Are you seeking effective strategies for capital contributions for project implementation efficiently and successfully? The below article by NPLaw provides practical strategies, and useful experience and recommendations to help you optimize capital resources, mitigate risks, and achieve your investment objectives. We address frequently asked questions, provide guidance on capital contribution contracts, and introduce professional legal advisory services to help you invest with confidence and achieve sustainable returns.

I. Overview of capital contributions for project implementation

Capital contributions for project implementation constitutes a critical financial resource that determines the success or failure of an investment project. The effective use of contributed capital requires investors to possess appropriate knowledge, experience, and well-defined strategies.

Capital contributions are not limited to cash; they may also include assets, intellectual property rights, or labor contributions. Diversifying forms of capital contributions can enable a project to mobilize a broader range of resources.

II. Legal regulations on capital contributions for project implementation

1. What are capital contributions for project implementation?

Capital contributions for project implementation is a terminology commonly used in business and investment activities; however, Vietnamese law currently does not provide a specific legal definition of such a definition. 

In practice, such a capital contribution may be understood as the amount of capital that an enterprise or investor contributes to a specific investment project. Such capital may be less than or greater than the enterprise’s charter capital and typically constitutes a portion of the total investment capital of the project. To distinguish clearly:

  • Project investment capital refers to the total amount of capital required to implement the project, including the investor’s own capital and capital mobilized from other sources (such as bank loans, bond issuance, or capital contributions from other investors).
  • Capital contributions for project implementation represent only a part of the total investment capital, reflecting the portion of capital that a particular enterprise or investor commits to contributing to the project.

2. What is the current level of capital contribution required for project implementation? Does it vary among different projects?

The Law on Investment 2020 and the Law on Enterprises 2020 do not prescribe a fixed capital contribution ratio applicable to all projects. The required level of capital contribution depends on various factors, including:

  • The total investment capital of the project (as determined in the Feasibility Study Report in accordance with Article 33 of the Law on Investment 2020);
  • The scale, nature, and sector of the investment project;
  • Market access conditions applicable to foreign investors (if any), as stipulated in Article 9 of the Law on Investment 2020 and Appendix I of Decree No. 31/2021/ND-CP;
  • Requirements under specialized laws (for example, minimum equity ratios applicable to real estate projects).

3. What are the procedures for making capital contributions to implement a project?

Procedures for capital contribution depend on the legal form of the project (enterprise establishment, business cooperation contract, etc.). If the project is implemented through the establishment of an economic organization (enterprise), investors must implement capital contribution procedures in accordance with the Law on Enterprise 2020 and register changes in members/shareholders and charter capital with the business registration authority.

III. Questions regarding capital contributions for project implementation

1. Is it necessary to increase charter capital when making capital contributions to implement a project?

An increase in charter capital is required if its results change the ownership ratios of the company’s members or shareholders. Procedures for increasing charter capital are implemented in accordance with Articles 68 and 87 of the Law on Enterprise 2020.

2. Are all projects required to comply with a specific capital contribution ratio? 

There is no general regulation on capital contribution ratio; its requirements depend on each specific project and the applicable provisions of specialized laws (if any).

3. Are capital contributions for project implementation subject to any limitations?

The number of investors participating in capital contributions is not limited, except for certain special business sectors. However, compliance with competition regulations is required in Article 30 of the Law on Competition 2018 on prohibited economic concentration.

In addition, for foreign investors, capital contribution, share acquisition, or acquisition of capital contributions in economic organizations must comply with conditions on charter capital ownership ratios as prescribed in Article 24 of the Law on Investment 2020.

4. Are capital-contributing members entitled to dividends or profits if the project has not yet generated profits?

Profit distribution is governed by the agreement or the company’s charter. As a general rule, if the project has not generated profits, members are not entitled to dividends or profit distributions.

5. Is it possible to transfer capital contributions in a project to a third party? What are the conditions and procedures?

Capital contribution transfers are permitted, subject to compliance with legal regulations in Articles 51 and 52 of the Law on Enterprise 2020 regarding transfer of capital contributions in limited liability companies, and the agreements among the parties.

6. Is it mandatory to execute a capital contribution contract when contributing capital to a project? What main clauses should be included to protect the parties’ interests?

Although a capital contribution contract is not legally mandatory, it is highly important for protecting the interests of the parties. Such an agreement should include main clauses, including:

  • Information of the parties
  • Project objectives
  • Amount of capital contribution
  • Rights and obligations of the parties
  • Profit and risk sharing mechanisms
  • Transfer of capital contributions
  • Dispute resolution

7. In the case of a dispute over capital contribution ratios or benefits, what principles apply under the law?

Disputes may be resolved through negotiation, mediation, or litigation before a competent court.

8. If a project is not implemented or incurs losses, may a capital-contributing party withdraw or request a refund of capital?

The right to withdraw capital depends on the terms agreed in the contract and applicable legal provisions (if any).

IV. Legal advisory services related to capital contributions for project implementation

NPLaw provides comprehensive legal advisory services on capital contributions for project implementation, assisting you to:

  • Assess the legal compliance and risks of projects;
  • Design an appropriate capital structure;
  • Draft capital contribution agreements and investment cooperation contracts;
  • Advise on capital contribution and capital transfer procedures;
  • Resolve disputes.

Understanding the main strategies for effectively utilizing capital contributions to successfully implement projects with NPLaw — contact us for in-depth legal consultation.