HANOI UNIVERSITY

Faculty of Management and Tourism

---------------------------------------------

BUSINESS LAW REPORT

Disputes on capital assets in shareholding companies
in Vietnam under Enterprise Law.

Lecturer: Mrs. Ho Thuy Hang

Students:
Bui Tran Khanh Chi 1504000008
Truong Thi Hien 1506090026
Nguyen Thi Thanh Kieu 1504000040
K.D. Greshani Chamika Wijayarathna 15L4000006
Class: Tut 1, Thursday 14:30
Submission date: December 17th, 2018

i
 TABLE OF CONTENTS
ABSTRACT ................................................................................................................................... 1
1. Introduction ........................................................................................................................... 2
2. Overview about shareholding companies ............................................................................ 2
2.1. Join Stock Company .......................................................................................................... 2
2.2. Capital assets ...................................................................................................................... 2
3. Several common disputes on capital assets ............................................................................. 3
3.1. Ownership of capital assets ............................................................................................... 3
3.2. Transfer of ownership........................................................................................................ 5
3.3. Loss and Profit distribution to shareholders ................................................................... 6
3.4. Real capital contributed are greater than the committed contributing capital ........... 7
3.5. Withdrawal of capital assets ............................................................................................. 8
4. Recommendation....................................................................................................................... 8
5. Conclusion ................................................................................................................................. 9
REFERENCES .............................................................................................................................. 1

ii
 ABSTRACT
In recent years, shareholding companies have widened their scope by becoming more
and more popular and play an eminent role in the economy of many countries all over the world.
Shareholding companies are considered as the most developing mode of mankind in order to
raise capitals and thereby develop each country’s development. Nevertheless, along with the
development trend of the society, creating a favorable business environment is essential in
attracting investors that internal enterprise’ stability is one of the decisive factors. Besides, on
focusing on how effectively the funds should be invested, the organization should pay more
attention in internal management of Joint Stock Company to limit the occurrence of internal
disputes. Therefore, this paper is made based on secondary research to provide an overview of
several common disputes on capital assets of shareholding companies in Vietnam as well as to
give some analyses and recommendations, which are discussed in accordance to The Enterprise
Law 2014.

1
 1. Introduction
Disputes are struggles for disagreements which is often in the interests of the parties. Under
the legal science view, it is possible to understand disputes as conflicts, disagreements about the
rights and obligations between subjects in the same legal relationship. Company internal disputes
are classified in business and commercial disputes under jurisdiction of the court. One of the
common disputes in shareholding companies is those that result from the conflicts in capital
assets, in which initial agreements and company’s charter are not thoroughly made and lack of
necessary legal procedures.
2. Overview about shareholding companies
2.1. Join Stock Company
According to Article 110 of Enterprise Law 2014, a shareholding companies (Joint Stock
Companies) is an enterprise which has several characteristics:
a) Charter capital is split into multiple units of equal value called shares;
b) Shareholders may be organizations and individuals; the minimum quantity of
shareholders is 03; the maximum quantity is not restricted.
c) Shareholders are only liable for the enterprise’s debts and other liabilities up to the value
of capital contributed to the enterprise;
d) Shareholders are entitled to transfer their shares to other persons, except for the cases in
Clause 3 Article 119 and Clause 1 Article 126 of this Law.
2. A joint-stock company has its legal status from the issuance date of the Certificate of
Business registration.
3. Joint-stock companies are entitled to issue various types of shares to raise capital.
Moreover, the shareholders are referred to as the members of the corporation.
2.2. Capital assets
According to Article 35, Enterprise Law 2014 on contributed assets, it is stated that:
“1. Contributed assets may be Vietnam Dong (VND), convertible foreign currencies, gold,
value rights to use land, value of intellectual property rights, technologies, technical secrets, and
other assets that can be assessed in VND.
2. Intellectual property rights contributed as capital include copyrights and relevant
rights, industrial property rights, plant variety rights, and other intellectual property rights

2
prescribed by regulations of law on intellectual property. Only the organizations and individuals
who are legitimate owners of the aforementioned rights may contribute such assets as capital.”
Capital asset is an asset which has a productive life lasting than one year and those capital
assets in the company are not planned for sales (Anon, 2018). It includes building, land and other
major movable and unmovable equipment. It also known as fixed assets or Property, plant &
equipment. Capital assets are company’s major income source and their benefits are obtained
beyond the time span of one year. However, due to the time value of money, assets are subjected
to deteriorate and become less valued. At this point company should maintain its depreciated
value as accumulated depreciation. If a company is on restructuring or in a threat of bankruptcy
then the above mentioned capital assets may be liquidated. For an example a company may sell
its current location and move for a new location with better opportunities.
Regarding shareholding companies, the “Charter capital of a joint-stock company is the
total face value of sold shares. Charter capital of a joint-stock company on the business
registration date is total face value of registered shares of various types. Charter capital is
specified in the company’s charter.” (Clause 1, Article 111, Enterprise law 2014).
In short, capital assets in shareholdings companies can exist in different types and the
way they are recorded in the company’s charter as well as the way they are used will lead to both
positive and negative results, which in the end causing the disputes among shareholders.
3. Several common disputes on capital assets
3.1. Ownership of capital assets
According to clause 2, Article 35, Enterprise Law 2014 about “Assets contributed as
capital”, it is prescribed that: “Only the organizations and individuals who are legitimate owners
of the aforementioned rights may contribute such assets as capital.” And in point d, clause 1,
article 110, it is stated that: “Shareholders are entitled to transfer their shares to other persons,
except for the cases in Clause 3 Article 119 and Clause 1 Article 126 of this Law.”
Ownership of capital assets disputes may happen due to an unfair decision or illegal decision of
company that leads to the fact that interests of other shareholders are not as expected. Several
cases includes disputes in contributing methods, in which the assets are significantly overvalued;
not reaching an agreement about contributed capitals as assets or transferring of ownership, and
so on.
Taking an example as follows:

3
 In 2010, Mr. Tuan and Mr. Hung, and HL Company agreed to contribute capital of VND
5 billion, 3 billion, and 2 billion respectively to establish Thaco Joint Stock Company with
chartered capital of VND 10 billion. Mr. Tuan was elected Chairman of the Board of Members
and appointed Mr. Hung as the Company's Director and the legal representative of the company.
In the course of business operation, Thaco Company had many violations affecting Mr. Tuan's
interests, so Mr. Tuan sued, requesting Thaco Company to distribute profits to its capital
contributing members during the business for the two year 2011 and 2012. During the court's
proceedings in accordance with Mr. Tuan's petition, on 28/4/2013, a meeting occured between
Mr. Tuan, Mr. Hung, and legal representative of HL Company. It was agreed that Mr. Tuan
would buy the amount of capital contribution of Mr. Hung and HL Company at Thaco Company.
The two sides agreed to invite the auditing firm to audit and determine the value of the enterprise.
The value of the audited enterprise was determined at the transfer value.
After the auditing report, Mr. Hung and HL Company offered the transfer price of 50%
of the capital contribution in Thaco Company, that is over 6.2 billion, but at the same time the
company set the conditions that were not included in the content of the agreement at the meeting
on 28/4/2013, causing difficulties in the transfer.
This is the first dispute about capital ownership and a solution was made on December 1,
2013, when Mr. Tuan filed a petition requesting a lawsuit, asking the Court to resolve the
transfer of capital contributed between Mr. Hung, HL Company and Mr. Tuan in accordance
with the law. Mr. Tuan agreed the transfer price of over 6.2 billion. The first-instance verdict
accepted Mr. Tuan's petition with Mr. Hung and HL Company for the transfer of capital
contributed by its members. Mr. Tuan was transferred the entire capital contribution of the other
two members and obliged to pay them the transfer amount of 50% of contributed capital in
proportion.
After the verdict was issued, HL Company filed an appeal against the entire sentence
because it was noticed that HL Company and Tuan had not signed any agreement or contract of
transfer of capital contribution. And HL had never admitted and agreed Minutes of the meeting
of shareholders of 28th April 2013 on the capital transfer agreement between parties. This is
considered as a second dispute over the ownership of transferring assets. Through the process of
interrogating the parties as well as from the analysis of the file’s content, the court found that the

4
arguments of HL Company lacked valid basis. As a result, the appellate court rejected HL
Company’s appeal, and upheld the first instance verdict.
3.2. Transfer of ownership
According to Article 124, Enterprise Law 2014 about “Transfer of ownership of
contributed assets”, it is stated that:
“1. Members of limited liability companies, general partners of partnerships, and
shareholders of joint-stock companies must transfer the right to ownership of assets contributed
as capital as follows:
a) If asset ownership registration is mandatory or the asset is land use right, the capital
contributor must follow procedures for transferring the ownership of such asset or land use right
to the company at a competent authority.
The transfer of ownership of contributed assets shall not incur registration fee;
b) If asset ownership registration is not mandatory, the capital contribution shall be recorded in
writing.(...)
c) Shares or stakes in the form of assets other than VND, convertible foreign currency, and gold
are considered transferred after the legal ownership of such assets is transferred to the company.
2. Contributed assets used for the sole proprietorship’s operation is exempt from
procedures for ownership transfer.
3. Payments for transfer of shares/stakes, and receipt of dividends of foreign investors
must be made through their capital accounts opened at banks in Vietnam, except for payment
with assets.”
The disputes on the transfer of ownership of contributed assets to existing shareholders can be
arisen from the fact that both parties involved in the transferring process do not follow closely
the prescribed procedures, thus leading to the ambiguity and conflicts. When one party want to
sell or transfer his capital assets, notices with full information that provided in the clause 1 of
Article 35 should be delivered in advance. However, if one party fails to miss any steps as
prescribed, it will result in the case of reclaiming the owner of those sold or transferred assets. In
such cases, even though the prior owner of the capital assets is taken away the rights and
responsibilities over the assets as well as his shares were sold out to other shareholders already,
he still insists his rights to reclaim the ownership as there would be lack of clear information on
the Minutes of Asset handover documents, including whether the assets of sale belonged to the

5
state which are allowed to publicly sold or not and so on. In short, when parties announcing their
transfer of ownership over the contributed capitals, they must strictly follow the procedure and
prepare documents with all prescribed items in order that there could be no disputes or conflicts
regarding these ambiguous documents.
3.3. Loss and Profit distribution to shareholders
According to Part c – Clause 1 of Article 110, Enterprise Law 2014, it is prescribed that:
“Shareholders are liable for the enterprise’s debts and other liabilities only within their amounts
of capital contributed to the enterprise”, which means that no matter how much profit or loss
that the company receives, shareholders are only responsible for the amounts that they
contributed as capitals to the company. Regarding the profit distribution, they will be processed
under the dividend payments (either under cash method or other methods) following the article
132, Enterprise Law 2014. However, conflicts may occur since the board of directors (of several
small companies) may divide the dividends not equally and do not follow any rules that are
prescribed in Enterprise Law. In this case, the company should complete all financial obligations
and come up with the undistributed earnings. From this amount, the company then decide the
dividends payments based on the proportion of contributed capitals from shareholders.
On the contrary, in terms of loss, disputes may occur more frequently due to the fact that
several companies are found based on “trust” between founders (also known as “friends”) and
the company charter are not thoroughly discussed. At the beginning of the company registration
process, documents are not well prepared and in some cases, only verbal agreements are made.
These facts would lead to the results that there will incur sophisticated disputes or conflicts over
loss’s coverage responsibility and ambiguous financial activities among shareholders. Several
disputes of this case can be questioned from who are liable for the loss of the company; whether
shareholders have to contribute more money to cover the loss amount; how much can I take back
after withdraw from a bankruptcy. As stated below, in terms of loss, shareholders only bear the
loss that equivalent to the amount of capital contributed and do not need to take their own money
to cover for the loss. Moreover, according to Clause 6, article 202 Enterprise Law 2014, it is
stated that: “After all debts and dissolution costs are paid, the remaining value shall be received
by the sole proprietorship’s owner, members, shareholders, or owner of the company according
to their holding of stakes or shares in the company.”. As a result, when there is a case of the
dissolution, the company assets are used to pay for all the liabilities and dissolution costs; and

6
the remaining will be divided equally based on the proportion of contributed capitals from
shareholders.
3.4. Real capital contributed are greater than the committed contributing capital
According to the clause 3, article 112, Enterprise law 2014, it considers to some aspects
of “real capital contributed are greater than the committed capital contributed issue”, which is
stated as following: “If after the deadline specific in clause 1 of this article, any shareholder who
has not paid for or only partially paid for the shares registered for purchase, the following
provisions shall apply: A shareholder who has not paid for the registered shares must naturally
no longer be a shareholder of the company and may not transfer such share purchase right to
another; (…)”
Taking a specific example, there are 3 shareholders: Mr. A, Mr. B, Mr. C who establish
TP Company and received the enterprise registration certificate in 2006 with 450 million VND
charter capital. However, Mr. A did not have enough money to contribute to the company as
registered, so Mr. D (who is outside of the company) make a contribution of 150 million VND
instead of Mr. A. Besides, Mr. D also contributes 300 million VND for company’ production
activities. Thus, in total, Mr. D contributes 450 million VND. However, since TP company
continuously make loss 150 million VND during running business, Mr. D want to withdraw his
capital.
+ According to the article 110, clause 1.c, Enterprise Law 2014, Mr. D is only liable
within amount of their capital contributed in case the company making loss. It means that Mr. D
has to bear 1/3 of 150 million losses when he withdraws the company. Besides, the amount of
300 million VND that Mr. D contributed for the company is considered as debts that TP
Company borrow Mr. D.
+ However, according to article 115, Enterprise Law 2014, it is mentioned that: “not to
withdraw the capital contributed by ordinary shares from the company in any form, unless their
shares are redeemed by the company of other persons”. Hence, Mr. D cannot withdraw his
capital directly from TP Company.
In general, shareholders often “over-contribute” the capitals to the company or in other
cases when they do not meet the obligations to contribute the capitals, another person is replaced
to do that. This in fact will lead to complicated disputes over contributed capitals, when
shareholders all just agree verbally or put their money in without any specification in the

7
company’s charter or in additional agreements. Also, during the process of transferring, if there
is no one to confirm the amount of transference, disputes may occur due to the ambiguity in the
value of shares, whether they are transferred with higher price or not. In the long-term, whether
the firm receive profits or not, conflicts on the amount of contributed capitals will definitely
appear since the shareholders will again reclaim the amount that they contributed but not the
amount that are recorded and confirmed in the charter or any agreements.
3.5. Withdrawal of capital assets
As mentioned above, shareholders cannot withdraw the capital contributed by ordinary
shares from the company in any form, unless their shares are redeemed by the company of other
persons (article 115, Enterprise Law 2014). Disputes on the withdrawal of capital assets may
happen when shareholders want to directly take all of their money back in cash when the
company face struggles or they just want not to be in the company. The thing is that some
shareholders contribute capitals that exceed the amounts specified in the company’s charter and
thus they take the rights to claim on a cash withdrawal of those “over-contributed” capitals.
However, on contributing assets to a shareholding company, shareholders are forced to commit
to all regulations prescribed under Enterprise Law. Therefore, if shareholders want to withdraw
the capital, they have to apply other methods as prescribed by Enterprise Law as followings:
+ Transfer the capital contributed for another person, it can be a person inside or outside
the company.
+ Request the company purchase shareholders’ capital. The redemption of shares at
request of shareholders has to follow the article 129, Enterprise Law 2014.
In conclusion, in different situations, different methods are taken into account to come up with
the best solutions for disputes under Enterprise Law.
4. Recommendation
Capital contribution nowadays is quite sensitive to the owners’ relationship and
company’s developments and internal disputes cannot be avoidable, especially within
Shareholding Companies. Therefore, business owners as well as management boards of the
company should draw up effective measures to limit disputes and resolve disputes. The most
successful owners of companies are those who can meet their needs most effectively and can set
out both the rights and obligations for the parties, determine what should happen in the events of
capital contribution disputes and provide a valuable method of valuing the shareholding. If the

8
owners have a clear and properly drafted agreement and company’s charter, it can help to resolve
disputes in an early stage and without the need for any litigations. Allowing a partnership to
issue bonds will also help the company raise capital more easily, attract more investors,
especially for the small and medium companies in Vietnam. In addition to raising awareness
about key management positions, improvement of corporate governance should be taken into
consideration. For a long time, it is believed that major shareholders with the most capitals
contributed will hold key management positions; however, it should be transferred to managers,
who can be the outsiders with professional qualifications and experience, not the one with the
most capital to run the business. (Anon, 2016)
5. Conclusion
It can be summarized that the shareholding companies has become more eminent in
nowadays business world. It is inevitably that there still exists the shortage of strict regulations
on the capital assets in join stock company under the Enterprise Law 2014 and further research
and recommendations are needed. In general, apart from effectively resolving disputes, each
company and management board of directors in particular should take measures in advance to
avoid conflicts, providing clear and effective the agreement that are agreed publicly between the
parties.

9
 REFERENCES
1. Anon, 2014. VIETNAM LAW ON ENTERPRISE. [online] VIETNAM LAND LAW 2013
- Law No. 45/2013/QH13. Available at:
<http://vietnamlawenglish.blogspot.com/2015/05/vietnam-enterprise-law-2014.html>
[Accessed 16 Dec. 2018].
2. Anon, 2016. Tranh chấp giữa các thành viên-Xác định rõ tư cách chủ sở hữu. [online] Công
ty luật Phạm Law. Available at: <https://phamlaw.com/tranh-chap-giua-cac-thanh-vien-xac-
dinh-ro-tu-cach-chu-so-huu.html> [Accessed 16 Dec. 2018].
3. Anon, 2018. Capital asset. [online] AccountingTools. Available at:
<https://www.accountingtools.com/articles/2017/5/4/capital-asset> [Accessed 16 Dec.
2018].

10