Legal consultancy on investment capital contribution

In the modern business market, investment capital contribution is not only a significant financial activity but also one that is directly governed by legal regulations aimed at protecting the lawful rights and interests of the participating parties. A thorough understanding of these regulations is essential to ensure that the capital contribution process is conducted smoothly, lawfully, and without unnecessary legal risks. In the following article, NPLaw analyzes the legal regulations related to investment capital contribution, helping individuals and organizations clarify the essential rules when participating in investment activities.

In the modern business market, investment capital contribution is not only a significant financial activity but also one that is directly governed by legal regulations aimed at protecting the lawful rights and interests of the participating parties. A thorough understanding of these regulations is essential to ensure that the capital contribution process is conducted smoothly, lawfully, and without unnecessary legal risks.

In the following article, NPLaw analyzes the legal regulations related to investment capital contribution, helping individuals and organizations clarify the essential rules when participating in investment activities.

I. Overview of investment capital contribution

1. How is investment capital contribution defined?

Clause 18, Article 4 of the Law on Enterprise 2020 defines the term “capital contribution” as the contribution of assets to form the charter capital of a company. Capital contribution includes contributions to establish an enterprise or additional contributions to the charter capital of an enterprise that has already been established.

Pursuant to Clause 8, Article 3 of the Law on Investment 2020: Business investment means an investor contributes capital to perform business activities.

Accordingly, investment capital contribution may be understood as the contribution of assets for investment purposes and the conduct of business activities.

2. Forms of investment capital contribution

Article 25 of the Law on Investment 2020 provides for forms of capital contribution, purchase of shares, and purchase of capital contributions for investment in Vietnam. Accordingly, investors may contribute capital to an economic organization in the following forms:

Purchasing shares issued for the first time or additional shares issued by a joint-stock company;
Contributing capital to a limited liability company or a partnership;
Contributing capital to other economic organizations not falling under the cases specified at Points a and b, Clause 2, Article 25 of the Law on Investment 2020.

II. Legal regulations on investment capital contribution

1. Procedures for investment capital contribution

Pursuant to Article 26 of the Law on Investment 2020, the procedures for investment capital contribution are as follows:

- Investors contributing capital, purchasing shares, or purchasing capital contributions in an economic organization must satisfy the applicable conditions and implement procedures for changes in members or shareholders in accordance with the law corresponding to each type of economic organization.

- Foreign investors must implement procedures for registration of capital contribution to an economic organization prior to the change of members or shareholders if falling under one of the following cases:

The capital contribution, purchase of shares, or purchase of capital contributions increases the ownership ratio of foreign investors in an economic organization operating in business lines subject to market access conditions applicable to foreign investors;
The capital contribution, purchase of shares, or purchase of capital contributions results in a foreign investor, or an economic organization specified at Points a, b, and c, Clause 1, Article 23 of the Law on Investment 2020, holding more than 50% of the charter capital of the economic organization in the following cases: Increasing the foreign investor’s ownership ratio from 50% or less to more than 50%; or further increasing the ownership ratio where the foreign investor already holds more than 50% of the charter capital of the economic organization;
A foreign investor contributes capital, purchases shares, or purchases capital contributions in an economic organization that holds a Certificate of Land Use Rights in islands or border communes, wards, or townships; coastal communes, wards, or townships; or other areas affecting national defense and security.
Investors not falling under the cases specified in Clause 2, Article 26 of the Law on Investment 2020 shall implement procedures for changes in shareholders or members in accordance with relevant laws upon contributing capital to an economic organization. Where there is a demand to register the capital contribution, investors shall proceed in accordance with Clause 2, Article 26 of the Law on Investment 2020.

2. Rights and obligations upon investment capital contribution

When making an investment capital contribution, investors are entitled to certain rights, including:

Right to receive dividends: Investors have the right to receive dividends from the enterprise’s profits based on their capital contribution ratio.
Right to participate in management: Depending on the capital contribution ratio, investors may participate in the management and operation of the enterprise.
Right to information: Investors have the right to request information regarding the enterprise’s operational and financial status.
Right to transfer capital: Investors have the right to transfer their contributed capital to others, subject to the consent of the remaining members of the company (for limited liability companies) or in accordance with the law (for joint-stock companies).

III. Common questions related to investment capital contribution

1. What are the procedures for investment capital contribution?

The procedures for investment capital contribution include the following steps:

Agreement between the parties: Prior to the capital contribution, the parties must reach a clear agreement on the amount of capital, the form of contribution, and the corresponding rights and interests.
Execution of a capital contribution agreement: After reaching an agreement, the parties shall execute a capital contribution agreement specifying the relevant terms and conditions.
Transfer of capital: The investor transfers the capital into the enterprise’s account. In the case of contribution in the form of assets, the parties must implement the necessary legal procedures for asset transfer.
Implementation of necessary legal procedures: The enterprise must update the capital contribution information in the register of members and notify the Business Registration Authority in accordance with the Law on Enterprise 2020; and implement procedures for registration of capital contribution to an economic organization in accordance with the Law on Investment 2020.

2. Conditions for investment capital contribution

Pursuant to Article 24 of the Law on Investment 2020 on investment in the form of capital contribution, investors have the right to contribute capital but must satisfy the following conditions:

Market access conditions applicable to foreign investors;
Assurance of national defense and security in accordance with the law;
Compliance with land law regulations on conditions for receiving land use rights and conditions for land use in islands, border communes, wards, or townships, and coastal communes, wards, or townships.

Conditions for performing investment activities in the form of capital contribution are further guided by Article 65 of Decree No. 31/2021/NĐ-CP, specifically:

Domestic investors contributing capital to an economic organization established in Vietnam shall comply with the conditions and procedures prescribed by the Law on Enterprise and the relevant laws applicable to each type of economic organization.
Capital contribution, purchase of shares, or purchase of capital contributions on the securities market shall comply with the law on securities.
Enterprises with 100% state-owned charter capital, and representatives of state capital investment in enterprises, must comply with the conditions and procedures prescribed by the law on management and use of state capital invested in production and business; the law on management and use of public assets; and other relevant laws when conducting investment activities in the form of capital contribution, purchase of shares, purchase of capital contributions in an economic organization, or transfer of capital contributions or shares to other organizations or individuals.
Foreign investors contributing capital to an economic organization established in Vietnam must satisfy the conditions specified in Clause 2, Article 24 of the Law on Investment.

3. Are there any restrictions on subjects eligible for investment capital contribution?

Investment capital contribution in Vietnam is subject to restrictions applicable to foreign investors. Accordingly, foreign investors contributing capital to an economic organization established in Vietnam must satisfy the conditions specified in Clause 2, Article 24 of the Law on Investment 2020, including:

Market access conditions applicable to foreign investors when contributing capital, purchasing shares, or purchasing capital contributions in an economic organization established in Vietnam as prescribed in Clause 3, Article 9 of the Law on Investment and Articles 15, 16, and 17 of Decree No. 31/2021/NĐ-CP;
Conditions on ensuring national defense and security and land use conditions applicable to economic organizations with foreign investor capital contribution, share purchase, or capital contribution purchase in cases where such economic organizations hold a Certificate of Land Use Rights in islands, border communes, wards, or townships, and coastal communes, wards, or townships; or other areas affecting national defense and security, except for economic organizations implementing investment projects in industrial zones, export processing zones, hi-tech zones, and economic zones established in accordance with Government regulations.

4. What are the regulations on investment capital contribution in foreign companies?

Investment capital contribution in a foreign company means an act whereby individuals, organizations, or enterprises from Vietnam invest capital in a company or business project in another country.

This form of capital contribution may include the purchase of shares, direct investment in projects, or participation in joint ventures with foreign partners.

The purpose of investment capital contribution is to receive profits from business operations or future development of the invested company.

IV. Consulting services and implementation of procedures related to investment capital contribution

Above is all the detailed information provided by NPLaw to support clients in relation to investment capital contribution. Should you have any questions regarding the above matters or other legal issues, please contact NPLaw immediately so that our lawyers can directly provide consultation and guidance on resolution.