This document provides an overview of key legal considerations when drafting a capital contribution agreement in Vietnam. The purpose is to clarify the legal nature of capital contribution, identify common types of capital contribution agreements, and highlight essential issues that parties must take into account to ensure legal compliance and mitigate transactional risks.
- What Is a Capital Contribution Agreement?
Pursuant to Article 385 of the 2015 Civil Code, a contract is deemed a civil agreement between two or more parties for the establishment, modification, or termination of civil rights and obligations.
In addition, under Clause 18 Article 4 of the 2020 Law on Enterprises, capital contribution refers to the act by which an individual or organization contributes assets to constitute the charter capital of an enterprise. Contributed assets may include cash, land use rights, intellectual property rights, gold, freely convertible foreign currencies, technical know-how, technologies, or any other assets capable of valuation in Vietnamese dong.
Capital contribution may occur in two circumstances:
- Establishment of a new company or increase of an enterprise’s charter capital;
- Capital contribution for the purpose of business cooperation with another entity.
Accordingly, a capital contribution agreement may be understood as a legal act giving rise to the ownership rights of an organization/group of contributors over contributed assets, and simultaneously giving rise to legal rights and obligations of the contributing individuals or organizations in proportion to their contributed capital.
- Types of Capital Contribution Agreements
- Capital Contribution Agreement for Company Establishment or Charter Capital Increase
A capital contribution agreement for establishing an enterprise is a written agreement under which the capital-contributing party and other parties agree to contribute assets (cash, land use rights, intellectual property rights, gold, freely convertible foreign currency, technical know-how, technology, or other assets that can be valued in Vietnamese dong) to establish a business or to increase its charter capital.
Notes:
(i) In the case of capital contribution for establishing a company: Members of a multiple-member limited liability company and founding shareholders of a joint stock company must contribute the full amount of capital they have committed within 90 days from the date the enterprise is granted its Enterprise Registration Certificate.
(ii) In the case of capital contribution to increase charter capital: A company may increase its charter capital by increasing the capital contributions of existing members/shareholders or by receiving additional contributions from new members/shareholders. Additional contributions must be fully completed before the company files its application for charter capital increase with the Department of Finance.
The capital contribution period does not include the time required to complete procedures for transfer of asset ownership, transportation, or importation of assets, and must be expressly stated in the capital contribution agreement.
- Capital Contribution Agreement for Investment or Business Cooperation
Where no enterprise is established, the contributing parties may agree to contribute capital to jointly implement a specific investment or business project. Such agreement is referred to as a Business Cooperation Contract (BCC) or Investment Cooperation Contract. If a foreign investor participates as a contributing party, the capital contribution agreement must be registered with the investment registration authority under the Department of Finance or the Ministry of Finance.
Under this structure, the parties agree to jointly contribute capital to conduct business activities without establishing a separate legal entity. Rights, obligations, and profit allocation must be clearly specified in the capital contribution agreement.
- Notes When Drafting a Capital Contribution Agreement
To minimize potential risks, capital contribution agreements should preferably be made in writing or notarized at a notary office. While the content of the agreement is subject to the parties’ autonomy, it must not contravene the provisions of the 2015 Civil Code on form, language, or contractual content. Key issues to consider include:
- The parties should clearly stipulate the exact amount of capital contributed by each party and the corresponding profit-sharing ratio. The agreement must contain binding clauses governing the parties’ obligations throughout the performance of the contract and specify the competent state authority responsible for dispute resolution.
- Financial terms relating to capital contribution, management and utilization of acquired assets, exploitation of asset value, and specific methods for terminating the cooperation must be clearly defined. Such provisions are critical for determining asset treatment options if the parties cease cooperation.
- The parties must clearly agree that only goods meeting all statutory conditions for trading may be purchased or sold under the cooperation arrangement.
- Given the unforeseeable nature of transactional risks, the agreement should include provisions on amendment and supplementation to allow the parties to adjust terms as necessary during contract performance.
In conclusion, a capital contribution agreement is a fundamental legal instrument governing the rights, obligations, and risk allocation between capital-contributing parties. Properly drafted agreements ensure legal compliance, clarify financial responsibilities, prevent disputes, and promote the stable, transparent implementation of investment and business activities. The careful consideration of legal requirements and detailed contractual terms will significantly reduce risks and enhance the effectiveness of cooperation between the parties.
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1. Lawyer Vu Thi Phuong Thanh, Chairman of the Members’ Council, Ha Noi Bar Association
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Dinh Phuong Thao