IS IT PERMITED FOR FOREIGN-INVESTED ENTERPRISES CONTRIBUTING LAND USE RIGHTS AS CAPITAL?

Foreign-invested enterprises play a crucial role in the economic development of Vietnam, not only by providing capital but also by introducing modern technology and creating employment opportunities for workers. In the context of an evolving legal framework, a clear understanding of the regulations regarding land use rights and the ability of foreign-invested enterprises in contributing land use rights as capital will help optimize investment opportunities, drive development, and facilitate business expansion.

Is it permitted for contributing land use rights as capital?

Land use rights are one of the types of assets allowed to be used for capital contribution under the provisions of the 2020 Enterprise Law, provided that they meet the requirements for valuation feasibility and the legal ownership rights of the contributing party. “Capital contribution” in this case includes both the contribution to the establishment of a new organization or the increase of the charter capital of an already established economic organization.

Pursuant to the provisions of Clause 3, Article 41 of the 2024 Land Law, foreign-invested economic organizations are permitted in contributing land use rights as capital, as well as assets attached to the land that they own, in cases where the land is leased by the State with a one-time payment for the entire lease term, or when the land is allocated by the State with payment for land use rights to implement a project.

Citation of the provision:

“Article 41. Rights and obligations of persons of Vietnamese descent residing overseas and foreign-invested business organizations using land for carrying out investment projects in Vietnam

…

3. A person of Vietnamese descent residing overseas or a foreign-invested business organization leased land by the State under one-off arrangement; a foreign-invested business organization allocated land by the State with land levy payment for carrying out a project shall have the following rights and obligations:

a) The common rights and obligations prescribed in Article 26 and Article 31 of this Code;

b) Right/obligation to convey LURs and privately owned property affixed to the land within the land use term;

c) Right/obligation to lease out or sublease LURs and privately owned property affixed to the land within the land use term;

d) Right/obligation to mortgage LURs and privately owned property affixed to land at credit institutions permitted to operate in Vietnam;

dd) Right/obligation to make capital contribution with LURs and privately owned property affixed to the land.”

What conditions must foreign-invested economic organizations satisfy upon contributing land use rights as capital?

Contributing land use rights as capital must fully satisfy the conditions prescribed by law to ensure the legal rights and interests of the parties involved in the transaction, including:

Proof of land use rights

The land user must have land use right certificate, certificate of ownership of housing and land use rights, certificate of land use rights, ownership of housing and other assets attached to the land, or a certificate of land use rights and ownership of assets attached to the land, except in cases of inheritance of land use rights, conversion of agricultural land during land consolidation, donation of land use rights to the State or local communities, and other specified cases.

Land dispute status

The land must be free of disputes or any disputes must have been resolved by the competent state authority, with a legally effective court ruling, decision, or arbitral award.

Coercive measures

The land use rights must not be subject to distraint or other coercive measures in order to ensure the judgment enforcement complies with civil judgement enforcement laws.

Land use term

To be within the prescribed land use term.

Temporary emergency measures

The land use rights must not be subject to any temporary emergency measures according to the law.

Additionally, land users should ensure that they meet specific conditions in particular cases, as required by law.

To ensure the legality of contributing capital through land use rights, what legal procedures should be paid attention to?

Valuation when contributing land use rights as capital

Land use rights, as a capital contribution asset, must be valued in Vietnam Dong. This valuation must be carried out through a valuation organization, members, shareholders of the company, or other relevant entities in accordance with specific legal requirements depending on the case.

Legal responsibility is imposed on the owner, member, shareholder, or contributor in the event of any discrepancy between the appraised value and the actual value at the time of the capital contribution.

Transfer of land use rights ownership

The contributor must complete the procedure for transferring the land use rights to the company according to the prescribed procedures. The capital contribution is only considered settled and completed when the legal ownership of the contributed asset has been transferred to the company.

For notarization, certification, and the capital contribution agreement involving land use rights, the land use rights and assets attached to the land must be notarized or certificated. This requirement does not apply when one of the parties in the transaction is a real estate business entity, in which case notarization or certification may be implemented depending on the parties’ specific requirements.

Additionally, any related financial obligations must be fully completed and on time, in accordance with the relevant regulations.

>> ATTENTION FOR ENTERPRISES UPON RECEIVING LAND USE RIGHTS TRANSFER? https://linconlaw.vn/what-should-be-paid-attention-for-enterprises-upon-receiving-land-use-rights-transfer/

>> PROCEDURES TO BE IMPLEMENTED WHEN LOSING RED BOOK? https://linconlaw.vn/procedures-to-be-implemented-when-losing-red-book/