
