Transfer of ownership of contributed assets according to Vietnam Law on Enterprises

Contributed assests to companies which have legal status are separate with assets of the owners. Therefore, transfer of ownership of contributed assests plays an important role in identifying company’s assets. Let’s find out this issue with Lawyer X through the following situation: “Dear Lawyer! I want to ask about what kinds of assets can be considered as contributed assets to company? And how does the current Vietnamese law regulate on transfer of ownership of contributed assets? Thanks for answering me!”

Legal grounds

Law on Enterprsises

What is an enterprise?

The definition of an enterprise is specified in Clause 10, Article 4 of Law on Enterprise 2020, whereby: “Enterprise means an organization that has a proper name, assets, premises, is established or registered in accordance with law for business purposes.”

According to the Enterprise Law 2020, inheriting the previous legal regulations, currently enterprises include the following four types: private enterprises, partnerships, limited liability companies, joint-stock companies. Thus we can answer the question if  enterprise and company are the same? Enterprise has broader connotations than company. Company refers to types of enterprises  that are: Partnerships, Limited Liability Companies, Joint-Stock Companies.

The rights to establish, contribute capital, buy shares/stakes and manage enterprises

– Organizations and individuals have the right to establish and manage enterprises in Vietnam in accordance with Law on Enterprises, except for the cases specified below.

– The following organizations and individuals do not have the right to establish and manage enterprises in Vietnam:

+ State authorities, People’s armed forces using state-owned assets to establish enterprises to serve their own interests;

+ Officials and public employees defined by the Law on Officials and the Law on Public Employees;

+ Commissioned officers, non-commissioned officers, career military personnel, military workers and public employees in agencies and units of Vietnam People’s Army; commissioned officers, non-commissioned officers and police workers in police authorities and units, except for those designated and authorized representatives to manage state-owned stakes in enterprises or to manage state-owned enterprises;

+ Executive officers and managers of state-owned enterprises prescribed in Point a Clause 1 Article 88 of Law on Enterprises, except those who are designated as authorized representatives to manage state-owned stakes in other enterprises;

+ Minors; people with limited legal capacity; incapacitated people; people having difficulties controlling their behaviors; organizations that are not juridical persons;

+ People who are facing criminal prosecution, kept in temporary detention, serving an imprisonment sentence, serving an administrative penalty in a correctional institution or rehabilitation center, has limited legal capacity or is incapacitated, is not able to control his/her own behaviors, is banned by the court from holding certain positions or doing certain works; other cases prescribed by the Law on Bankruptcy and the Anti-corruption Law.

If requested by the business registration authority, the applicant shall submit the judicial records;

+ Juridical persons that are banned from business operation or banned from certain fields as prescribed by the Criminal Code.

– Organizations and individuals have the right to contribute capital, buy shares and stakes of joint stock companies, limited liability companies and partnerships in accordance with Law on Enterprises, except:

+ State authorities, People’s armed forces contributing state-owned assets to enterprises to serve their own interests;

+ The entities that are not allowed to contribute capital to enterprises prescribed by the Law on Officials, the Law on Public Employees, and Anti-corruption Law.

– The act of serving one’s own interests mentioned in Point a Clause 2 and Point a Clause 3 of Article 17 of Law on Enterprises means the use of incomes from business operation, capital contribution, acquisition of shares/stakes for any of the following purposes:

+ Any kind of distribution to some or all of the persons specified in Point b and Point c Clause 2 of Article 17 of Law on Enterprises

+ Inclusion in the operating budget of the organization/unit against state budget laws;

+ Establishment or contribution to an internal fund of the organization/unit.

 Contributed assets

– Contributed assets include VND, convertible foreign currencies, gold, land use right (LUR), intellectual property rights, technologies, technical secrets, other assets that can be converted into VND.

– Only the individual or organization that has the lawful right to ownership or right to use the asset mentioned in Clause 1 of Article 34 of Law on Enterprises may contribute it as capital as prescribed by law.

Transfer of ownership of contributed assets

– Transfer of contributed assets by members of a limited liability company, partners of a partnership, shareholders of a joint stock company shall comply with the following regulations:

+ For assets whose ownership have been registered and LURs, the capital contributor shall follow procedures for transfer the ownership of such assets or the LUR to the company as prescribed by law. This transfer is exempt from registration fee;

+ Contribution of assets whose ownership is not registered shall be recorded in writing unless the contribution is made by wire transfer.

– The record on transfer of contributed assets shall contain the following information:

+ The company’s name and headquarters address;

+ Full name, mailing address, legal document number of the contributor that is an individual; legal document number of the contributor that is an organization;

+ Types and quantities of contributed assets; total value of contributed assets and the ratio of this value to the company’s charter capital;

+ Date of transfer; signatures of the contributor or the contributor’s authorized representative and the company’s legal representative.

– The contribution is considered complete once the lawful ownership of the assets has been transferred to the company.

– Procedures for ownership transfer are exempt for assets serving business operation of the private enterprise

– Payment for transfer of shares/stakes, receipt of dividends of remittance of profits by foreign investors shall be carried out through accounts in accordance with foreign exchange laws, except for payment in assets and cashless payment.

Valuation of contributed assets       

– Contributed assets that are not VND, convertible foreign currencies or gold shall be valued by members/partners/shareholders or a valuation organization and expressed as VND.

– Assets contributed upon establishment of an enterprise shall be valued by members/partners/founding shareholders by consensus or by a valuation organization. In the latter case, the value of contributed assets must be accepted by more than 50% of the members/partners/founding shareholders.

In case a contributed asset is valued at a value higher than its actual value at contribution time (overvalued), the members/partners/founding shareholders shall jointly contribute an amount equal to the difference and are jointly responsible for the damage caused by the overvaluation.

– Assets contributed during the operation shall be valued by the owner or the Board of Members/Partners (for limited liability companies and partnerships) or the Board of Directors (for joint stock companies) and the contributor or by a valuation organization. In the latter case, the value shall be accepted by the contributor and the owner, the Board of Members/Partners/Directors.

In case a contributed asset is overvalued, the contributor, the owner and members of the Board of Members/Partners/Director shall jointly contribute an amount equal to the difference and are jointly responsible for the damage caused by the overvaluation.

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Conclusion: So the above is Transfer of ownership of contributed assets according to Vietnam Law on Enterprises. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com