PROVISIONS ON CHARTER CAPITAL

Legal basis:

• The Enterprise Law 2020 takes effect from January 1, 2021;
• The Investment Law 2020 takes effect from January 1, 2021;
• Decree No. 01/2021/ND-CP issued on January 4, 2021 on Enterprise Registration;
• Decree 31/2021/QĐ-TTg Elaboration Of Some Articles Of The Law On Investment

When making a capital contribution in Vietnam, foreign investors must follow the provisions of law as well as the management regulations in Vietnam.

1.    Provision on charter capital contribution

Form of capital contribution

A foreign investor may contribute capital to a business organization in the following forms:

a) Purchase of shares of joint-stock companies through the initial public or additional issuance;

b) Contribution of capital to limited liability companies and partnerships;

c) Contribution of capital to other business organizations

Areas of responsibility

Capital-contributing members are organizations and individuals in limited liability companies, partnerships and joint-stock companies who are only responsible for the company’s debts to the extent of the amount of capital committed to contribute to the company.

2. Conditions for charter capital contribution by foreign investors

a) Over 50% of its charter capital or more is held by a foreign investor(s) or the majority of the general partners are foreigners if the business organization is a partnership;

b) Over 50% of its charter capital or more is held by a business organization(s) mentioned in Point a;

c) Over 50% of its charter capital or more is held by a foreign investor(s) and a business organization(s) mentioned in Point a.

3. Regulations on assets contributed as charter capital

Capital contribution property

According to the provisions of Article 34 of the Enterprise Law 2020, the assets contributed as capital are: Vietnam Dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical know-how, and financial resources. other property that can be valued in Vietnam Dong.

Only individuals or organizations that are lawful owners or have lawful use rights of assets intended to contribute capital have the right to use such assets to contribute capital as prescribed by law.

Transfer of ownership of assets contributed as capital

According to the provisions of Article 35 of the Enterprise Law 2020, members of limited liability companies, partnerships and shareholders of joint-stock companies must transfer ownership of assets contributed as capital to the company in accordance with the following provisions:

• For assets with registered ownership or land use rights, the capital contributor must carry out procedures to transfer ownership of such property or land use rights to the company in accordance with law. The transfer of ownership or land use rights for assets contributed as capital is not subject to registration fees;
• For assets without registered ownership, the capital contribution must be made by handing over the contributed assets certified by minutes, except for the case where it is done through an account.

The capital contribution is only considered as complete payment when the legal ownership of the contributed assets has transferred to the company.

The charter capital contribution to establish a company

The law on enterprises does not specify the minimum contributed capital, however, it is dependent on the type of each company, and the business line has its own requirements for meeting the capital contribution.

For example:

No.	Business line	Minimum capital
1	Labor export service	VNĐ 05 billion
2	Audit service	VNĐ 05 billion
3	Real estate business	VNĐ 20 billion

 

Capital contribution in cash of foreign investors

When contributing capital in VNĐ or freely convertible foreign currency to a foreign-owned company, foreign investors are required to transfer funds through an investment capital account opened at a commercial bank. This account is a direct or indirect investment capital account depending on the charter capital ownership ratio of foreign investors.

4.   About the time limit for charter capital contribution

Depending on the type of enterprise that the foreign investors intends to establish in Vietnam, the time limit for capital contribution as follows:

For limited company

Members must contribute capital to the company with the full amount and the right type of assets as committed when registering for business establishment within 90 days from the date of being granted the Certificate of Business Registration, excluding the time of transportation, import and export. Import assets for capital contribution, carry out administrative procedures to transfer property ownership. During this period, the member has rights and obligations in proportion to the committed capital contribution ratio. A member of the company may only contribute capital to the company with an asset other than the committed one if it is approved by more than 50% of the remaining members.

Assets contributed as capital for which ownership rights must be registered must complete all procedures for title transfer and transfer within this time limit.

For Joint Stock Company

Shareholders must pay in full the number of shares registered for purchase within 90 days from the date of issuance of the Certificate of Business Registration, unless the company’s charter or contract for registration of share purchase provides for a other shorter period. In case shareholders contribute capital with assets, the time for import and export transportation and carrying out administrative procedures to transfer ownership of such assets shall not be included in this time limit for capital contribution. Assets contributed as capital for which ownership rights must be registered (land use right, house ownership, car ownership, etc.) used for payment must also complete the procedures for title transfer and transfer within the time limit. this.

For partnerships

The Enterprise Law 2020 does not stipulate the time limit for capital contribution for a partnership, but the time limit will be set by the general partners and capital contributors in the company’s charter.

5. Issuance of capital contribution certificate / share ownership certificate

The certificate of capital contribution has an important meaning for an individual member or an organization of the enterprise, it is a document certifying the full contribution of the registered capital contribution, demonstrating the rights, obligations as well as being responsible for the capital contribution. liability for debts and other property obligations of the enterprise within the amount of capital that the individual or organization has committed and properly performed within the prescribed time limit.

The certificate of capital contribution is issued to company members by limited liability companies with 2 or more members and partnerships. Share ownership certificates are issued to Founding Shareholders and other shareholders by the Joint Stock Company.

6.  Regulations on transfer of contributed capital, donation of contributed capital and other cases

According to the provisions of the Enterprise Law 2020, different types of enterprises will have certain regulations on the transfer of contributed capital. Specifically:

For one member limited liability company:

The owner is entitled to transfer part or all of the capital to another individual or organization. (In the case that the transfer of a capital contribution will lead to the conversion of the type of company according to each legal case).

The company owner is only entitled to withdraw capital by transferring part or all of the charter capital to another organization or individual; in case of withdrawing part or all of the contributed charter capital from the company in another form, the company owner and individuals and organizations have.

In case the company owner transfers or donates a part of the charter capital to one or more other organizations or individuals or the company admits new members, the company must organize management according to the type of enterprise similar to that of the company. respond and register to change the contents of business registration within 10 days from the date of completion of the transfer, donation or admission of new members.

For limited liability companies with two or more members:

Capital-contributing members are entitled to transfer part or all of their capital to other individuals or organizations.

Repurchase of capital contribution:

• A member has the right to request the company to buy back his/her capital contribution if that member has voted against the resolution or decision of the Members’ Council on the following issues:

1. • Amending and supplementing contents in the company’s charter related to the rights and obligations of members and the Members’ Council;
   • Reorganize the company;

• Other cases as prescribed in the company’s charter.
• Request for redemption of contributed capital must be made in writing and sent to the company within 15 days from the date of adoption of the resolution or decision specified in Clause 1 of this Article.
• Within 15 days from the date of receiving the member’s request, the company must buy back the member’s contributed capital at the market price or the price determined according to the principles specified in the company’s charter, except in case the two parties can agree on the price. The payment can only be made if, after fully paying the redeemed contributed capital, the company still fully pays all debts and other property obligations.
• In case the company fails to pay the required share back, that member has the right to freely transfer his/her contributed capital to another member or a person who is not a member of the company.

Transfer of contributed capital

• Except where the company buys back the contributed capital and in the case of donation of the contributed capital, a member of a limited liability company with two or more members has the right to transfer part or all of his/her contributed capital to another person. in accordance with the following provisions: (i) Offering such share of capital contribution to the remaining members in proportion to their capital contribution in the company under the same offering conditions; (ii) Transferring with the same offer conditions for the remaining members to non-members if the remaining members of the company do not buy or do not buy all of them within 30 days from the date of offering. .
• Transferring members still have rights and obligations towards the company corresponding to the relevant contributed capital until information about the buyer is fully recorded in the member register.
• In case of transferring or changing the contributed capital of members, resulting in only one member of the company, the company must organize management in the form of a single-member limited liability company and register the change. change contents of business registration within 15 days from the date of completion of the transfer

Handling of contributed capital in some special cases

• In case a company member being an individual dies, the heir under the will or law of that member is a member of the company.
• Where an individual member is declared missing by a court, the member’s rights and obligations shall be performed through the member’s property manager in accordance with civil law.
• In case a member has limited or lost capacity for civil acts, has difficulties in awareness and behavior control, the rights and obligations of that member in the company shall be performed through a representative.
• A member’s capital contribution is acquired or transferred by the company in accordance with this Law in the following cases:
• The heir does not want to become a member;
• The person given as a gift according to regulations is not approved by the Members’ Council to become a member;
• Company member is a dissolved or bankrupt organization.
• In case the capital contribution of a company member who is an individual dies without an heir, the heir refuses to accept the inheritance or is deprived of the right to inherit, such capital contribution shall be settled according to the provisions of law on Civil.
• In case a member donates part or all of his/her capital contribution in the company to another person, the recipient becomes a member of the company in accordance with the following provisions:

1. • If the recipient is a legal heir under the Civil Code, this person is automatically a member of the company;
   • If the recipient does not fall into the categories specified above, he/she will only become a member of the company when approved by the Members’ Council.

• In case a member uses the contributed capital to repay the debt, the payee has the right to use the contributed capital in one of the following two forms:

• • Become a member of the company if approved by the Members’ Council;
  • Offering and transferring such contributed capital in accordance with the Law on Enterprises.

• In case a company member is an individual who is detained, is serving a prison sentence, is serving administrative handling measures at a compulsory detoxification establishment or compulsory education institution, such member shall authorize allow others to exercise some or all of their rights and obligations at the company.
• In case a company member being an individual is banned by the Court from practicing certain occupations or doing certain jobs, or a member of the company being a commercial legal entity is banned by the Court from doing business or from operating in certain areas of the law within the scope of business lines of the company, such member may not practice or do prohibited jobs at that company or the company suspends or terminates related business lines under a court’s decision.

For partnerships

• Partnership A general partner is not entitled to transfer part or all of his/her capital contribution in the company to another person without the consent of other general partners.
• Capital-contributing members have the right to transfer their capital contributions to other people.

For joint stock companies

• Within 03 years from the date the company is granted the Certificate of Business Registration, the common shares of founding shareholders are freely transferable to other founding shareholders and can only be transferred to persons who are not is a founding shareholder if approved by the General Meeting of Shareholders. In this case, founding shareholders who intend to transfer ordinary shares do not have the right to vote on the transfer of such shares.
• In addition, shares are freely transferable, except for the case specified above and the company’s charter restricts the transfer of shares. If the company’s charter contains restrictions on the transfer of shares, these provisions will only take effect when clearly stated in the shares of the respective shares
• The transfer is done by contract or transaction on the stock market. In case of transfer by contract, the transfer papers must be signed by the transferor and the transferee or their authorized representatives. In case of transactions on the stock market, the order and procedures for transfer shall comply with the provisions of the law on securities.
• In case a shareholder being an individual dies, his/her will or legal heir will become a shareholder of the company.
• In case an individual shareholder dies without an heir, the heir refuses to receive the inheritance or is deprived of the right to inherit, the shares of such shareholder shall be settled according to the provisions of civil law.
• Shareholders have the right to donate part or all of their shares in the company to other individuals or organizations; use shares to pay off debt. Individuals and organizations that are given or received debt repayment by shares will become shareholders of the company.
• Individuals and organizations receiving shares in the cases specified in this Article only become shareholders of the company from the time their information specified in Clause 2, Article 122 of this Law is fully recorded in the register. shareholder sign.
• The company must register the change of shareholders in the shareholder register at the request of the relevant shareholder within 24 hours from the date of receipt of the request as prescribed in the company’s charter.

7. Prohibited acts related to charter capital contribution and handling measures for failure to charter contribute capital on time

As specified in Clause 5, Article 16 of the Enterprise Law 2020, prohibited acts related to the form of capital contribution are: False declaration of charter capital, failure to contribute the full amount of charter capital as registered; intentionally valuing assets contributed as capital at the wrong value.

The handling measures for failure to contribute capital on time for each type of enterprise are as follows:

For limited company

After 30 days from the date of issuance of the enterprise registration certificate, if a member has not yet contributed or has not fully contributed the committed capital, the following handling shall be made:

• A member who has not contributed capital as committed is automatically no longer a member of the company;
• A member who has not yet fully contributed the committed capital contribution has the rights corresponding to the contributed capital;
• Shares of contributed capital of members are offered for sale according to resolutions and decisions of the Members’ Council.

For joint stock companies

• A shareholder who has not yet paid for the number of shares registered to buy is automatically no longer a shareholder of the company and may not transfer the right to buy such shares to another person;
• Shareholders only pay a part of the shares registered to buy with voting rights, receive dividends and other rights in proportion to the paid shares; may not transfer the right to purchase unpaid shares to another person;
• Unpaid shares are considered unsold shares and the Board of Directors is entitled to sell;
• Within 30 days from the end of the time limit to pay in full for the number of shares registered to buy, the company must register to adjust the charter capital equal to the par value of the shares already paid in full, unless unpaid shares have been sold out within this period; register to change founding shareholders.

For partnerships

• General partners who fail to contribute in full and on time the committed capital, causing damage to the company, must be responsible for compensating for the damage.
• If a capital-contributing member fails to contribute in full and on time the committed capital, the incompletely contributed capital shall be considered a debt of that member to the company. In this case, capital-contributing members may be expelled from the company by decision of the Members’ Council.

Contributing charter capital to establish a company is a meaningful act both economically and legally. The regulations on the establishment of enterprises on the one hand are to ensure the freedom of business of investors, on the other hand, must meet the requirements of state management of enterprises, creating a possibility as well as ownership rights. assets of capital contributors and shareholders to the company, and also bind the rights, obligations and interests of founding members and shareholders. Therefore, subjects who want to establish and contribute capital to enterprises must pay attention to and meet the conditions prescribed by law.