Correct understanding of capital contribution for foreigners

by DungTran

Correct understanding of capital contribution for foreigners. 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. Let us learn about this topic with LSX law firm as follow:

Correct understanding of capital contribution for foreigners

Accordingly, Clause 18, Article 4 of the 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.

Accordingly, article 34 of the Enterprise Law 2020, assets contributed as capital 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, and other assets that valued in Vietnam Dong.

Secondly, only individuals or organizations that are lawful owners; or have lawful use rights to properties specified in Clause 1 of this Article have the right to use such assets to contribute capital as prescribed by law. ”

As such, the contributed capital must be the property listed above or other assets valued in Vietnam Dong. Note, the contribution of capital with “effort”; or contribution with “intelligence” is not considered a form of capital contribution because these are objects that are not considered assets.

Currently, the law on enterprises does not stipulate the minimum amount of capital contributed to the company; but will depend on the needs of each company. However, some business lines and industries have penalty requirements for reaching the minimum amount of contributed capital (legal capital) to be; allowed to do business, for example:

Firstly, real estate business: 20 billion VND

Secondly, labor export service: 05 billion VND

Can foreign investors contribute capital in cash?

According to Clause 1, Article 3 of Circular 06/2019/TT-NHNN, “foreign investors” include: individuals with foreign nationality; organizations established under foreign laws; conducting investment activities foreign direct entry into Vietnam.

The fact that foreign investors contribute capital to enterprises through the issuance of investment licenses; in accordance with the provisions of the investment law.

Clause 3, Article 4 of Circular 06/2019/TT-NHNH stipulating

“3. 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.

Thus, 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 – 40 million (point b, Clause 5, Article 13). Decree 50/2016/ND-CP).

Note that individuals and organizations must contribute capital in full within 90 days from the date of being; granted 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 changes with the business registration agency; when it does not contribute enough charter capital as registered; it may be fined from 10 to 20 million VND (Clause 3, Article 28 of Decree No. 50/2016/ND-CP).

Thus, foreign investors are not allowed to contribute cash to invest in Vietnamese enterprises.

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If you worry about Dossier for capital contribution of foreigners to companies in Vietnam, please contact with us!

Finally, hope this article about Correct understanding of capital contribution for foreigners is helpful for you!

In case you have any questions, don’t hesitate to get in touch with Lawyer X for quick and best legal services: +84846175333 or email: hoangson@lsx.vn.

Related questions

What is capital contribution?

Capital contribution is the contribution of assets to form the charter capital of the company. Capital contribution includes capital contribution for the establishment of an enterprise or additional capital contribution to the charter capital of an established enterprise.

Assets brought to capital contribution include what?

Assets brought into capital contribution are very diverse, including many different types of assets such as Vietnam Dong, freely convertible foreign currencies, gold, value of land use rights, value of intellectual property rights, technology, etc. technical know-how, other assets that can be valued in Vietnam Dong.

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