How is the procedure for contributing capital to the company in vietnam implemented?

Currently, the demand for integration between countries is growing economically and culturally. In particular, Vietnam is considered a place that many investors seek. So, are there any incentives for contributing capital to the company in Vietnam? How does Vietnamese law regulate this issue? Let's find out that together with NPLaw through the article below.

I. The capital contribution to the company in Vietnam in reality.  

With the development of socioeconomic and integration needs, Vietnam is considered a fertile land for businesses and investors. Therefore, Vietnam needs appropriate mechanisms and policies to take advantage of this opportunity to cooperate and develop.

II. What is the procedure for contributing capital to the company in Vietnam? 

According to Clause 18, Article 4 of the Law on Enterprise 2020, capital contribution is the contribution of assets to form the company's charter capital, including the contribution of capital to the establishment of the company or additional charter capital of the established company. Therefore, contributing capital to a company in Vietnam means the investor contributes money or property to become a shareholder or member of that company. Through capital contribution, the investor will have the right to own part of the company's assets, sharing the company's profits and risks.

III. Regulations on capital contribution to the company in Vietnam

Currently, the Law on Enterprise 2020 sets out the regulations on capital contribution to the company in Vietnam as follows:

- Organizations and individuals have the right to contribute capital, buy shares, buy stakes to the following types of enterprises: Joint Stock Company, Limited Liability Company, Partnership Company. Except for some subjects who are not entitled to contribute capital according to the Law on Cadres and Civil Servants,...

- Assets to contribute capital is the Vietnamese Dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical know-how, and other assets can be valued in Vietnamese Dong. Only subjects of capital contribution who are the legal owners or have the legal right to use the aforementioned assets can get this land use rights to contribute capital according to law. These subjects must transfer the ownership of contributed assets to the company.

- For limited liability companies, the time limit for capital contributions is 90 days from the date of issuance of the business registration certificate. After the time limit specified above, the member who has not contributed capital as committed will no longer be a member of the company, and the member who has not contributed enough capital as committed will have the rights corresponding to the contributed capital.

- For joint stock companies, the time limit for capital contributions is 90 days from the date the business registration certificate is issued, except in cases where the charter or the share purchase agreement stipulates a shorter period. 

- For the partnership, the general partner or capital-contributing members shall pay the full amount of capital committed to be contributed to the company within 15 days from the date of approval, unless the board of members otherwise determines the time limit.

IV. Conditions for capital contribution to the company in Vietnam

To contribute capital to Vietnam, some of the following conditions are needed:

- Do not fall into cases where the capital contribution is not entitled to be done according to Clause 3, Article 17 of the Law on Enterprises 2020 such as state agencies and people's armed forces units contribute state assets as capital to enterprises to benefit their agencies and units; Subjects shall not contribute capital to enterprises according to the Law on Cadres and Civil Servants, Law on Public Employees, Anti-corruption Law. 

Foreign investors have the right to contribute capital, buy shares, buy stakes in economic organizations, as prescribed in Article 24 of the Law on Investment 2020. However, contributing capital, buying shares, and buying stakes in the economic organization of foreign investors must meet the following regulations and conditions: 

+ Conditions of accessing the market for foreign investors specified in Article 9 of this law. 

+ Ensuring defense and security in accordance with this law. 

+ Provisions of the law on land, conditions of receiving land use rights, conditions of land use in islands and border areas covering communes, wards, towns as well as coastal regions covering communes, wards, and towns. 

V. Procedures for contributing capital to the company in Vietnam. 

1. Documents for capital contributions to the company in Vietnam. 

Commonly, foreign investors carry out the contribution of capital to the company in Vietnam, therefore, they need to prepare documents as follows:

+ Written request for registration of capital contribution, purchase of shares, or stakes

+ Written agreement on capital contribution, purchase of shares or stakes.

+ Power of attorney in case of authorizing a third party to represent in the performance of the capital contribution registration procedure. 

 + Certified copies of passport and relevant legal papers of foreign investors. 

Legal basis: Clause 2 Article 66 of Decree 31/2021 / ND-CP.

2. Procedures for contributing capital to the company in Vietnam.

Step 1: Investors submit the documents mentioned to the Department of Planning and Investment, where the economic organization is headquartered, to register for capital contributions, purchase of shares, or stakes. If these meet the conditions, the Department of Planning and Investment shall notify investors in writing within 15 days from the date on which the complete documents are received so that investors can carry out procedures for changing shareholders and members according to the law. In case of failure to meet the conditions, the Department of Planning and Investment shall notify the investor in writing and clearly state the reason. 

Step 2: After being approved by the Investment Department – Department of Planning and Investment for foreign investors to contribute capital, buy shares or stakes, the investor shall carry out the following procedure: if the investor buys capital from 51% of Vietnamese company capital, it is required to open a direct investment account for Vietnamese company, then the foreign investor contributes capital for transfer and declare transfer income tax.

Step 3: The company of which the investor proceeds to buy contributed capital, and shares will carry out the procedure for changing shareholders and members on the business registration certificate according to the law at the Business Registration Office – Department of Planning and Investment.

Legal basis: Clause 3 Article 66 of Decree 31/2021 / ND-CP.

VI. Answer some common questions about contributing capital to the company in Vietnam

1. Suppose contributing capital to the company in Vietnam with insufficient capital as committed. How can this issue be solved? 

- When contributing capital to a limited liability company with insufficient capital contributions as committed, the investor has rights corresponding to its contributed capital under point b Clause 3, Article 47 of the Law on Enterprises 2020.

- When contributing capital to a joint stock company through the form of buying shares, but shareholders have not paid enough for shares registered, the investor has the right to receive the return and other rights corresponding to the number of shares paid under point b Clause 3, Article 113 of the Law on Enterprises 2020.

- When contributing capital insufficiently and late to a partnership as committed, which damages the company, the investor shall be liable and indemnify the company for a loss. The insufficient contribution is considered as that investor's debt to the company.

2. What is the penalty for capital contribution in Vietnam being formally wrong? What should be done to avoid sanctions for the formally wrong contribution? 

- According to Article 3 of Circular 09/2015 / TT-BTC, enterprises shall not use cash to pay when making transactions of capital contribution and purchase and transfer of stakes to enterprises. This rule does not impose restrictions on individual contributions. Therefore, when enterprises contribute capital to Vietnamese companies in cash, they will be sanctioned from 300 million to 400 million and may apply additional remedies to handle the consequences which means they are forced to contribute the number of illegal benefits obtained by committing the violation to the state budget; do not allow to expand the scope, scale, and area of operation when the infringement has not been remedied (Clause 8, Article 26 and point d, Clause 3, Article 3 of Decree 88/2019/ND-CP). 

Therefore, in order not to be sanctioned for violating the form, the subject (if a business) must contribute properly and sufficiently according to the Law on Enterprises within 90 days when contributing capital to the company in Vietnam; this contribution should be paid by check, payment order, transfer, or other forms except cash according to regulations.

3. Is it imperative for foreign investors to open a personal capital account to contribute capital to a company in Vietnam when investing indirectly in the country? 

According to Circular 06/2019 / TT-SBV, when investing in Vietnam, foreign investors (with the type of foreign enterprise) must open a direct investment capital account in foreign currency at 01 bank allowed to carry out legal transactions in foreign currency in relation to foreign direct investment in Vietnam.

VII. Services for consulting and guidance on the implementation of procedures for capital contribution to the company in Vietnam

The above information is about contributing capital to the company in Vietnam. To get support as well as learn information and the law on contributing capital to the company in Vietnam, you can contact NPLaw for advice from a team of experienced lawyers and legal experts.