Legal basis for technology capital contribution activities in Vietnam

1. Contributing capital by technology according to the Law on Enterprises 2020

The Law on Enterprises 2020 (Law No. 59/2020/QH14) allows enterprises to receive capital contributions in non-monetary assets, including technological assets. Specifically, Article 34 of the Law on Enterprises 2020 stipulates that assets contributed as capital can be: Vietnam Dong, freely convertible foreign currency, gold, value of land use rights, intellectual property rights, technology, technical know-how and other assets that can be valued in Vietnam Dong. Only individuals and organizations that are the lawful owners or have the lawful right to use such assets are entitled to use the assets for capital contribution. This means that the person who contributes capital with technology must have legal ownership or use rights to that technology before contributing capital.

When contributing capital with assets, the Law on Enterprises requires the transfer of ownership of assets contributed as capital to the company. According to Article 35 of the Law on Enterprises 2020, for assets with registered ownership (such as patents, trademarks, copyrights) or land use rights, capital contributors must carry out procedures for transferring ownership to the company in accordance with the law. For assets whose ownership is not registered, capital contribution must be made by the delivery and receipt of assets contributed as capital certified in writing, except for cases where capital contribution is made via bank transfer. It can be seen that, according to the provisions of Vietnam's enterprise law, the capital contribution is only considered complete when the legal ownership of the assets has been transferred to the company. Thus, if contributing capital with a registered invention or trademark, the capital contributor must carry out the procedures for transferring the name of industrial property rights to the company under the Intellectual Property Law; if capital is contributed by unregistered technological know-how, there must be a contract to transfer the right to use/own that know-how to the enterprise. For assets without ownership registration such as machinery and equipment or technical know-how or secrets, the capital contribution shall be made by handing over and receiving the assets together with a written certification.

The Law on Enterprises also provides for the valuation of assets contributed as capital. According to Article 36 of the Law on Enterprises 2020, assets contributed as capital that are not Vietnamese Dong, foreign currencies or gold must be valued and converted into Vietnam Dong. The valuation shall be agreed upon by the founding members and shareholders or by a professional valuation organization. In case of hiring an organization to appraise the price, the value of assets contributed as capital must be approved by more than 50% of the members and founding shareholders. If the assets are valued higher than the actual value at the time of capital contribution, the capital contributors jointly contribute the difference and are jointly responsible for the damage caused by deliberately valuing them higher than the actual value. This regulation aims to ensure that technological assets or intellectual property contributed as capital are valued objectively and accurately, avoiding "inflating the price" of contributed assets.

In addition, the Law on Enterprises also sets a time limit for capital contribution for the establishment of a company. Normally, members/shareholders must contribute the full committed capital within 90 days from the date of issuance of the Enterprise Registration Certificate. Therefore, if contributing capital by technology or intellectual property rights when establishing the company, within 90 days, the capital contributor needs to complete the technology transfer/transfer of intellectual property rights to the company. If the enterprise fails to contribute sufficiently and on time, the enterprise must adjust the charter capital and capital contribution rate, and the member who does not contribute enough loses the right to the uncontributed capital as prescribed in Articles 47 and 48 of the Law on Enterprises 2020. In summary, the Law on Enterprises 2020 lays the foundation for capital contribution by technology and intellectual property, but requires full transfer of ownership, proper valuation and compliance with capital contribution deadlines and procedures.

2. Capital contribution by technology according to the Law on Technology Transfer 2017

The Law on Technology Transfer in 2017 (Law No. 07/2017/QH14) directly regulates technology transfer activities in Vietnam, including cases of capital contribution by technology. "Technology" under this law is understood as a solution, process or know-how with or without tools and means used to transform resources into products[1]. Article 7 of the Law on Civil Engineering 2017 stipulates that organizations and individuals with the right to use technology (owners or persons who are transferred the right to use technology by the owner) may transfer the right to use such technology to other organizations and individuals (which need to be agreed by the owner, if the transferring organization or individual is the party that has previously been transferred the right to use by the owner). Article 8 of the Law on Civil Engineering 2017 clearly defines that organizations and individuals with the right to transfer technology are entitled to use that technology to contribute capital to investment projects. In other words, technology capital contribution is a legal form of technology transfer. In case the investment project is funded by state capital, the capital contribution technology must be appraised in accordance with law. This is to ensure that technology assets are accurately valued, avoiding the loss of state capital.

Since technology capital contribution is considered a form of technology transfer, the law requires that this transfer must be made into a written contract. According to Clause 4, Article 5 of the Law on Civil Engineering 2017, the transfer of independent technology or the transfer of technology in the form of capital contribution must be made into a contract. The technology transfer contract must comply with general formal conditions such as: made in writing, signed by the parties and stamped with the adjacent seal (if any). Article 22 of the Law on Civil Engineering 2017 stipulates that industrial contracts are concluded and performed in accordance with this law and concurrently in accordance with the Civil Code 2015, the Commercial Law, the Law on Intellectual Property and relevant legal provisions. This shows that a technology transfer contract is a specific civil/business contract, governed by many laws at the same time. From specialized laws such as the Technology Transfer Law, IP Law, to the Commercial Law, the Civil Code. For example, the contents of the transfer of intellectual property rights in contracts will be governed by the IP Law, or contract disputes may be subject to the Commercial Law. The Technology Transfer contract must contain the main contents such as[2]: name of the technology, content and scope of transfer, method of transfer (transfer of ownership or transfer of use right), price and method of payment, rights and obligations of the parties, validity period,....

The Law on Technological Innovation 2017 also clearly stipulates the payment method when transferring technology: The parties can agree to pay in cash, in goods, at the percentage of revenue/profit or by "converting the value of technology into contributed capital" to the investment project or enterprise capital. This is the legal basis for using technology to value shares/contributed capital. However, in order to ensure transparency, for technology transfer transactions involving State elements or transactions between parties having special relationships, the law requires an audit of the transfer price and compliance with regulations on taxes and transfer prices.

An important point is the procedure for registering a technology transfer contract. Article 31 of the Law on Technology Transfer 2017 stipulates cases in which it is mandatory to register a technology transfer contract with the state management agency in charge of science and technology (the Ministry of Science and Technology or the Department of Science and Technology, as the case may be). Specifically, contracts in one of the following cases must be registered: (a) technology transfer from abroad into Vietnam; (b) transfer of technology from Vietnam to foreign countries; (c) Domestic technology transfer with state capital (except for technologies for which there is a certificate of registration of results of scientific and technological tasks). Technology capital contribution often arises in the context of domestic investment projects; if such projects are funded by state capital, capital contribution contracts must be registered. Even if it is not mandatory, the State encourages parties to actively register technology transfer contracts for better protection. The registration dossier includes: application for registration, a copy of the technology transfer contract and relevant documents. According to the law, within 90 days from the date of signing the contract, the party obliged to register must submit a dossier to the competent authority. This agency will issue a technology transfer registration certificate within 05 working days if the dossier is valid.

Regarding the effective time of the technology transfer contract, Article 24 of the Law on Technology Transfer 2017 stipulates that: the parties can agree on the effective time; if no agreement is reached, the default contract takes effect from the time of signing, except for special cases. In case of transfer of technology restricted from transfer (i.e. technology on the list of restricted technologies that require permission), the contract shall only take effect from the time of issuance of the technology transfer license issued by the Ministry of Science and Technology. In particular, for technology transfer contracts subject to registration, the contracts are only effective from the time of issuance of the Technology Transfer Registration Certificate. Applicable to the case of capital contribution by technology or capital subject to registration (because it is considered as part of a domestic technology transfer investment project), the technology transfer contract with capital contribution takes effect from the time the state agency grants the registration certificate. In other words, the capital contribution by technology is only legally completed when the technology transfer contract has been registered. This is also in line with the requirements of the Law on Enterprises that technology ownership must actually be transferred to the company before the capital contribution is considered complete.

In summary, the Technology Transfer Law 2017 provides a specialized legal framework for capital contribution by technology. Capital contributors must make technology transfer contracts in compliance with statutory contents and forms; if it is subject to registration, it is necessary to register with the Ministry of Science and Technology, and only after completing these procedures, the capital contribution by technology will be effectively recognized. This regulation aims to control the transfer of technology, especially technology from abroad or technology using state capital, and at the same time create a strict legal corridor to protect the interests of parties in capital contribution transactions with technology.

3. Capital contribution with intellectual property under the Law on Intellectual Property 2005 (amended in 2022)

Intellectual property (IP) is an important form of intangible property that can be used to contribute capital, including: copyright, industrial property rights (such as inventions, industrial designs, trademarks, integrated circuit layout designs, trade secrets, etc.) and rights to plant varieties. The current legal framework on IP is specified in the IP Law 2005, which was recently amended and supplemented by Law No. 07/2022/QH15 (effective from January 1, 2023). The contribution of capital by intellectual property requires that the IP right must first be legally established for the capital contributor, and then transfer or transfer that right to the enterprise.

Regarding the establishment of intellectual property rights, Vietnamese law stipulates that each subject has a different establishment mechanism. Copyright arises automatically from the moment the work is created and expressed in a certain material form without registration. In contrast, most industrial property rights (for inventions, industrial designs, layout designs, trademarks) are only established on the basis of protection titles granted by competent state agencies according to IP registration procedures. In other words, an invention or trademark that wants to be considered as an asset for capital contribution must usually be granted a Patent or a valid Trademark Registration Certificate by the National Office of IP. In some special cases, such as well-known trademarks are recognized thanks to the process of widespread use, without registration, but proving a "famous" trademark in Vietnam is currently very complicated[3]. The right to a trade secret is established when the subject legally possesses the secret and keeps the business secret, including technical and technological know-how, which is confidential and has not been disclosed to a third party. Rights to plant varieties are similar to inventions, they must have a plant variety protection certificate issued by the Ministry of Agriculture and Rural Development (now the Ministry of Agriculture and Environment). In short, individuals/organizations that want to contribute capital with an IP asset need to ensure that they are the legal owners of that intellectual property: for inventions, trademarks and designs, they must have a protection title in their name; for works, they are the authors/owners of the works; with business secrets, they hold secrets and have security measures.

Once the legal IP right is obtained, the capital contributor must transfer the ownership or right to use the intellectual property to the company. The IP law stipulates the forms of licensing including: transfer of ownership of IP objects, or transfer of use rights (licensing) for IP objects.

• For industrial property rights (patents, trademarks, etc.): Article 138 of the IP Law defines an industrial property right transfer contract as the owner's transfer of his or her ownership to another organization or individual. This transfer is required to be made into a written contract. Similarly, Article 141 stipulates that the contract for the transfer of the right to use (license) an industrial property object must also be in writing. Contracts must have basic contents such as information on the transferor and the recipient, scope of transfer rights, transfer prices, rights and obligations of the parties, etc. Note that the law has some limitations: for example, geographical indications cannot be transferred to other subjects (due to association with geographical areas); the trade name shall only be transferred together with the transfer of the entire production and business establishment associated with that name; the transfer of trademarks must not cause confusion about the origin and nature of goods; and the trademark recipient must meet the conditions for the subject to register such trademark. These are constraints to prevent the arbitrary transfer of IP rights that mislead consumers or violate the law.
• For copyright and related rights: Capital contributors can transfer property rights (economic rights) associated with works, phonograms, programs, etc. through a copyright/related rights transfer contract. According to the IP Law, authors are not allowed to transfer moral rights associated with works (such as the right to bear names) but property rights (the right to copy, distribute, make derivative works,...) can be transferred freely unless otherwise agreed. The copyright transfer contract must also be made in writing, no need to be registered at a state agency to take effect. However, the parties often notarize the contract to increase the legal value, and can register the copyright at the Copyright Office to create evidence of the owner of the work before and after the transfer.

Regarding the validity of the transfer of IP rights, the law has strict regulations, especially for industrial property rights: An industrial property right transfer contract is only legally effective when it is registered at the State Management Agency for IP (National Office of Intellectual Property). The provisions of Article 148(1) of the IP Law clearly state that for industrial property rights that must be registered (including inventions, designs, trademarks, layout designs), the transfer contract must be registered to take effect. Thus, after signing an invention/trademark transfer contract for capital contribution, the parties need to submit a dossier for registration of that contract at the NOIP; The Department will record and issue the Certificate of registration of the industrial property right transfer contract. Only when this registration procedure is completed will the company be recognized by law as the new owner of the invention/trademark and then the capital contribution with this asset will be legally completed.

For a contract for the transfer of the right to use (licensing) an industrial property object, Article 148(2) of the IP Law (amended 2022) stipulates that the licensing contract is effective according to the agreement between the parties, and registration is not required to take effect between them. However, it should be noted that except for trademark licensing contracts, other licensing contracts must be registered at the NOIP to be legally valid for third parties. This means that, if not registered, the patent/design licensing agreement remains valid between the licensor and the franchisee, but a third party such as the person who acquires the patent from the licensor may not be bound by the unregistered contract. Therefore, to be safe, when contributing capital by letting the company use intellectual property (instead of transferring ownership completely), the parties should also register a licensing contract at the NOIP. Particularly, trademark licensing is currently not required by Vietnamese law (because the 2022 Law has removed the requirement to register a trademark use contract to take effect), but registration is still encouraged to publicize the status of trademark use.

In summary, the IP Law ensures that intellectual property used for capital contribution must be legally protected and transferred in accordance with procedures. Capital contributors with IP rights need to sign a transfer or licensing contract in accordance with regulations (in terms of form and content) and register at state agencies if required by law. Only then, the ownership or right to use intellectual property will officially belong to the enterprise, meeting the conditions for transferring ownership under the Law on Enterprises. The combination of the IP Law and the Enterprise Law/ Technology Transfer Law helps protect both the capital contributor and the capital contributor, avoiding disputes in the future.

4. The relationship between the Law on Enterprises, the Law on Technology Transfer and the Law on IP in capital contribution by technology

Contributing capital by technology is an intersection of many legal fields, so it is necessary to apply the provisions of the Law on Enterprises, the Law on Technology Transfer and the Law on IP at the same time. Each law regulates one aspect, forming a complete legal process for capital contributions with this particular type of property.

• According to the Law on Enterprises: Capital contribution by technology or intellectual property is first of all a form of capital contribution with assets, in order to recognize the charter capital of members/shareholders. The Law on Enterprises sets general requirements: such assets must be valued, ownership must be transferred to the company, and the capital contribution must be completed within the statutory time limit. If only considered according to the Law on Enterprises, after valuing the technology and "delivering" the assets, the capital contributor becomes a shareholder and the company becomes the owner of the asset. However, due to the special legal nature of technological/intellectual property (related to intangible ownership rights), the "delivery" cannot be as simple as the delivery of money or tangible assets, but must follow a specialized procedure (signing a contract, registering with the competent authority, etc  are granted certificates).
• According to the Technology Transfer Law: Any technology transfer, including hidden in capital contribution activities, must comply with the legal procedures on technology transfer. As analyzed in section 1.2, the Technology Transfer law requires the signing of a technology transfer contract in writing, registration of a contract with the competent authority if it is mandatory, and only when completed will the transfer take effect. Therefore, in case of capital contribution by a technical know-how or technological process (which is a technology that has not been specifically registered for protection), the technology transfer contract is a legal means to transfer that knowledge and know-how from the individual contributing capital to the company. If the technology transfer contract is not made, the company will have no legal basis to receive and use the technology to contribute capital, leading to the capital contribution may be considered incomplete. Practice shows that capital contribution by technology is often accompanied by a technology transfer contract to clearly define the rights and obligations of the parties as well as the scope and content of the technology to be contributed. This contract is a bridge for the Law on Enterprises (on capital contribution) and the Law on Technology Transfer (on the transfer of technological assets) to meet: it both helps to transfer assets as required by the Law on Enterprises, and complies with the transfer procedures of the Law on Technology.
• According to the IP Law: If the technology contributed as capital is related to the object of IP protection (such as inventions, copyrighted software, chip designs, trademarks, etc.), the transfer of such assets must also meet the requirements of IP law. Specifically, in order for the company to truly take ownership of the invention/trademark, it is necessary to have an industrial property right transfer contract and register with the NOIP. If only a generic technology transfer contract is signed without carrying out procedures for transferring the name of the protection title, the law still recognizes the original individual as the owner of the invention/trademark, and the company does not have a monopoly on that property. This will contradict the company's capital contribution books (recording that the company owns assets) and potential disputes. In fact, similar incidents have happened many times in reality[4]. Therefore, the process of contributing capital by technology associated with IP requires the simultaneous application of the IP Law to carry out procedures for transferring or licensing IP rights. For example, in the case of capital contribution to a patent that has been granted, the contributor must sign a patent assignment contract for the company and submit an application for registration of that contract at the NOIP; contributing capital with trademarks, similarly need to transfer trademark registration; capital contribution by computer software, in addition to the technology transfer contract, there should also be a copyright transfer contract or at least an exclusive licensing contract for the company. As quoted in Article 22(3) of the Law on Technology Transfer 2017, the industrial contract must comply with the IP Law, which is the intersection point to ensure that intellectual property is transferred in accordance with the law in the process of capital contribution.
• Priority order of application: Basically, the three laws mentioned above do not contradict each other but complement each other. When carrying out capital contribution activities by technology, the parties shall simultaneously comply with the Law on Enterprises on valuation, capital contribution and capital contribution period; comply with the Law on Technology Transfer; and complying with the IP Law on IP rights transfer. Where there is a difference (e.g. on the validity of the contract), specialized law usually prevails. For example, the capital contribution technology transfer contract only takes effect when the registration is completed (according to the Law on Technology Transfer) although the Enterprise Law only allows 90 days of capital contribution. This means that if after 90 days the registration procedure has not been completed, it can be considered that the capital contributor has not fulfilled its obligations and the enterprise must adjust the capital. However, in practice, these regulations are compatible if the parties involved carry out the right process and are well prepared during the implementation of the procedure.

In short, capital contribution by technology is a case in which the law must be synthesized. The Law on Enterprises defines technology and IP rights as a valid type of capital contribution asset and requires the transfer of ownership to the company. The Technology Transfer Law provides the legal means (contract, registration) to legally carry out such transfer in the field of technology. The IP Law ensures that intellectual property rights in technology are fully transferred and established to the company (through registration of diplomas, registration of IP contracts). These three legal systems have a close relationship, aiming at the ultimate goal: the enterprise actually owns/controls the technology and intellectual property after receiving the capital contribution, and the capital contributor receives the capital contribution commensurate with the value of the transferred assets.

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