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Contributing capital to establish a business using intellectual property rights in Vietnam - 2


CHAPTER 1

GENERAL OVERVIEW OF CAPITAL CONTRIBUTION TO ESTABLISH A BUSINESS USING INTELLECTUAL PROPERTY RIGHTS

1.1 General overview of capital contribution to establish a business

1.1.1 Concept and classification of enterprises

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1.1.1.1 Business concept

From an economic perspective , “enterprise” is a term originating from the field of economics. The term “enterprise” is derived from the French word “entreprendre” which means “to undertake” or “to operate”. When conducting production and business activities and obtaining the highest economic benefits, organizations and individuals will have to consider, review and choose a suitable business model, depending on the intention, scale, expected business time... Accordingly, economics often studies enterprises under the following criteria: mobilization; allocation, use of capital sources; hiring, division of labor; transaction costs; business organization; efficiency and benefits for society. According to M. Francois Peroux: “ An enterprise is an organizational and production unit where people combine different production factors (with attention to the prices of the factors) by business employees to sell products or services on the market to receive the difference between the selling price of the product and the cost of that product ”. From an economic perspective, an enterprise is considered under the following factors: costs to organize capital mobilization; labor organization; conducting business and costs to coordinate those factors together. It can be said that an enterprise is one of the forms of activity that organizations and individuals choose to express their business ideas.

Contributing capital to establish a business using intellectual property rights in Vietnam - 2

From a legal perspective , a business is recognized by law as an independent legal entity. A business has the right and must also bear the responsibility.


legal obligations arising from its activities. Clause 1, Article 4 of the 2005 Enterprise Law stipulates: “ An enterprise is an economic organization with its own name, assets, a stable transaction office, registered for business in accordance with the provisions of law for the purpose of carrying out business activities ”. Thus, from a legal perspective, an enterprise is an economic organization with legal status, a seal, assets, civil rights and obligations, operating under an independent accounting regime, taking responsibility for all activities within the scope of investment capital managed by the enterprise and subject to state management through various types of laws and enforcement policies.

1.1.1.2 Business classification

Depending on different classification criteria, businesses will be divided into different types. Specifically:

According to the criteria of ownership form and purpose of operation , enterprises are divided into private enterprises and state-owned enterprises.

(i) State-owned enterprises are economic organizations that the State invests capital in, establishes, and organizes management, business activities, or public service activities to achieve socio-economic goals assigned by the State.

(ii) A private enterprise is an enterprise in which organizations and individuals contribute capital, conduct production and business activities and are responsible for all of their assets or for limited liability within the amount of capital contributed to the enterprise for all activities of the enterprise, depending on the specific type. According to the provisions of Vietnamese law, private enterprises have the following legal forms: Private enterprises; limited liability companies with two or more members; limited liability companies with one member; joint stock companies; partnerships.


According to the scale criterion , enterprises are divided into small and medium enterprises and large enterprises. To distinguish enterprises according to the above scale, most countries rely on standards such as: (i) total investment capital of the enterprise; (ii) number of employees in the enterprise; (iii) revenue of the enterprise; (iii) annual profit. In which, the standards of total capital and total number of employees are the main factors to classify enterprises, and the factors of revenue and profit are used in combination with the above factors for classification. However, depending on the level of production development in each country, depending on each specific industry in different periods, the quantity quantified according to each country's standards is not the same.

Based on the association , enterprises are divided into independent enterprises; business groups; multinational enterprises.

(i) Independent enterprises are enterprises that are established and operate independently.

(ii) A business group is a group of businesses that have a long-term relationship with each other in terms of economic interests, technology, market and other business services.

(iii) Multinational enterprises are enterprises that produce or provide services in at least two or more countries.

Based on the field of operation of enterprises in the national economy , enterprises are divided into agricultural enterprises, industrial enterprises, commercial enterprises, and service enterprises.

(i) Agricultural enterprises: are enterprises operating in the agricultural sector, focusing on the production of products such as plants and animals. The production and business activities of these enterprises depend heavily on natural conditions.


(ii) Industrial enterprises: are enterprises operating in the industrial sector, aiming to create products by using equipment and machinery to exploit or process raw materials into finished products. In the industrial sector, it can be divided into: manufacturing industry; construction industry; electronics industry...

(iii) Commercial enterprise: is an enterprise operating in the field of commerce, focusing on exploiting services in the field of distributing goods to consumers.

(iv) Service enterprises: are enterprises that focus on exploiting the provision of services for human life. Along with economic development, the service sector has been increasingly diversified, leading to the rapid development of enterprises in the service sector.

1.1.2 Concept and agreement on capital contribution to establish an enterprise

For enterprises, contributing capital to establish an enterprise is to create the first material basis for all production and business activities of the enterprise. Capital plays a very important role for enterprises. Capital (i) is the condition, the premise to ensure the existence, stability and development of the enterprise; (ii) is the condition for the enterprise to be born and win in competition; (iii) is the condition for production and business activities to take place continuously and stably; (iv) is the condition for the enterprise to carry out investment and development activities.

“Capital contribution” is a legal act of organizations and individuals to put their assets together with the assets of other entities to jointly conduct production and business activities for the purpose of making a profit. Therefore, it can be understood that “Capital contribution to establish an enterprise” is a legal act of organizations/individuals in the “pre-enterprise” stage to put the assets of organizations and individuals into assets.


of the enterprise to enjoy certain benefits from the formed enterprise.”

From an economic perspective, capital contribution to establish a business is understood as contributions whose total contributions become a representative sign of the business’s capital. In essence, it is the “dowry” that each member gives to the business when it is first established.

From a legal perspective , the act of contributing capital to establish a business is understood as an organization or individual transferring ownership or the right to use an asset to a business to enjoy benefits from the business that will be established. That could be the right to receive profits or the right to manage the business activities of the business...

According to the 2005 Law on Enterprises of Vietnam, “ Capital contribution is the act of bringing assets into an enterprise to become the owner or joint owners of the enterprise. Contributed assets can be Vietnamese currency, freely convertible foreign currency, gold, land use rights value, intellectual property rights value, technology, technical know-how, other assets recorded in the Enterprise Charter, contributed by members to form the capital of the Enterprise .” [13, Article 4]

Here, we need to distinguish the act of the capital contributor transferring the contributed assets to the enterprise, which is completely different from buying and selling. Although these acts are similar in that they both involve the transfer of ownership or the right to enjoy the assets from one subject to another; and this transfer requires determining the value of the transferred assets. However, they differ in that: in the act of buying and selling, the seller will receive an amount of money equivalent to the value of the transferred or leased assets. As for contributing capital to establish an enterprise, instead of receiving a material value, the capital contributor will enjoy certain benefits from the enterprise.


capital contribution such as: profit, membership, shares for the capital contributor... The distinction here is very clear, reflected in the rights of the asset owner after the transfer of that asset. In addition, if it is an act of buying and selling, the seller will end all obligations to the asset in the form of "buying out, selling off". If it is a capital contribution to establish an enterprise, the capital contributor may still have binding responsibilities for the assets used to contribute capital and they may have the opportunity to receive back the contributed assets in some cases according to the provisions of law. The act of contributing capital to establish an enterprise is subject to a different legal regime than the act of buying and selling.

A capital contribution agreement to establish an enterprise is an agreement established between a capital contributor or a person who commits to contribute capital and the enterprise to be established and brings benefits to the established enterprise itself - as an independent legal entity. Accordingly, the capital contributor is obliged to transfer the contributed capital assets to the enterprise and the enterprise has the right to request the capital contributor/person who commits to contribute capital to be responsible if that person does not perform/performs incorrectly or incompletely the capital contribution obligation, causing damage to the enterprise. The capital contribution agreement can be expressed in writing or not in writing. However, in practice, the capital contribution agreement is often expressed by the parties in writing, it can be an independent document, a commitment or a clause in the capital contribution contract to establish an enterprise. In general, the laws of countries around the world stipulate that the establishment of an enterprise must be made in a contract and the capital clause is an essential clause in the enterprise establishment contract. Malaysian and Singaporean law holds that: “unless it is a company with unlimited liability, the contract of incorporation must contain a capital clause stating the amount of capital permitted and the distribution of that capital.”


into shares with a fixed number becoming the limit to which the enterprise may be allowed to donate [27, pp. 155-156].

To determine the capital contribution obligations of members, the capital contribution agreement includes main contents such as: Capital contributor; capital contribution value; contributed assets; method of capital transfer; time of capital contribution...

1.1.3 Assets contributed to establish a business

According to the Civil Code of the French Republic: “ An enterprise is established by two or more people on the basis of a contractual agreement on the contribution, use of their assets or efforts in a common business activity to share profits or gain profits.

In cases prescribed by law, an enterprise may be established by one person.

The members of the enterprise commit to bear the loss together” [5, Article 1832]

According to the provisions of the French Civil Code, the assets used to contribute capital here can be the assets or efforts of the contributor. The concept of "assets" according to the provisions of the Civil Code of the French Republic is not specifically listed but is only divided into movable or immovable property.

According to the 2005 Law on Enterprises of Vietnam, the assets that can be used to contribute capital to establish an enterprise have been listed by lawmakers. Assets used to contribute capital to establish an enterprise include objects, money, valuable papers and property rights. However, the use of the listing method can easily lead to incompleteness, so the 2005 Law on Enterprises has an open provision that in addition to the listed assets, other assets recorded in the Enterprise Charter are also considered contributed capital. Based on the concept of assets, we can classify assets used to contribute capital to establish an enterprise as the following objects:


Money and valuable papers . According to economics, money is the value representing the real value of goods and is a means of circulation in human life. Valuable papers are certificates or book entries, which confirm the property rights of a certain subject in terms of legal relationships with other subjects. Valuable papers include: stocks, bonds, promissory notes, bills of exchange, government bonds, checks, payment orders, savings books, etc. Contributing capital in cash is similar to spending money to buy interests in a business. However, the initial capital contributors are the ones who create those interests [3, p53] . Contributing capital to establish a business in cash or valuable papers is considered complete when the capital contributor transfers cash or valuable papers to the established business. In the event that a capital contributor has committed to contribute money but fails to contribute or fails to contribute on time, the amount of money committed is considered a debt of that person to the enterprise and that capital contributor must bear interest on this amount from the date of the capital contribution commitment and must compensate for any damage caused by this failure to contribute capital. As the Civil Code of the French Republic stipulates: “ A member who must contribute a sum of money to an enterprise but fails to contribute shall automatically become obliged to pay interest on that amount, from the date of the contribution and compensate for any damage, if any ” [5, Article 1843-3].

In kind, this is the use of a tangible asset by a capital contributor to contribute capital to establish an enterprise. Although, in principle, any asset that is a physical object can be used to contribute capital to establish an enterprise. However, in the act of contributing capital to establish an enterprise, there will be a transfer of assets from the capital contributor to the enterprise. Therefore, to ensure this requirement, the asset that is a physical object used to contribute capital to establish an enterprise must be an object that can be put into civil exchange. It must fully satisfy three requirements: (i) the physical object must be a set

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