Increasing company’s charter capital with land use rights

In the context of an increasingly developed economy, increasing charter capital is a vital strategy for businesses to enhance their financial capacity, expand operations, and strengthen market credibility. Among the methods, using land use rights as capital contribution is not only a legal approach but also an effective way to leverage available resources from the company or its contributing members and shareholders. However, implementing this procedure requires a clear understanding of legal frameworks and related legal aspects to ensure rights protection and mitigate unnecessary risks. This article by Apolat Legal will delve into the procedures for increasing charter capital with land use rights and highlight important considerations during the process.

1. Land Registration Procedures for Capital Contribution with Land Use Rights 

For land use rights, contributors must carry out procedures to transfer land use rights to the company in accordance with legal regulations. The transfer of ownership or land use rights for capital contribution purposes is exempt from registration fees (Article 35.1(a) of the 2020 Law on Enterprises). 

The capital contribution with land use rights is only considered complete when the legal ownership of the contributed asset has been transferred to the company (Article 35.3 of the 2020 Law on Enterprises). 

Therefore, determining whether the legal ownership of the land use rights has been transferred from the contributing member/shareholder to the company depends on the outcome of land use rights change registration procedures, as stipulated under land use rights capital contribution cases requiring land registration changes (Article 133.1(a) of the 2024 Land Law). 

The timeframe for conducting land registration change procedures for cases of capital contribution with land use rights is no more than 10 working days (Article 22.2(a) of Decree 101/2024/ND-CP, “Decree 101”). 

The dossier for land registration change procedures, as specified in Article 29 of Decree 101, includes:  

  • An application for land registration changes and assets attached to land using Form No. 11/DK issued under Decree 101.
  • Issued land use rights certificate. 
  • Contract or document regarding the transfer of land use rights or ownership of assets attached to land. 
  • A document designating representation under civil law regulations for cases where land registration and asset registration procedures are conducted through a representative. 

Additional documents may be required by the competent land registration agencies during the process to complete the land registration change procedure and transfer land use rights from the contributing member/shareholder to the company. 

2. Procedures for Registering Charter Capital Increase through Land Use Rights Contribution

After completing the land registration change procedure to record the transfer of land use rights from the contributing member/shareholder to the company as mentioned above, the business will proceed with the procedure to register changes in business registration content, specifically to reflect the increase in charter capital using land use rights. 

The dossier for increasing charter capital with land use rights (as per Article 51.1 of Decree 01/2021/ND-CP) includes: 

  • Notification of changes in enterprise registration content, signed by the legal representative of the enterprise.
  • Resolution/decision of the company owner for a single-member limited liability company; resolution/decision and meeting minutes of the Members’ Council for a multi-member limited liability company or partnership; resolution/decision and meeting minutes of the General Meeting of Shareholders for a joint-stock company regarding changes in charter capital. 
  • Document of approval from the investment registration agency for capital contribution, share purchase, or capital contribution purchase by foreign investors or foreign-invested economic organizations in cases requiring registration procedures under the Investment Law. 

Depending on the perspective of the competent agency handling the dossier, enterprises may need to submit a certified copy of the Certificate of land use rights and ownership of land-attached assets to the land used to increase charter capital, noting that the land use rights have been transferred from the contributing member/shareholder to the company. 

See more:

1/ Contributing capital with machinery and equipment: Legal regulations and practice

2/ Some notes on receiving capital contributions in the form of land use rights for project implementation


Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.

Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Business and Investment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.



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