Capital contribution to a company under the laws of Vietnam

-

Currently, setting up a foreign-invested enterprise in Vietnam is no longer difficult too much, however, foreign investors (the “Investor”) should be aware of some key regulations related to the company establishment to strictly comply with. Regulation on capital contribution is one of the important points that the Investor should keep in mind when forming a foreign-invested enterprise in Vietnam.

1. Time limit for making capital contribution

Subject to the types of enterprise that the Investor registers to set up in Vietnam, the time limit for making capital contribution differ as follow:

Limited liability company – LLC (comprising multiple-members LLC and singer-member LLC): the Investor shall contribute capital as committed within 90 days from the date of Enterprise Registration Certificate issued by the Vietnamese competent authority;

Joint stock company: The Investor shall fully pay for the subscribed shares within 90 days from the date of the Enterprise Registration Certificate issued by the Vietnamese competent authority unless a shorter time limit is specified by the company’s charter.

Whatever types of enterprise set up in Vietnam, the time needed to transport or import the contributed assets and complete ownership transfer procedures shall be exclusive of the time limit above.

For the foreign-invested enterprise to implement a newly established investment project, the investment capital contribution time limit is recorded on the Investment Registration Certificate which is usually similar to the charter capital contribution mentioned above. The charter capital under the ERC and the contributed investment capital are two different concepts but usually the same amount.

From our experience, many Investors have trouble by failing to meet the deadline of the capital contribution above. The Investors may be administratively fined if they do not contribute capital on time and must apply for adjustment to the capital contribution period recorded on the IRC before transferring money into Vietnam. Therefore, the Investors should register the contributed capital appropriate with their available finance capacity, registering capital over the actual finance capacity for the ease of licensing procedures shall not be a wise choice.

2. Assets to be used for capital contribution

The Investor can only make a capital contribution by asset under his/her/its legitimate ownership. Contributed assets include VND (lawful Vietnamese currency), convertible foreign currencies, gold, intellectual property rights, technologies, technical secrets and other assets that can be converted into VND. In case the contributed assets are not VND, convertible foreign currencies or gold, they must be valued by members/partners/shareholders or a valuation organization and expressed as VND. In practice, VND and convertible foreign currencies are the most popular contributed assets by the Investor of their flexibility and convenience. Nevertheless, contributing capital by machinery or equipment is also usually chosen by the Investor in the manufacturing investment projects where the Investor must perform import procedures for such assets.

Suppose the Investor contributes assets other than VND and convertible foreign currencies as contributed capital to the company. In that case, the Investor must transfer his/her/its ownership of the contributed assets to the company in accordance with the following regulations:

  • For assets whose ownership must be registered to state authorities (e.g.: car, motorbike, etc.), the Investor shall follow procedures for transfer the ownership of such assets to the company as prescribed by law. This transfer is exempt from the registration fee;
  • For assets whose ownership is not required to register, the contribution shall be recorded in writing filed at the company.  

3. Direct Investment Capital Account

Under the Law on Enterprise 2020 and foreign exchange regulations of Vietnam, contributing capital by VND or convertible foreign currencies to the new foreign-invested enterprise must be carried out through a direct investment account (“DICA”). The DICA shall be opened under the name of the foreign-invested enterprise. Only one DICA in a convertible foreign currency can be opened at one authorized bank in Vietnam. In the case of investing in VND, the Investor can only open one DICA in VND at the authorized bank where the DICA in foreign currency has been opened.

The process of capital contribution shall be as follows:

Moreover, remittance abroad of profits earned from the foreign-invested enterprise must be made through the DICA as well. In practice, many investors cannot transfer their profits abroad from Vietnam, even if the process costs them much time and money, as they did not open the DICA in the past. Therefore, the Investor should keep in mind and comply with regulations on the DICA for the avoidance of any awkwardness in the investment in Vietnam.

Comments

Post a Comment

Popular posts from this blog

ESOP of non-public companies in Vietnam

-
In recent years, Employee Stock Ownership Plan (" ESOP ") is becoming a popular solution for Vietnamese enterprises in their human resources strategy. The issuance of shares under ESOP (" ESOP Shares ") by the public company is subject to regulations of Law on Securities, which shall not be applied to the non-public company. This article expresses some relevant respects of issuing ESOP Shares by the non-public company in compliance with current Vietnamese Law. Conditions of ESOP Shares issuance While the public companies planning to issue ESOP Shares shall closely comply with provisions of Decree No. 155/2020/ND-CP promulgated by the Government on 31 December 2020 guiding on the execution of Law on securities (hereinafter referred to as " Decree 155/2020 "), the non-public company shall not be subject to. Although conditions for ESOP Shares issuance of the non-public company are absent in Law on Enterprises as well as other legal documents, the non-public ...
Read more

Amending provisions on cooperation and investment with foreign investors in education

-
Decree No. 86/2018/ND-CP regulating on foreign cooperation and investment in education was issued on 6 June 2018 and took effect from 1 August 2018 (hereinafter referred to as Decree 86/2018). After 3 years of implementation, in addition to remarkable results in creating a legal framework for a foreign entity participating in the educational development of Vietnam, Decree No. 86/2018 has also revealed inadequacies and asynchronous issues. Therefore, it is necessary to promulgate a revising decree amending and supplementing articles of Decree No. 86/2018 (hereinafter referred to as Draft). This article points out a brunch of new and prominent regulations amended in the mentioned Draft. Firstly, the Draft supplemented the entities eligible for engaging in joint education: In particular, the Draft supplemented the entities eligible for engaging in joint education that are private educational institutions established and operating in Vietnam (regardless of investment capital in Vietnam or ...
Read more

The integrity of data message from a legal perspective (Part 3)

-
In Vietnam, electronic documents, emails, telegraphs, faxes,… which are familiar forms and can be easily collected and evaluated the integrity, electronic data is a much more comprehensive and diverse concept. The definition of electronic data specified in Clause 1, Article 99 of the Criminal Procedure Code 2015 may refer to: ” Electronic data is a   symbol, letter, digit, image, sound or similar form created, stored, transmitted or received by electronic means”.   Electronic data is collected from electronic media, computer networks, telecommunication networks, online, and other electronic sources collectively referred to as the electronic environment. Electronic data is invisible and immaterial because the electronic environment is a “virtual” environment. In addition, non-border or territorial electronic data may be initiated in one country while such data is stored in another (e.g., online gambling cases in Vietnam but the server system that stores gambling data is all abr...
Read more