What is the asset contributed as capital? What are the types?

Individuals and organizations must contribute assets as capital to establish enterprises, accordingly, what is the asset contributed as capital? LuatVietnam shall mention this issue in the following article:

1. What is the asset contributed as capital? What are the types?

Pursuant to Clause 1, Article 34, Law on Enterprise 2020, assets contributed as capital may be in the form of Vietnam dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical know-how and other assets that can be valued in Vietnam dong.

Clause 18, Article 4 of this Law prescribes that:

Capital contribution means the contribution of assets to make up the charter capital of a company, including contribution of capital for the establishment of a new company or additional contribution to the charter capital of an existing company.

Accordingly, only organizations and individuals that are lawful owners of or have the lawful right to use the assets may use such assets for capital contribution in accordance with law.

Therefore, assets contributed as capital include: Vietnam dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical know-how and other assets that can be valued in Vietnam dong.

2. Transfer of ownership over assets contributed as capital

Pursuant to Article 35, Law on Enterprise 2020, members of a limited liability company or partnership and shareholders of a joint stock company shall transfer ownership over assets contributed as capital to the company:

- For assets with registered ownership or land use rights: Carry out procedures for transfer of ownership over such assets or for transfer of such land use rights to the company in accordance with law.

The transfer of ownership or transfer of land use rights over assets contributed as capital is not subject to a registration fee;

- For assets not subject to ownership registration: The capital contribution shall be made in the form of a handover of the assets which shall be recorded in a minute (unless it is made via a bank account).

Within that, A minutes of handover of assets contributed as capital must have the following principal contents:

• Name and head office address of the company
• Full name, contact address, and serial number of the legal paper of the individual, and serial number of the legal paper of the organization where the capital contributor works;
• Type of assets and number of units of assets contributed as capital; total value of assets contributed as capital and percentage of the total value of such assets in the charter capital of the company;
• Date of handover;
• Signatures of the capital contributor or his/her authorized representative and of the at-law representative of the company.
• A capital contribution may be regarded as completed only when the lawful ownership over assets contributed as capital has been transferred to the company.

Note:

- For assets of the owner of a sole proprietorship used for business operations, it is not required to carry out procedures for the transfer of their ownership to the enterprise.

- The payment for the purchase, sale, and transfer of shares and contributed capital amounts, receipt of dividends, and transfer abroad of profits by foreign investors shall be made via bank accounts in accordance with the law on foreign exchange management, unless the payment is made in assets or another non-cash form.
 

3. Valuation of assets contributed as capital

Article 36, Law on Enterprise 2020 prescribes the valuation of assets contributed as capital as follows:

1. Assets contributed as capital that is not Vietnam dong, freely convertible currency, or gold shall be valued by the members, founding shareholders, or a price appraisal organization and denominated in Vietnam dong.

2. Assets contributed as capital to an enterprise upon its establishment shall be valued by the enterprise’s members or founding shareholders on the principle of consensus or by a price appraisal organization.  If the valuation is conducted by a price appraisal organization, the assessed value of assets contributed as capital shall be approved by more than 50% of members or founding shareholders.

If assets contributed as capital are overvalued compared to their actual value at the time of capital contribution, members or founding shareholders shall jointly contribute an additional capital amount equal to the difference between the assessed value and the actual value at the time of completion of the valuation; they shall also be jointly responsible for the damage caused by the intentional over valuation of assets

3. Assets contributed as capital in the process of operation of an enterprise shall be valued on the basis of agreement between the owner or Members’ Council, for a limited liability company or partnership, or the Board of Directors, for a joint stock company, and the capital contributor, or by a price appraisal organization. If the valuation is conducted by a price appraisal organization. If the valuation is conducted by a price appraisal organization, the assessed value of assets contributed as capital shall be approved by the capital contributor and the owner or Members’ Council or Board of Directors.

In case assets contributed as capital are overvalued compared to their actual value at the time of capital contribution, the capital contributor and the owner or member of the Members’ Council, for a limited liability company or partnership, or member of the Board of Directors, for a joint stock company, shall jointly contribute an additional capital amount equal to the difference between the assessed value and the actual value at the time of completion of the valuation; they shall also be jointly responsible for the damage caused by the intentional over-valuation of assets.

Therefore, enterprises must be responsible for conducting the price appraisal of assets compared to their actual value at the time of capital contribution. A fine of between VND 30 million and VND 50 million shall be imposed for incorrectly assessing the value assets contributed as capital in a deliberate manner (the fine imposed on an individual shall be 1/2 (half) that imposed on an organization) in accordance with Point b, Clause 3, Article 46, Decree No. 122/2021/ND-CP.