State policies and laws on business registration have been positively changed over the years, in the direction of creating favorable conditions for people and businesses to have the opportunity to participate in the market. In order to improve the business investment environment to become more and more healthy, transparent and fair, the regulations on handling violations must be paid more attention and attention. Recently, regulations related to handling violations of over-declaration of charter capital is one of the important issues when developing legal documents and is of particular interest to the public.
1. Regulations prohibiting over-declaration of charter capital
At the time of 1999, the act of making false declarations of charter capital was not regulated in the 1999 Law on Enterprises. However, regarding the content of declaration of charter capital, in Clauses 4, 5 Article 120 of the Law on Enterprises of the year 1999 stipulates that violations of the law include: "Declaring dishonestly, inaccurately, untimely content, changes in the content of the enterprise's business registration documents" and "Intentional pricing determinations" capital contribution is higher than its actual value”. According to the provisions of Clause 4, Article 23 of the Law on Enterprises of the year 1999, the founding member is the person who appraises such assets, the Board of Directors of a joint-stock company, the Board of members of a limited liability company, all members of the Board of Directors of a joint-stock company. General partners of a partnership company must be responsible for the truthfulness and accuracy of the value of assets contributed as capital. In case the value of the property contributed as capital is determined higher than its actual value at the time of capital contribution, the capital contributor and the appraiser must contribute the full amount of capital as assessed; If causing damage to others, they must be jointly responsible for compensation.
From 2005 up to now, the act of making false declaration of charter capital has been clearly stipulated in the Law on Enterprises.
Clause 4, Article 11 of the Law on Enterprises of the year 2005 stipulates that one of the prohibited acts is: “Wrong declaration of registered capital, failure to contribute fully and on time the registered capital; intentionally valuing the assets contributed as capital at an incorrect value”.
According to Clause 5, Article 17 of the Law on Enterprises of the year 2014, one of the prohibited acts is: “Declaring false charter capital, failing to contribute the full amount of charter capital as registered; intentionally valuing the assets contributed as capital at the wrong value”.
Currently, the over-declaration of charter capital is strictly prohibited and is specified in Clause 5, Article 16 of the Law on Enterprises of the year 2020 as follows: “Declaring the charter capital, failing to contribute the full amount of charter capital as registered; intentionally valuing the assets contributed as capital at the wrong value”.
2. Regulations on handling of violations against regulations on acts of intentionally valuing assets contributed as capital at an incorrect value and making false declarations of charter capital
Since the Law on Enterprises of the year 1999 was promulgated to now is the Law on Enterprises of the year 2020, the sanction for valuing assets contributed as capital that is not in accordance with the actual value is specified in the following documents:
According to the provisions at Point a, Clause 1, Article 8 of the Government's Decree No. 37/2003/ND-CP dated April 10, 2003 on penalties for administrative violations on business registration, a fine of from VND 5,000,000 up to VND 10,000,000 for the act of registering capital but actually having no capital, or registering capital greater than the actual capital.
Clause 4, Article 32 of Decree No. 53/2007/ND-CP dated April 4, 2007 of the Government regulating the handling of administrative violations in the field of Planning and Investment stipulates: “A fine of from VND 10,000,000 up to 15,000,000 VND for enterprises with registered capital greater than the actual capital.
According to the provisions of Clause 3, Article 23 of Decree No. 155/2013/ND-CP dated 11/11/2013 of the Government on sanctioning of administrative violations in the field of planning and investment, a fine of from 25,000,000 VND to 30,000,000 VND for the act of intentionally valuing the assets contributed as capital without the actual value.
According to the provisions of Point a, Clause 4, Article 28 of the Government's Decree No. 50/2016/ND-CP dated June 1, 2016 on penalties for administrative violations in the field of planning and investment, a fine from VND 20,000,000 to VND 30,000,000 for acts of intentionally valuing the assets contributed as capital at an incorrect value.
Currently, according to the provisions of Point b, Clause 3, Article 46 of the Government's Decree No. 122/2021/ND-CP dated December 28, 2021 on penalties for administrative violations in the field of planning and investment, a fine ranging from VND 30,000,000 to VND 50,000,000 shall be imposed for intentionally valuing the assets contributed as capital against the actual value.
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At the same time, Article 47 of Decree No. 122/2021/ND-CP has added regulations on penalties for violations of false declaration of charter capital:
“1. A fine ranging from VND 20,000,000 to VND 30,000,000 shall be imposed if the falsely declared charter capital is less than VND 10 billion.
2. A fine ranging from VND 30,000,000 to VND 40,000,000 shall be imposed if the falsely declared charter capital is from VND 10 billion to less than VND 20 billion.
3. A fine ranging from VND 40,000,000 to VND 60,000,000 shall be imposed if the falsely declared charter capital is from VND 20 billion to less than VND 50 billion.
4. A fine ranging from VND 60,000,000 to VND 80,000,000 shall be imposed for false declaration of charter capital with a value of between VND 50 billion and under VND 100 billion.
5. A fine ranging from VND 80,000,000 to VND 100,000,000 shall be imposed if the falsely declared charter capital is VND 100 billion or more.
6. Remedial measures: The violator is compelled to declare the actual charter capital, which equals the actually contributed capital if any of the violations specified in Clauses 1 through 5 of this Article is committed.”.
Thus, with the regulation on handling violations of over-declaration of charter capital, it is concretized and detailed, contributing to preventing and limiting the situation of enterprises taking advantage of and over-declaring charter capital for the purpose of polishing, calling for investment capital contribution, and illegal business.
In recent times, public opinion has been very concerned about the appearance of a number of "virtual" capital declarations with charter capital of up to hundreds of trillions of dong, taking advantage of the openness of the law to publicly calling for investment via electronic networks and social networks, adversely affecting the business investment environment, affecting the interests of genuine businesses.
In the coming time, state management agencies in charge of enterprise registration in particular and specialized state management agencies in general need to continue to strengthen coordination, proactively monitor and supervise to promptly detect, preventing the above-mentioned cases of over-declaring capital.