Capital contribution means the contribution of assets to form the charter capital of the company, including capital contribution to the establishment of the company or additional contribution to the charter capital of an already established company. The Law on Enterprises specifically stipulates the types of assets contributed as capital, specifically: Assets contributed as capital are Vietnam Dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, etc. technology, technical know-how and other assets valuable in Vietnam Dong. Along with that, only individuals and organizations that are lawful owners or have lawful use rights to the above-mentioned assets have the right to use such assets to contribute capital as prescribed by law. Thus, land use right is also one of the objects used to contribute capital.
Conditions for enterprises to contribute capital or receive capital contribution with land use rights
According to Clause 1, Article 188 of the Land Law 2013, land used to contribute capital for business investment must meet the following conditions;
– Must have a certificate of land use right of the owner of the capital contributor;
– The land is in an undisputed state;
– The land use rights of the capital contributors are not distrained to ensure judgment enforcement.
– Expiry date of land use.
Conditions for the recipient to contribute capital with land use rights
Enterprises, households and individuals that are entitled to receive capital contribution with land use rights to conduct production and business investment activities must satisfy the conditions specified in Article 193 of the 2013 Land Law as follows:
– If the land contributed as capital is agricultural land, a written approval from a competent state agency must be obtained for the project using agricultural land.
– The purpose of use for the land area receiving capital contribution must be consistent with the master plan and plan on land use already approved by a competent state agency;
– For land specializing in wet rice cultivation and being converted to non-agricultural land, an amount of money must be paid to the State to supplement the lost area of land specialized in wet rice cultivation or increase the efficiency of rice land use in accordance with the Government’s regulations.
Procedures for capital contribution with land use rights
Step 1: Valuing assets contributed as capital with land use rights
The valuation of assets contributed as capital is a very important step, greatly affecting the interests of both the company and the capital contributors. The valuation of assets can be through the capital contributors of the valuation company according to the principle of consent or vote. If not directly pricing, you can hire an organization specializing in asset valuation to contribute capital to the enterprise. But this valuation also needs to be agreed upon by more than 50% of capital contributors and founding shareholders.
If the assets contributed as capital are valued higher than the actual value of such assets at the time of capital contribution, founding members and shareholders jointly contribute an additional amount equal to the difference between the assessed value and the capital contribution. actual value of assets contributed as capital at the time of valuation completion; at the same time jointly responsible for damage caused by intentionally pricing assets contributed as capital higher than the actual value.
Step 2: Sign a contract to contribute capital with land use rights
After the valuation of the property contributed as capital is the land use right, the two parties agree on the terms and make a capital contribution contract. This contract will have to be brought to the Notary Office to be recognized as legal.
Step 3: Submit application for registration of capital contribution with land use rights
When you have fully prepared the above documents, you need to go to the Land Registration Office or the Branch Office of the Land Registration Office of the People’s Committee of the district, town or city directly under the province. The land registration office is responsible for checking the dossier, sending cadastral information to the tax authority to determine and notify the collection of financial obligations in case financial obligations must be fulfilled as prescribed; confirm the content of changes in the issued Certificate according to the regulations of the Ministry of Natural Resources and Environment.
Step 4: Get the result
The land registration office is responsible for returning the land use right certificate to the land user within 15 working days from the date of receipt of a complete dossier. Fees when carrying out procedures for capital contribution with land use rights depend on the regulations of each locality.
Notes when making capital contribution with land use rights
Land is an asset of great value and always changes and fluctuates over time, that change cannot be foreseen and cannot be quantified in the future. Therefore, when contributing capital with land use rights, it often leads to disputes, bankruptcy and even lawsuits. If the two parties (capital contributor, capital contribution recipient) do not have specific terms in the contract.
To avoid risks in capital contribution with land use rights, it is necessary to note the following issues:
First, assets contributed as capital with land use rights must have a certificate of land use rights from the capital contributor.
Second, when making a capital contribution contract, the parties must clearly define the time of capital contribution.
Third, that land use right is allocated or leased by the State (for how long) should also be clarified in the contract.
And fourth, is that land use right associated with the ownership of houses and other assets attached to the land. The parties need to consider all these issues very carefully before deciding to contribute and receive capital contribution to anticipate all possible risks.
In addition to the necessary conditions prescribed by law as analyzed above for the capital contribution by land use rights, the recipient of the capital contribution by the land use right must also provide sufficient conditions and must be able to specified in the contract are; what is the value of the land use right used for capital contribution (that value must be calculated specifically for each year or during the capital contribution period); capital contribution period; capital contribution purpose; the way in which profits are distributed; ways to resolve disputes.