More and more foreign investors want to invest in a potential market like Vietnam. One of the issues that investors are most concerned about is the regulations on the investment capital contribution ratio. However, most foreign investors are not familiar with the provisions of Vietnamese law on investment capital contribution. So about the matter “Regulations on foreign investment capital contribution in Vietnam” Let’s find out with LSX in the article below.
Legal grounds
- Investment Law No. 2020
- Decree No. 31/2021/ND-CP dated March 26, 2021 detailing and guiding the implementation of a number of articles of the Investment Law.
- Decree No. 50/2016/ND-CP dated June 1, 2016 on sanctioning of administrative violations in the field of planning and investment.
What is a foreign invested company?
Clause 19, Article 3 of the Law on Investment 2020 stipulates that “Foreign investor is an individual with foreign nationality or an organization established under foreign law conducting business investment activities in Vietnam”.
Besides, Clause 22 of this Article also stipulates that “Foreign-invested economic organization means an economic organization with foreign investors as members or shareholders”.
Thus, from the above regulations, we can understand that foreign-invested companies (foreign companies) are enterprises with foreign direct investment, regardless of the percentage of investors’ capital. How much foreign contribution is, regardless of the type of enterprise. Foreign companies include:
• (1) Enterprises with 100% foreign capital;
• (2) Enterprises invested by individuals with foreign nationality or organizations established under foreign laws (contributing capital for establishment, purchasing contributed capital);
Regulations on foreign investment capital contribution in Vietnam
On June 26, 2019, the State Bank of Vietnam issued Circular 06/2019/TT-NHNN guiding foreign exchange management for foreign direct investment activities in Vietnam. Accordingly, foreign investors and Vietnamese investors in enterprises with foreign direct investment in Vietnam may contribute investment capital in foreign currencies and Vietnam dong (VND) according to the amount of capital contributed by the investor.
Foreign investors are allowed to own unlimited charter capital in economic organizations, except for the following cases:
• The percentage of foreign investors’ ownership in state-owned enterprises which are equitized or converted into other forms shall comply with the law on equitization and transformation of state-owned enterprises;
• The foreign investor’s ownership ratio is not specified at Points a and b of this Clause. To comply with other provisions of relevant laws and treaties to which the Socialist Republic of Vietnam is a contracting party.
• Rate of foreign investment ownership in listed companies and public companies, as well as securities trading organizations and securities investment funds in accordance with the law on securities;
According to Clause 2, Article 1 of Decree No. 60/2015/ND-CP, the foreign investor’s ownership ratio in a public company is as follows:
• In case a public company operates in an investment or business industry where the law on investment and relevant laws provide for the percentage of foreign ownership, the provisions of such law shall apply.
• Where an international treaty to which Vietnam is a member contains provisions on the percentage of foreign investors’ ownership, the international treaty shall apply;
For a public company operating in a business or investment industry, there are conditions to apply to foreign investors without any specific regulations on foreign ownership. The maximum foreign ownership ratio is 49%;
• In the case of a public company operating in multiple industries or professions. And there are different regulations on the percentage of foreign ownership. The foreign ownership ratio must not exceed the lowest level in the industries or professions (in which the company is operating) that have regulations on the foreign ownership ratio. Unless otherwise provided for in an international treaty;
• For public companies that do not fall into the cases specified at Points a, b and c of this Clause. Foreign ownership will not be limited. Unless otherwise provided by the company’s charter.
• For state-owned enterprises undergoing equitization in the form of a public offering of securities, the foreign ownership ratio shall comply with the legal provisions on equitization. If there are no provisions in the law on equitization, this ratio shall comply with the corresponding provisions in Clause 1 of this Article.
Time limit for fully contributing investment capital on the Investment Registration Certificate
The Investment Law 2020 does not stipulate a time limit for fully contributing investment capital, but depending on the form of investment, the time limit for full capital contribution is regulated by specialized law as follows:
• (1) For the capital contribution to establish a company with 100% foreign capital, the time limit for full capital contribution is 90 days from the date of issuance of the Certificate of Business Registration.
• (2) For capital contribution or share purchase, the time of capital contribution and capital transfer is also the time of capital contribution. Enterprises may allow shareholders, members to delay capital contribution, swap capital contribution obligations, etc., but it must be expressed through signed documents to serve the completion of corporate accounting books.
• (3) For investment under contract, the time limit for capital contribution shall be mutually agreed upon by the parties.
• (4) For investment in implementing normal investment projects, the Department of Planning and Investment or the Management Board of Industrial Parks usually records the full contribution period of 3 months. Except for projects associated with the construction and renovation of factories or projects with a large total investment capital, the term of full capital contribution is longer than usual, possibly up to 2 years.
Customers need to carefully study and understand the time of capital contribution of each form of investment to avoid penalties for violations of the time limit for investment capital contribution in accordance with current Vietnamese laws.
Regulations on proving the financial capacity of investors
Regardless of whether the investor contributes capital in any form, the Law on Investment 2020 also stipulates that the investor must comply with the registered capital contribution and project implementation schedule when applying for a certificate to receive investment registration. This is also the reason why the competent authority requires investors to prove their financial capacity to present the contents of registration for the issuance of the Investment Registration Certificate. Usually, the documents proving the financial capacity of the investor include:
• For investors who are enterprises operating in foreign countries: audited financial statements for the last two years, paying attention to annual revenue, asset value, and profit. In case the enterprise is not profitable, it is necessary to prove its ability to raise capital through confirmation of a bank guarantee or confirmation of deposit balance at a bank;
• For investors who are newly established enterprises to implement the project: Need to prove the ability to raise capital through confirmation of bank guarantee or confirmation of deposit balance at the bank or commitment to support capital of the parent company;
• For individual investors: the investor’s ability to raise capital through a passbook, confirm the bank account balance on the investor’s account;
Services of LSX
Prestigious professional services: Firstly, the team of consultants and consultants for many years in the field of civil status, and customer support.
On-time: Certainly, with the motto “Get your lawyer right at your fingertips”, we ensure the service always performs on time. The rights and interests of customers always come first.
Cost: Besides, LSX’s service costs are highly competitive; depending on the nature of the particular case. So, we want our guests to have the best possible service experience. Therefore, costs which guaranteed to be the most suitable and economical for customers.
Confidentiality of client information: Finally, all brand information of client LSX will be 100% confidential.
Please contact us immediately if you have any questions about “Regulations on foreign investment capital contribution in Vietnam”
Contact LSX
Above is the advice of LSX Law firm on the topic of “Regulations on foreign investment capital contribution in Vietnam”. We hope that the article is helpful to our readers. In addition, readers can refer to: Foreign investment consulting services in Vietnam… via +84846175333 or Email: [email protected]
Please see more
- Applying for a foreign investment certificate under Vietnam law
- Benefits of foreign-invested enterprises under Vietnam
- Liability to compensate for damage arising in Vietnam
Frequently asked questions
The investor shall submit the prescribed dossier at the Department of Planning and Investment where the economic organization’s head office is located;
In case the foreign investor’s capital contribution, share purchase or capital contribution meets the following conditions, the Department of Planning and Investment shall notify in writing within 15 days from the date of receipt of a complete dossier for the investor. shall carry out procedures for changing shareholders and members in accordance with law. In case the conditions are not met, the Department of Planning and Investment shall notify in writing the investor and clearly state the reason.
Investors who are not allowed to contribute capital must carry out the procedures for changing shareholders or members in accordance with law when contributing capital, buying shares or contributed capital portions of economic organizations. In case investors wish to register for capital contribution or purchase of shares or capital contributions of economic organizations, investors shall follow the procedures for registration of capital contribution, purchase of shares or contributed capital.
Foreign investors contribute capital, purchase shares, or contribute capital to economic organizations operating in conditional investment and business lines applicable to foreign investors.
The contribution of capital, purchase of shares or contributed capital to foreign investors or economic organizations must satisfy the following conditions:
► There are foreign investors holding 51% or more of the charter capital or the majority of general partners are foreign individuals, for economic organizations that are partnerships;
►There are economic organizations specified at Point a of this Clause holding 51% or more of charter capital;
►There are foreign investors and economic organizations specified at Point a of this Clause holding 51% or more of charter capital.
According to Clause 4, Article 13 of Decree 50/2016/ND-CP on violations of regulations on investment activities in Vietnam:
“4. A fine ranging from VND 20,000,000 to VND 30,000,000 shall be imposed for one of the following acts:
Failing to carry out procedures for registration of capital contribution, purchase of shares or capital contribution to economic organizations;
Failing to carry out procedures for adjusting investment projects;
Extending the project implementation schedule, extending the investment schedule but not proposing in writing to the investment registration agency or having notified but not yet approved in writing by the investment registration agency; ….
A fine ranging from VND 30,000,000 to VND 40,000,000 shall be imposed for one of the following acts: Failing to conduct investment activities according to the contents of the investment registration dossier (for cases not eligible for issuance of a license). Investment Registration Certificate) or Investment Certificate, Investment Registration Certificate, Investment Policy Decision;”
Thus, the investor’s failure to contribute enough committed capital will be subject to a fine of up to VND 40,000,000
Conclusion: So the above is Regulations on foreign investment capital contribution in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
