Contributing capital to a business organization is not only a financial action but also a commitment to trust and participation in the decisions and activities of the enterprise. To ensure transparency and fairness, legal regulations regarding capital contribution define the rights and responsibilities of shareholders and members, as well as principles and standards for capital contribution to protect the interests of shareholders and members. To control and supervise the capital contribution process, corporate law also establishes provisions to regulate shareholders, members, and the enterprise itself when they delay in fulfilling capital contribution obligations. This article will provide a better understanding of this issue.

1. Regulations on capital contribution for a Single-Member Limited Liability Company

According to clause 34 Article 4 of the Enterprise Law 2020, charter capital is the total value of assets contributed or committed to be contributed by member or owner of a limited liability company or a partnership when establishing the company; it is the total par value of shares sold or registered for purchase when establishing a joint-stock company.

According to Article 75 of the Enterprise Law 2020, the charter capital of a single-member limited liability company upon its establishment is the total value of assets that the company’s owner commits to contribute and is recorded in the company’s charter. The company’s owner shall contribute sufficient and appropriate assets as committed when registering the establishment of the enterprise within 90 days from the date of issuance of the Certificate of Business Registration (excluding the time for transportation, importation of contributed assets, and administrative procedures for transferring ownership rights). During this period, the company’s owner has corresponding rights and obligations regarding the committed capital contribution.

In case the charter capital is not fully contributed within the above-mentioned period, the owner shall register a change in the charter capital by the value of the contributed capital within 30 days from the last day for the completion of the charter capital contribution. The owner is responsible for the corresponding part of the committed capital contribution regarding the company’s financial obligations that arise within the period before the last day the company registers the change in the charter capital.

In the event of damages resulting from non-contribution, insufficient contribution, or failure to contribute the charter capital within the prescribed period, the company’s owner has responsibility for his/her entire assets for the financial obligations of the company.

2. Regulations on capital contribution for Limited Liability Company with two or more members

According to Article 47 of the Enterprise Law 2020, the charter capital of a limited liability company with two or more members upon its establishment is the total value of capital contributions committed by the members and recorded in the company’s charter.

Member shall contribute sufficient and appropriate assets as committed when registering the establishment of the enterprise within 90 days from the date of issuance of the Certificate of Business Registration, excluding the time for transportation, importation of contributed assets, and administrative procedures for transferring ownership rights. During this period, member has corresponding rights and obligations according to the proportion of his/her committed capital contribution. He/She can only contribute capital to the company with assets other than the committed assets if it receives the consent of over 50% of the remaining members.

After the specified legal period mentioned above, if the member has not yet contributed capital or contributed the committed amount, the following actions are taken:

• A member who has not made the capital contribution as committed is no longer a member of the company.
• A member who has not contributed the full amount of the committed capital has rights corresponding to the contributed capital portion.
• The unpaid capital contributions of member can be offered for sale according to resolutions and decisions of the Board of Members.
• If there are members who have not made their capital contributions or have not contributed the full amount of the committed capital, the company shall register a change in the charter capital, adjusting the proportion of capital contributions by the amount of capital already contributed within 30 days from the last day for the completion of the capital contribution as regulated.
• Members who have not made their capital contributions or have not contributed the full amount of the committed capital are responsible for the proportionate share of the committed capital contribution regarding the financial obligations of the company that arises before the date of registration of the change in the charter capital and the proportion of the member’s capital contribution.

3. Regulations on capital contribution for Joint Stock Company

According to Article 113(1) of the Enterprise Law 2020, shareholders shall fully pay for the registered shares within 90 days from the date of issuance of the Certificate of Business Registration (unless the company’s charter or the share subscription agreement specifies a shorter deadline). If a shareholder contributes capital in the form of assets, the time for transportation, importation, and administrative procedures for transferring ownership of those assets is not included in this capital contribution period.

During the period from the date the company is issued the Certificate of Business Registration until the final date for the full payment of the registered shares, the voting rights of shareholders are calculated based on the ordinary shares registered for purchase, unless otherwise stipulated in the company’s charter.

If, after the 90 days mentioned above (unless a shorter deadline is specified in the company’s charter or the share subscription agreement), a shareholder fails to make the payment or only partially pays for the registered shares, the following regulations apply:

• A shareholder who has not made the payment for the registered shares is no longer a shareholder of the company and cannot transfer the right to purchase those shares to another person;
• A shareholder who has only partially paid for the registered shares has the right to vote, and receive dividends, and other corresponding rights to the portion of shares that have been paid for. They are not allowed to transfer the right to purchase the unpaid shares to another person;
• The unpaid shares are considered unsold, and the Board of Management has the right to sell them;
• Shareholder who has not paid or have not fully paid for the registered shares are responsible for the total nominal value of share registered to purchase for the financial obligations of the company arising within the previous date of registration for the adjustment of the charter capital.

The member of the Board of Management and legal representatives shall be  jointly responsible for any damages arising from non-compliance or improper compliance with the capital contribution regulations. Within 30 days from the end of the time limit for the full payment of the registered shares, the company shall:

• Register for the adjustment of the charter capital by the nominal value of the fully paid shares, unless the unpaid shares have been sold out within this period;
• Register for the change of founding shareholder.

Failure to comply with the above capital contribution regulations may result in a fine ranging from 30,000,000 to 50,000,000 Vietnam dong, and the company may be required to perform procedures of adjustment of the capital or change member and founding shareholder. It should be noted that the legal consequences of late capital contribution mentioned here are limited to administrative penalties. If a shareholder or member transfers shares or capital to a third party without fulfilling the capital contribution or completing the adjustment of capital and shareholding ratio according to the actual contribution, it will affect the validity of the transfer transaction and the rights of the transferee.

The legal regulations on capital contribution for shareholder and member  play a crucial role in determining the rights and responsibilities of the parties involved. They provide a solid legal foundation to promote economic development and investment.

However, to achieve true success, we shall ensure compliance from all parties involved and adjust internal documents following the provisions of enterprise law.

Time of writing: 19/05/2023

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer at info@cdlaf.vn

You can refer for more information:

• Establishment of Enterprise in Vietnam, What Foreign Investors Need to Consider (Part 1)
• Establishment of Enterprise in Vietnam, What Foreign Investors Need to Consider (Part 2)
• Procedure for Foreign Investor to contribute capital, purchase shares in the enterprise in Vietnam.
• The enterprise with opening and using direct investment capital account
• Avoiding the risks when leasing the office in Vietnam – some recommendations
• Foreign Investors provide Employment Services in Vietnam
• Franchise in Vietnam (Part 1)
• Franchise in Vietnam (Part 2)
• Foreign investor doing hotel business in Vietnam