Despite the impact of the Covid-19 pandemic, at present, countries still have hope for solutions to restore the economy. Therefore, the need to set up a company has gradually increased again. Under the current law, individuals and organizations are not required to make a contract before setting up a company. The parties can directly carry out procedures for registering the establishment of an enterprise at the Business Registration Agency. However, making Agreement before setting up a company has many benefits in minimizing risks and disputes. Therefore, we would like to offer legal sharings on the 03 most important contents that a Cooperation agreement for setting up a company needs.
Pursuant to Clause 1 Article 18 of the Enterprise Law 2020, company founders may sign contracts for the establishment and operation of the company before and during the enterprise registration process. However, the Enterprise Law and Investment Law do not regulate clearly the contents that must be included in the Contract for the establishment of an enterprise. The parties may arbitrarily agree on the content of the Contract within the scope of the law.
According to TNTP’s experience, Cooperation agreement for setting up a company must include 03 following contents:
1. Capital contribution
Capital contribution is an important content that must be included in Cooperation agreement to set up a company. Whereby, the parties should clearly stipulate the total value of capital to set up company (Charter capital), the value of capital contribution of each founder equivalent to a percentage of the total capital, the time limit to contribute capital, and type of capital contribution asset.
Normally, capital contribution assets should be Vietnam Dong (VND) to facilitate enterprise registration. In addition, company founders can still contribute capital in freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical secret, and other assets that can be valued in Vietnam Dong. However, the contribution of capital in foreign currency, gold, and land use rights may contain risks because the value converted into Vietnam Dong may change over time, the market, which leads to the change in the value of the capital contribution of company founders.
2. Rights and obligations of the parties
For a partnership to set up a company, the parties have the right to become a member or a shareholder of the company after registering enterprise. In addition, the parties are obliged to contribute capital with the right type of assets, value, and time limit as committed.
However, the regulation of obligation of contributing capital does not completely avoid the risk that one party has signed a Cooperation agreement and committed to contribute capital but then fails to contribute capital or does not contribute enough capital. At that time, the parties will have to adjust the registered charter capital or find another party to contribute capital instead. Adjusting charter capital or finding another party to contribute capital can take a lot of effort and time because the parties have to adjust the charter, list of shareholders, and carry out procedures to change the content of the Enterprise Registration Certificate granted to the company.
In addition, the parties may authorize one party to carry out the procedures of enterprise registration, title and role of each party in the Company. For example: member of the Board of Directors, Manager, Legal representative, …
3. Dispute settlement
Although the risk of a dispute is an undesirable outcome, in fact, there are many disputes related to capital contribution to set up a company. Therefore, the parties should stipulate the dispute settlement sequence and the competent authority to settle the dispute. In this case, TNTP recommends that the parties should specify the competent authority to settle the dispute as “the Competent Court”.
Above are legal sharings of TNTP about content that must be included in Cooperation Agreement for setting up a company. We hope this article is useful for you.
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TNTP & Associates International Law Firm