Legal regulations on capital contribution to a company in the form of assets

Contributing capital in the form of assets is a common method of capital contribution in companies. This allows investors not necessarily to contribute capital in cash, but also through other assets such as real estate, machinery, equipment, land use rights, or intangible assets such as inventions and trademarks. However, capital contribution in the form of assets must comply with specific legal regulations to ensure transparency and legality in business operations.

So how does Vietnamese law regulate capital contribution to a company in the form of assets? Let’s explore with NPLAW in the article below.

I. Current situation of capital contribution to a company in the form of assets

Contributing capital in the form of assets is a popular form of capital contribution and is recognized under Vietnamese law, especially in limited liability companies (LLCs) and joint stock companies (JSCs). In practice, with the development of the economy, many investors and enterprises choose to contribute capital by various types of assets instead of cash to start up or expand business operations.

In newly established companies, capital contribution by assets is increasingly popular, particularly in industries such as real estate, manufacturing, technology, or sectors requiring substantial fixed assets. Assets such as real estate, machinery, equipment, intellectual property rights, brands, or land use rights are often used for capital contribution instead of simply cash.

II. Legal regulations on capital contribution to a company by assets

1. What does the law provide about capital contribution to a company by assets?

According to Clause 1, Article 34 of the Law on Enterprises 2020, contributed assets 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, only individuals and organizations that are lawful owners or have lawful use rights to such assets are entitled to use them for capital contribution under the law.

2. Regulations on transfer of ownership when contributing capital by assets

According to Article 35 of the Law on Enterprise 2020, transfer of ownership when contributing capital by assets is regulated as follows:

- For assets subject to ownership or land use rights registration, the capital contributor must implement procedures to transfer ownership of such assets or land use rights to the company under the law. The transfer of ownership or land use rights for contributed capital is exempt from registration fees.

- For assets not subject to ownership registration, capital contribution must be performed by delivering and receiving the contributed assets with a written record, unless performed through an account.

Assets used in the business activities of private enterprises are not required to complete procedures to transfer ownership to the enterprise.

Payment for all activities of purchasing, selling, transferring shares and contributed capital, receiving dividends, and transferring profits abroad by foreign investors must be performed via accounts in accordance with the law on foreign exchange management, except for payments in assets or other non-cash forms.

3. Regulations on valuation of assets contributed as capital

According to Article 36 of the Law on Enterprise 2020, contributed assets other than Vietnamese Dong, freely convertible foreign currencies, or gold must be valued by members, founding shareholders or a valuation organization and must be converted into Vietnamese Dong.

- For assets contributed at the time of enterprise establishment, they must be valued by the members or founding shareholders by consensus or by a valuation organization. If valued by a valuation organization, the valuation must be approved by more than 50% of the members or founding shareholders.

- For assets contributed during operation, they must be valued by agreement between the capital contributor and the owner, the Members’ Council in the limited liability company or partnership, or the Board of Directors in the joint stock company, or by a valuation organization. If valued by a valuation organization, the valuation must be approved by the capital contributor and the owner, Members’ Council, or Board of Directors.

III. Clarification of some issues related to capital contribution to a company by assets

1. Is the time for completing ownership transfer procedures counted in the time limit for capital contribution?

According to Clause 2 Article 47, Clause 2 Article 75, and Clause 1 Article 73 of the Law on Enterprise 2020, the time limit for fully contributing capital with the type of assets committed upon enterprise registration is 90 days from the issuance date of the Enterprise Registration Certificate, excluding the time for transporting, importing contributed assets, and completing administrative procedures to transfer ownership.

Thus, the time for completing ownership transfer procedures when contributing capital by assets is not counted in the time limit for capital contribution.

2. Is it allowed to value contributed assets higher than their actual value?

The parties may value contributed assets higher than their actual value. However, under Clause 2 Article 35 of the Law on Enterprises 2020, if assets are valued higher than their actual value at the time of contribution, the members or founding shareholders must jointly contribute the difference between the appraised value and actual value and are jointly liable for damages caused by deliberately overvaluing the assets.

3. Can one use assets under authorization to manage for capital contribution?

According to Clause 2 Article 34 of the Law on Enterprise 2020, only individuals or organizations that are lawful owners or have lawful use rights to such assets are entitled to use them for capital contribution under the law.

Thus, being authorized to manage assets does not constitute lawful ownership or use rights of such assets, so these cannot be used for capital contribution.

4. Is it mandatory to notarize the contract when contributing real estate as capital?

When contributing real estate as capital, depending on the type of contract, the law may require notarization.

For example:

- Under Point a, Clause 3, Article 27 of the Land Law 2024, contracts for capital contribution by land use rights or land use rights and assets attached to land must be notarized or authenticated, except where a party or parties to the transaction are real estate business organizations and notarization or authentication is implemented at the request of the parties.

- For capital contribution by residential houses, under Clause 1, Article 164 of the Housing Law 2023, contracts for capital contribution by residential houses must be notarized or authenticated.

5. Can assets contributed as capital be withdrawn after completing capital contribution procedures?

Assets contributed as capital can be withdrawn after completing the capital contribution procedures by requesting the company to repurchase the capital portion or by transferring such capital portion, depending on the type of enterprise.

IV. Legal consultancy services related to capital contribution to a company by assets

The above is all the detailed information provided by NPLaw to support our valued clients related to capital contribution to a company by assets. If you have any further questions regarding the above or other legal matters, please contact NPLaw directly for consultation and support.