Contributing capital with machinery and equipment: Legal regulations and practice

When starting a company or investing in an existing business, the assets and form of capital contribution are among the top concerns for investors. Current Vietnamese corporate law allows business owners to choose from various types of assets for capital contributions, including Vietnamese Dong, convertible foreign currency, gold, land use rights, intellectual property rights, and essentially any other asset that can be valued in Vietnamese Dong. 

One common type of asset for capital contribution is machinery and equipment. Their availability and ease of valuation in Vietnamese Dong, along with the ability to help investors mitigate financial risks compared to investing entirely in cash, make machinery and equipment a popular choice for many investors. Understanding the legal regulations and practical aspects of contributing capital through machinery and equipment will help investors proceed with their contributions and establish or invest in enterprises more smoothly and effectively. 

1. Capital contribution of machinery and equipment with registered ownership

When contributing capital with machinery and equipment that must be registered, the contributor must register the transfer of ownership of those assets at the time of establishing or investing in the business. In practice, the competent business registration authorities in Vietnam tend to require that the contributor transfer ownership to the company before proceeding with the capital contribution or company establishment. Additionally, they may ask for documents proving the transfer of ownership from the contributor to the company as a basis for considering and approving the registration application. 

Note: The transfer of ownership for machinery and equipment in this case is not subject to registration tax. 

2. Capital Contribution with Machinery and Equipment Not Registered for Ownership

The contribution of capital with machinery and equipment that is not registered for ownership must be conducted through an asset handover minutes in accordance with the provisions of the Law on Enterprise 2020. 

Current legislation does not specify a standard template for the asset handover minutes for capital contributions, allowing the contributor and the receiving company to create a document that meets their specific needs and preferences. However, an asset handover minutes must include the following content: 

• Name and address of the company’s head office; 

• Full name, contact address, legal document number of the individual, and legal document number of the organization of the contributor; 

• Type of asset and number of asset units contributed; total value of the contributed assets and the proportion of that total value in the company’s charter capital; 

• Date of handover; signatures of the contributor or the authorized representative of the contributor and the legal representative of the company. 

In practice, the aforementioned minutes will serve as a basis for the competent authority to review the capital contribution application. In cases where the contributor is contributing a large and diverse quantity of machinery and equipment, it is necessary for the contributor to provide a detailed list of the value of each piece of machinery and equipment after being appraised in the asset valuation minutes. 

3. Regarding valuation of assets contributed as capital

• When establishing a brand new company: 

Valuation of machinery and equipment contributed as capital must be conducted by the enterprise’s members or founding shareholders on the principle of consensus or by a price appraisal organization. If the valuation is conducted by a price appraisal organization, the assessed value of assets contributed as capital shall be approved by more than 50% of members or founding shareholders. 

If machinery and equipment contributed as capital are overvalued compared to their actual value at the time of capital contribution, members or founding shareholders shall jointly contribute an additional capital amount equal to the difference between the assessed value and the actual value at the time of completion of the valuation; they shall also be jointly responsible for the damage caused by the intentional overvaluation of machinery and equipment. 

• When contributing capital to an operating enterprise: 

Machinery and equipment contributed as capital in the process of operation of an enterprise shall be valued on the basis of agreement between the owner or Members’ Council, for a limited liability company or partnership, or the Board of Directors, for a joint stock company, and the capital contributor, or by a price appraisal organization. If the valuation is conducted by a price appraisal organization, the assessed value of assets contributed as capital shall be approved by the capital contributor and the owner or Members’ Council or Board of Directors. 

In case machinery and equipment contributed as capital are overvalued compared to their actual value at the time of capital contribution, the capital contributor and the owner or member of the Members’ Council, for a limited liability company or partnership, or member of the Board of Directors, for a joint stock company, shall jointly contribute an additional capital amount equal to the difference between the assessed value and the actual value at the time of completion of the valuation; they shall also be jointly responsible for the damage caused by the intentional overvaluation of machinery and equipment. 

Note: Intentionally misvaluing contributed machinery and equipment is prohibited under the the Law on Enterprise 2020 and may result in administrative penalties ranging from 15,000,000 VND to 25,000,000 VND for individuals, and from 30,000,000 VND to 50,000,000 VND for organizations. 

For enterprise types owned solely by an individual, such as a single-member limited liability company, the valuation of assets will be conducted by that individual, who will also be responsible for declaring the valuation of their own contributed assets.  

The contribution of capital through machinery and equipment must be completed within 90 days from the date the Enterprise Registration Certificate is issued. The time required for transporting or importing the machinery and equipment and for completing administrative procedures to transfer ownership of the assets will not be included in the 90-day period above. 

See more:

1. The use of shares in Vietnam to contribute capital to establish enterprises in foreign

2. Change of representative managing the contributed capital under the law on enterprise 2020

Share: