When establishing an enterprise in Vietnam, individuals or organizations need to follow procedures prescribed by law. In particular, the time limitation of the contribution of charter capital to an enterprise is an issue that should be noted in order to facilitate the establishment and registration of enterprises.
Classified according to ownership structure and method of capital contribution to the enterprise, enterprises are divided into single-owner enterprises (private enterprises, single-member limited liability companies) and multi-owner enterprises (shareholding company, multiple-member limited liability company, partnership).
In this article, BLawyers Vietnam presents the provisions of Vietnamese law that address the time limit for charter capital contributions and the settlements when contributions to charter capital are made beyond the prescribed time limit.
1. General regulations on capital contribution duration for each type of enterprise
Pursuant to Vietnamese Law, each type of enterprise has specific regulations on capital contributions.
(i) Single-member limited liability company (“SLLC”)
Within 90 days from the date that the enterprise is granted an Enterprise Registration Certificate (“ERC”), the owner of the enterprise must contribute in full and the right type of assets as a commitment while conducting enterprise registration procedures.
Of note, the 90-day duration as mentioned above does not include the period to transport, import capital contribution property, and carry out administrative procedures to transfer the ownership of the properties. During this time, the owner of the enterprise has rights and obligations corresponding to the amount of capital contribution as committed.
If insufficient capital is contributed past the 90-day duration as prescribed, the owner must conduct a procedure for registration of a change of charter capital equivalent to the value of the contributed capital within 30 days from the last date that the owner must have contributed charter capital in full.
(ii) Multiple-member limited liability company (“MLLC”)
The capital contribution duration of MLLC is 90 days from the date the enterprise is granted an ERC. In addition, members contributing capital to the company have rights and obligations corresponding to the committed capital contribution.
If the members do not contribute enough capital as committed, the company will settle as follows:
- If the member has not fulfilled the obligation to contribute capital as committed, such a member is definitively no longer a member of the company;
- If the member only contributed a part of the capital and has not yet contributed capital in full as committed, that member has rights and obligations corresponding to the actual contributed capital.
- In terms of the capital portion not contributed by the company’s members, the company will offer to sell based on a resolution and decision of the Member’s Council.
In the above cases, the company must conduct procedures for registration of change of charter capital, and the proportion of the capital contribution of members must be equal to the amount of capital contributed within 30 days from the last date that the capital contribution must have been fully contributed.
(iii) Joint stock company (“JSC”)
The duration for payment of shares registered to buy is within 90 days from the date of issuance of an ERC.
However, the JSC may stipulate in the company’s charter or the share purchase registration contract a duration shorter than the prescribed duration. For shareholders contributing capital with assets, the period to transport, import, and conduct administrative procedures to transfer ownership of such assets is not included in the capital contribution duration.
After the 90-day time limit as mentioned above, if a member still fails to contribute or fails to fully contribute the capital amount as committed:
- A shareholder that has not yet paid for registered shares shall automatically no longer be a shareholder of the company and may not transfer such share purchase right to another;
- A shareholder that has only partially paid for registered shares may vote, receive profits, and have other rights in proportion to the number of paid-up shares; and may not transfer the purchase right regarding the unpaid shares to another;
- Unpaid shares shall be regarded as unsold shares and may be sold by the Board of Directors.
Within 30 days from the deadline for making full payment for shares registered for purchase of registered shares, the company shall register for adjustment of its charter capital to be equal to the total par value of shares that have been fully paid for, except for unpaid shares that have been sold within such time limit and except for registration to change the founding shareholders.
(iv) Partnerships and sole proprietorships
Partnerships and sole proprietorships have unlimited liability for the assets contributed to the enterprise. Therefore, Vietnamese Law does not stipulate that the owners of these types of enterprises must contribute capital in full and on time within a specific time limitation. Therefore, in cases of capital contribution, the owner must be liable for all of its liability with assets for the obligations of the company.
2. Sanctions for administrative violations in cases when charter capital is contributed past the prescribed time limitation
In cases in which the enterprise has not contributed capital within the prescribed time limitation, the enterprise may be administratively sanctioned as follows:
(i) Monetary fine
Enterprises shall be fined up to VND50,000,000 (~USD2,100) when committing the following violations:
- Failing to carry out procedures for capital adjustment or change of founding members of shareholders as prescribed by the competent authority from the expiration date of capital contribution;
- At the end of the capital adjustment period, founding shareholders have not fully contributed capital, and none of the members or founding shareholders have performed their commitment to contribute capital.
(ii) Administrative remedies
In addition to paying fines with the above amounts, enterprises must also take remedies such as forcing the implementation of procedures for capital adjustment or changing founding members or shareholders due to violations of the provisions mentioned above.
To summarize, enterprises need to comply with regulations on the time limitation of capital contributions and conduct necessary procedures when not contributing enough charter capital at the competent authority in order to avoid legal risks.
The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at firstname.lastname@example.org. We would love to hear from you!
Date: 10 July 2023
Writers: Linh Nguyen & Uyen Tran