Businesses often raise capital by receiving capital contributions from foreign investors. In particular, how to contribute capital is one of the issues that foreign investors need to pay attention to in the investment process. Can foreign investors contribute capital in cash? LSX Law firm will provide all regulations and information about this issue
Investment Law 2020
Enterprise Law 2020
Correct understanding of capital contribution to the company
Accordingly Enterprise Law 2020 , capital contribution is the contribution of assets to form the charter capital of the company, including capital contribution to establish a company or additional contribution to the charter capital of an already established company. Assets contributed as capital are prescribed as follows:
Firstly, assets contributed as capital are Vietnam Dong, freely convertible foreign currencies; gold; land use rights, intellectual property rights; technology; technical know-how, other assets that can be valued in Vietnam Dong.
Secondly, only individuals and organizations that are lawful owners or have lawful use rights to the property specified in Clause 1 of this Article have the right to use such property to contribute capital as prescribed by law.
As such, the contributed capital must be the property; or other assets valued in Vietnam Dong.
Currently, the law on enterprises does not stipulate the minimum amount of capital to be contributed to the company; but will depend on the needs of each company. However, some business lines and industries have fine requirements for reaching the minimum amount of contributed capital (legal capital) to operate; for example:
– Real estate business: 20 billion VND
– Labor export service: 05 billion VND
Can foreign investors contribute cash capital to the company?
Accordingly Circular 06/2019/TT-NHNN stipulating that “foreign investors” include: individuals with foreign nationality, organizations established under foreign law conducting direct investment activities; foreign countries into Vietnam.
In fact, foreign investors contribute capital to enterprises through the issuance of investment licenses accordingly the provisions of the investment law.
Besides, clause 3, Article 4 of Circular 06/2019/TT-NHNH stipulating
The contribution of investment capital in money of foreign investors; Vietnamese investors must be done through the form of transfer to the direct investment capital account.
So when foreign investors contribute capital to a company in Vietnam to conduct investment and business activities they must contribute in the form of bank transfer, not in cash.
In case foreign investors fail to comply with regulations on the form of capital contribution, namely capital contribution in cash; they will be administratively sanctioned with a fine of between VND 30 and 40 million.
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Individuals and organizations must fully contribute capital within 90 days from the date of issuance of the Certificate of Business Registration. If the enterprise fails to contribute enough capital, the enterprise must carry out procedures to reduce its charter capital.
In case the company fails to register the change with the business registration agency when it fails to contribute enough charter capital as registered; it may be subject to a fine of between VND 10 and 20 million.
In case foreign investors fail to comply with regulations on the form of capital contribution, namely capital contribution in cash; they may be subject to a fine of between VND 30 and 40 million.