Capital contribution in the form of technology: Opportunities and legal challenges

In the era of the knowledge-based economy, the core value of enterprises no longer lies in factories or machinery, but is increasingly shifting toward technology, software, technical solutions, and operational know-how — often referred to as “intellectual assets.” This reality raises an important question: can technology be used as capital contribution in Vietnam, and if so, where do the legal risks lie? 

This article analyzes the current legal framework and assesses the practical feasibility of capital contribution in the form of technology from a practitioner’s perspective. 

1. Legal basis for technology as a capital contribution asset 

Vietnamese law has formally recognized technology as a lawful form of capital contribution. 

Pursuant to Article 2.2 of the Law on Technology Transfer 2017, “technology means solutions, processes, or know-how, with or without tools and means, used to transform resources into products.” 

At the same time, Article 34.1 of the Law on Enterprises 2020 clearly provides that: 

“1. Capital contribution assets include Vietnamese dong, freely convertible foreign currencies, gold, land use rights, intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese dong. 

2. Only individuals or organizations that are lawful owners or have lawful rights to use such assets may use them for capital contributionin accordance with law.” 

In addition, Article 8 of the Law on Technology Transfer 2017 stipulates that “organizations and individuals entitled to transfer technology may use technology as capital contribution to an investment project, where the investment project involves state capital, the contributed technology must be valued in accordance with applicable valuation regulations.” 

Accordingly, as a matter of principle, enterprises may contribute capital in the form of technology provided that two key conditions are satisfied: 

1. The technology must be capable of being monetized and valued in Vietnamese dong; and 
2. The contributor must be the lawful owner or have lawful rights of disposition over such technology under applicable laws. 

2. Transfer of ownership 

Unlike cash contributions, capital contribution in the form of technology requires the completion of ownership transfer or lawful usage rights in favor of the company. 

Under Article 35 of the Law on Enterprises 2020: 

1. Technology associated with registered intellectual property rights (such as patents or utility solutions): the contributor must complete formal ownership transfer procedures. The capital contribution is deemed completed only when the company is officially recorded as the new owner in the relevant protection titles or certificates issued by the competent authority. 
2. Unregistered technology, technical know-how, or processes: the contribution is carried out through an asset handover record, which should clearly describe the technical content, scope of transfer, confidentiality obligations, and exploitation rights. 

Failure to complete these procedures will result in the contributed capital being deemed unpaid, and the contributor shall be subject to the legal consequences applicable to insufficient capital contribution under enterprise law. 

3. Valuation of technology as a capital contribution 

Technology is an intangible asset, and its value is often subjective and market dependent. As such, valuation is the most challenging aspect of contributing capital in the form of technology. 

Article 36 of the Law on Enterprises 2020 provides two valuation methods: 

1. Valuation by unanimous agreement of the founding members or shareholders; or 
2. Valuation by an independent professional valuation organization. 

However, if the technology is overvalued compared to its actual value, the capital contributors must jointly compensate for the difference and bear liability for any resulting damages. This risk is particularly significant for startups, where technology has not yet generated stable revenue. 

4. Practical implementation in Vietnam: opportunities, but not without obstacles

Despite the open legal framework, capital contribution in the form of technology in Vietnam still faces several practical challenges: 

1. Investment registration authorities often require stringent evidence of ownership, while many technologies are internally developed and have not yet been formally registered for protection. 
2. Tax authorities closely scrutinize the determination of the initial value of intangible assets; without a persuasive valuation report, depreciation expenses may be disallowed for corporate income tax purposes. 
3. Current laws lack detailed guidance on valuation methodologies or dispute resolution mechanisms where parties fail to agree on the value of the contributed technology. 

Capital contribution in the form of technology is an effective mechanism for recognizing the intellectual value of founders. However, it can become a “double-edged sword” if the legal documentation is not properly structured. In the context of a rapidly evolving innovation-driven economy, a clear understanding and correct application of this mechanism is not merely a legal compliance issue, but a long-term strategic advantage for enterprises. 

Date Written: 20/12/2015

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