How is the valuation of capital contribution to establish a company with houses and land use rights done?

02/03/2023

Question:

Mr. X, Ms. Y, Mr. Z and Mr. T jointly contribute capital and intend to establish Company A as a joint stock company. In which, Mr. X, Mr. Z, Mr. T all contributed capital in Vietnamese Dong. Ms. Y contributed capital with the house and land use rights where the enterprise is expected to be headquartered. So, how is the valuation of the house and land use rights that are contributed by Ms. Y?

Reply:

According to the provisions of Article 36 of the Enterprise Law 2020:

“1. Assets contributed as capital other than Vietnam Dong, freely convertible foreign currencies, and gold must be valued by members, founding shareholders or a valuation organization and expressed in Vietnam Dong.

2. Assets contributed as capital upon enterprise establishment must be valued by founding members and shareholders on the principle of consensus or by a valuation organization. In the case of a valuation organization, the value of assets contributed as capital must be approved by more than 50% of the members and founding shareholders.

In case the assets contributed as capital are valued higher than the actual value of such assets at the time of capital contribution, the founding members and shareholders jointly contribute an additional amount equal to the difference between the assessed value and the value of the assets contributed as capital. and the actual value of the assets contributed as capital at the end of valuation; at the same time jointly responsible for damage caused by intentionally pricing assets contributed as capital higher than the actual value.

3. Assets contributed as capital in the course of operation shall be agreed upon by the owner, the Members’ Council, for limited liability companies and partnerships, and the Board of Directors, for joint-stock companies, and capital contributors. valuation or by a valuation organization. In the case of valuation by a valuation organization, the value of assets contributed as capital must be approved by the capital contributor and owner, by the Members’ Council or by the Board of Directors.

In case the assets contributed as capital are valued higher than the actual value of such assets at the time of capital contribution, the capital contributors, owners, members of the Members’ Council, for limited liability companies and companies partnerships, members of the Board of Directors, for joint-stock companies, jointly contribute an additional amount equal to the difference between the assessed value and the actual value of the assets contributed as capital at the time of valuation completion; at the same time jointly responsible for damage caused by the intentional valuation of assets contributed as capital higher than the actual value.”

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Thus, with the assets contributed as capital when establishing the business as the house and land use rights of Ms. Y, the valuation can be done by all shareholders on the principle of consensus. In case of disagreement, the shareholders ask/hire a professional valuation organization to determine the valuation (the company has the function of valuation…). In case a professional valuation organization makes a valuation, the value of assets contributed as capital must be approved by a majority of founding shareholders.

In case Ms. Y’s house and land use rights are valued higher than the actual value at the time of capital contribution, Mr. X, Ms. Y, Mr. Z and Mr. T shall jointly contribute an additional amount equal to the difference between assessed value and actual value of assets contributed as capital at the end of valuation; at the same time jointly responsible for damage caused by intentionally pricing assets contributed as capital higher than the actual value.