Required Documents and Procedures for Capital Contribution to Foreign-Invested Companies

Capital contribution to foreign-invested companies in Vietnam is a crucial and frequent activity in the context of international economic integration. This not only helps foreign investors expand their business operations but also benefits the Vietnamese economy by attracting capital, technology, and management expertise. However, to ensure these capital contribution activities strictly comply with Vietnamese law, enterprises and investors must clearly understand the dossiers, procedures, and related legal requirements. 

Legal Basis Governing Capital Contribution to Foreign-Invested Companies

Regulations related to capital contribution to foreign-invested companies in Vietnam are governed by the following primary legal documents:

• The Law on Investment 2020 (Law No. 61/2020/QH14): Provides regulations on forms of investment, rights and obligations of foreign investors, procedures for applying for an Investment Registration Certificate (IRC), and conditions for participating in various business sectors in Vietnam.
• The Law on Enterprises 2020 (Law No. 59/2020/QH14): Regulates the organization, operation, and management of enterprises, including foreign-invested enterprises (FIEs).
• NDecree No. 31/2021/ND-CP guiding the Law on Investment 2020 Details the procedures for granting investment certificates, capital contributions, and the management of foreign investment projects.
• Decree No. 01/2021/ND-CP on enterprise registration Regulates enterprise registration procedures, including the registration of foreign-invested companies.

Forms of Capital Contribution to Foreign-Invested Companies

Capital contribution to a foreign-invested company can be executed in various forms, depending on the purpose and needs of the investor. Common forms include:

• Contributing capital to a newly established company: This is a form where a foreign investor contributes capital to establish a new company in Vietnam. This requires a complete investment dossier and compliance with the procedures to apply for an Investment Registration Certificate.

• Contributing capital to an existing company: A foreign investor purchases shares or capital contributions of a company already operating in Vietnam. For this form, conducting a thorough legal and financial due diligence of the target company is crucial to avoid unwanted risks.

• Joint venture with a Vietnamese partner: A foreign investor can participate in establishing a joint venture company with a domestic partner based on an agreed capital contribution ratio.

Conditions and Procedures for Capital Contribution to Foreign-Invested Companies

Conditions:

• Foreign investors contributing capital, purchasing shares, or purchasing capital contributions in economic organizations engaging in conditional business investment lines applicable to foreign investors;

• The capital contribution, purchase of shares, or purchase of capital contributions results in the charter capital ownership ratio of foreign investors or economic organizations (as specified in Points a, b, and c, Clause 1, Article 23 of the Law on Investment) increasing from less than 51% to 51% or more;

• The capital contribution, purchase of shares, or purchase of capital contributions results in the charter capital ownership ratio of foreign investors or economic organizations (as specified in Points a, b, and c, Clause 1, Article 23 of the Law on Investment) increasing from a level of 51% or more to a higher level.

Procedures: 

• Step 1: Registration of capital contribution, purchase of shares, or purchase of capital contributions:

  • The investor submits a registration dossier for capital contribution, purchase of shares, or purchase of capital contributions in accordance with Clause 2, Article 26 of the Law on Investment to the Department of Planning and Investment (DPI) where the economic organization receiving the investment is headquartered.

  • The DPI examines the fulfillment of investment conditions applicable to foreign investors and notifies the investor so they can proceed with the procedures for changing shareholders/members according to the law. If the conditions are not met, the DPI will notify the investor in writing and clearly state the reasons.

• Step 2: Amending enterprise registration information:

  • The economic organization receiving the foreign investment carries out the procedures to change members or shareholders at the business registration authority in accordance with the law on enterprises (for enterprises) and other relevant laws (for non-enterprise economic organizations).

  • The economic organization is not required to perform procedures for the issuance or adjustment of the Investment Registration Certificate or investment policy approval for investment projects executed prior to the time the foreign investor contributed capital or purchased shares/capital contributions.

Notes on the Rights and Obligations of Investors

When contributing capital to a foreign-invested company, investors must note the following issues:

• Capital ownership ratio: Investors must comply with regulations on capital ownership ratios within the company, especially concerning conditional business lines and international commitments. Vietnam requires foreign ownership to be below certain prescribed thresholds in specific sectors such as telecommunications, finance, banking, and insurance.

• Investor’s rights: Investors have the right to participate in major company decisions, including amending the charter, appointing senior managers, and deciding on profit distribution. However, this right depends on the ownership ratio and the agreements between the parties.

• Financial obligations: Investors must ensure that capital is contributed fully, on time, and comply with other financial obligations required by Vietnamese law. Failure to fulfill commitments may lead to administrative penalties or the revocation of the investment license.

Legal Risks and Issues Related to Capital Contribution

Although contributing capital to foreign-invested companies in Vietnam presents many opportunities, investors should also be aware of potential legal risks, including:

• Ownership and management risks: Especially when contributing capital to an existing company, investors may face difficulties in controlling the company if their ownership ratio is insufficient or if there is no consensus from other shareholders.

• Tax and financial obligation risks: Issues related to taxes and financial reporting can cause difficulties for investors, particularly if income or profits are not distributed reasonably.

• Policy change risks: Vietnam’s investment policies may change over time, and these changes can affect the rights and interests of foreign investors.

Contact Information

For legal consultation regarding foreign investment activities from BKC Law, clients can contact our Lawyers using the following information:

• Phone: 0901 3333 41

• Email: info@bkclaw.vn

• District 1 Office: 9th Floor, Diamond Plaza Building, 34 Le Duan Street, Sai Gon Ward, Ho Chi Minh City.

• Binh Tan Office: 41 Ten Lua Street, An Lac Ward, Ho Chi Minh City.

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