Contributing assets (land, machinery, intellectual property, etc.) as capital is a lawful investor right. But in practice, assets are sometimes “inflated” far above real value — to boost charter capital on paper, to claim a larger ownership ratio, or to “beautify” financial statements. This is not a harmless trick: the 2020 Enterprise Law imposes severe legal consequences.
This article analyzes six legal consequences of overvalued asset contributions under Article 36 of Enterprise Law 59/2020/QH14 (amended by Law 76/2025/QH15, effective 1 July 2025).
1. Joint obligation to contribute the difference
The most direct consequence. Under Article 36:
- At establishment (Clause 2): if a contributed asset is valued above its real value at contribution time, the founding members/shareholders must jointly contribute the difference between the appraised value and the real value at the conclusion of valuation.
- During operation (Clause 3): the contributor, the owner, Members’ Council members (LLCs, partnerships) and Board of Directors members (JSCs) must jointly contribute the difference.
“Jointly” means each person may be required to contribute the entire difference, not just a pro-rata share. Example: land really worth 10 billion dong valued at 15 billion for contribution — the parties must jointly make up the 5 billion gap.
2. Joint liability for intentional overvaluation damages
Beyond topping up, Article 36 makes the parties jointly liable for damages caused by intentional overvaluation. Such damages may affect:
- The company (“phantom” charter capital, insolvency);
- Other members/shareholders (fraudulently diluted ownership);
- Creditors and counterparties relying on the inflated charter capital.
Compensation is determined under the Civil Code 2015, with “intent” as the key factor distinguishing it from ordinary valuation errors.
3. Phantom charter capital and expanded limited liability in practice
With inflated charter capital, members/shareholders believe they are “liable only within contributed capital” — but the committed capital is calculated on the phantom value. Upon insolvency, creditors may demand members contribute the full committed capital, including the overvaluation gap. “Limited liability” becomes a trap of one’s own making.
4. Tax risks: imputed pricing and disallowed expenses
- Tax authorities may impute the taxable price where asset values deviate from market value (Tax Administration Law 108/2025/QH15, effective 1 July 2026);
- Depreciation of fixed assets formed from contributions may be disallowed as deductible CIT expenses if the recorded value is unreasonable;
- Corresponding input VAT risks non-deduction.
5. Administrative penalties
Dishonest charter-capital declarations or misstated asset values may attract administrative penalties in enterprise registration and planning/investment (under current sanction regulations — refer to Decree 122/2021/ND-CP and amending documents at the time of handling). Beyond fines, enterprises must remedy the violation (adjust charter capital).
6. Criminal liability — where fraud and appropriation exist
In particularly serious cases — e.g., using inflated assets to defraud other investors or to obtain bank loans for misappropriation — criminal liability under the 2015 Penal Code (amended 2017) may be considered. This is a delicate boundary: any case showing signs of fraud needs specific counsel assessment; this article states no offence for any particular scenario.
7. Three precautions for honest investors
- Hire an independent valuer holding an eligibility certificate for valuation services (Price Law 11/2024/QH15) — do not self-value large assets;
- Keep the full valuation certificate, valuation agreement minutes, and documents proving asset origin and ownership;
- Value at market price as of valuation conclusion — “expected future appreciation” is never a lawful valuation basis.
Frequently asked questions
I am a minority shareholder who did not participate in valuation — am I jointly liable?
Joint liability under Article 36 applies to founding members/shareholders (at establishment) or to the contributor plus the owner/Council/Board approving the valuation (during operation). Minority shareholders who neither participated nor approved the inflated valuation are generally outside joint liability — but need evidence of non-participation.
What to do upon discovering an overvalued contribution after incorporation?
Request re-valuation by an independent organization; relevant parties fulfil the top-up obligation; adjust charter capital if needed; and consider damage claims where losses exist.
Is undervaluation a problem?
The law does not prohibit valuing below real value (a dispositive right), but abnormally low values may raise tax issues (imputed pricing) — weigh carefully.
Conclusion
Overvaluing contributed assets is not a “trick” but a legal violation with cascading consequences: topping up the gap (jointly), damage compensation, phantom capital, tax risks, administrative penalties, and in serious cases criminal liability. For honest investors, an independent valuation certificate is the cheapest investment against all these troubles.
If you are preparing an asset contribution and need valuation or legal review, contact FLAT Law Firm for advice.
This article is pending review by the QA Council.
Transparency note: this article was prepared by the FLAW AI Legal Council based on the laws in force at the time of writing (15 October 2026). It is for general information only, is not an official document, and does not replace legal advice for any specific case.
