A capital contribution agreement is a critical legal document in business and investment activities, especially for enterprises and individuals participating in capital contribution to establish or expand a company or engage in business cooperation. Understanding the legal framework, types, and key provisions of such agreements is essential for minimizing risks and ensuring compliance with Vietnamese regulations. Below is an in-depth analysis of capital contribution agreements, their types, content, and important considerations when drafting these documents.
1. What is a Capital Contribution Agreement?
According to Article 385 of the 2015 Civil Code, a contract is defined as a civil agreement between two or more parties regarding the establishment, modification, or termination of civil rights and obligations. Similarly, Clause 18, Article 4 of the 2020 Law on Enterprises defines capital contribution as the act of individuals or organizations contributing assets to form the charter capital of a company. Contributed assets may include cash, land use rights, intellectual property rights, gold, freely convertible foreign currencies, technical know-how, technologies, or other assets that can be valued in Vietnamese dong.
Capital contribution occurs in two scenarios:
- Establishment of a new company or increase in the company’s charter capital.
- Contribution of capital for business cooperation with other entities.
A capital contribution agreement is thus a legal act that establishes ownership rights over contributed assets for the contributing parties or organizations. It also creates corresponding rights and obligations based on the contributed capital ratio.
Capital Contribution for Company Establishment or Charter Capital Increase
A capital contribution agreement for company establishment is a written agreement between the contributing parties regarding the contribution of assets (e.g., cash, land use rights, intellectual property rights, foreign currency, technical know-how, and other assets valued in Vietnamese dong) to establish a company or increase the charter capital of the following types of enterprises:
- Limited Liability Company (LLC) with two or more members.
- Joint-Stock Company (JSC).
- Partnership (for capital-contributing members).
Key Regulations:
- For company establishment: Members of an LLC with two or more members or founding shareholders of a JSC must contribute their committed capital fully and on time within 90 days from the date the company receives its business registration certificate.
- For increasing charter capital: The company may increase charter capital by:
- Increasing contributions from existing members/shareholders.
- Accepting additional contributions from new members/shareholders.
Contributions must be completed before the company submits the procedure to increase charter capital to the Department of Finance. The contribution deadline excludes the time required for asset ownership transfer, transportation, importation, and must be explicitly stated in the capital contribution agreement.
2. Types of Capital Contribution Agreements
Capital Contribution for Business or Investment Cooperation
In cases where no legal entity is established, parties may contribute capital to jointly execute a specific investment or business project. This agreement is referred to as a business cooperation or investment cooperation agreement. For foreign investors, such agreements must be registered with the investment registration authority under the Department of Finance or Ministry of Finance.
These agreements allow parties to contribute capital without forming a legal entity. The rights, obligations, and profit-sharing arrangements are specifically outlined in the agreement.
3. Content of a Capital Contribution Agreement
When drafting a capital contribution agreement, it is essential to include the following key elements:
- Information about the parties entering the agreement.
- The subject matter of the capital contribution agreement.
- Payment methods and timeline for capital contribution.
- Rights and obligations of the parties involved.
- Profit-sharing arrangements.
- Validity of the agreement.
- Dispute resolution mechanisms.
- Additional clauses as agreed upon by the parties.
4. Key Considerations When Drafting a Capital Contribution Agreement
To minimize risks, parties should draft the agreement in writing and have it notarized by a licensed notary organization. The content of the agreement must comply with the provisions of the 2015 Civil Code, including regulations on form, language, and contractual terms. Additional considerations include:
- Clearly specifying the contribution percentage of each party and the corresponding profit-sharing ratios.
- Including binding clauses regarding the rights and obligations of the parties during the execution of the agreement. Designating the competent authority for dispute resolution in case of conflicts.
- Adding detailed financial clauses regarding the management and use of contributed assets, handling of acquired assets, and termination of cooperation.
- Stipulating that only goods permitted for sale under the law may be traded.
- Including provisions for modifying or amending the agreement to address unforeseen risks or issues arising during its execution.
In conclusion, a capital contribution agreement is an essential legal tool that governs the rights, obligations, and interests of parties participating in capital contribution activities. Properly drafting and adhering to the terms of such agreements not only ensures compliance with Vietnamese law but also reduces risks and promotes smooth cooperation among the parties involved. By understanding the legal framework and incorporating clear and detailed provisions, businesses and investors can safeguard their interests and achieve long-term success in capital contribution ventures.
📞 CONTACT LEGAL CONSULTANT:
TLA Law is a leading law firm with a team of highly experienced lawyers specializing in criminal, civil, corporate, marriage and family law, and more. We are committed to providing comprehensive legal support and answering all your legal questions. If you have any further questions, please do not hesitate to contact us.
1. Lawyer Vu Thi Phuong Thanh, Manager of TLA Law LLC, Ha Noi Bar Association
Email: vtpthanh@tlalaw.vn
2. Lawyer Tran My Le, Chairman of the Members’ Council, Ha Noi Bar Association
Email: tmle@tlalaw.vn.
Dinh Phuong Thao