Vietnam is a potential developing market, foreign investors want to invest here but do not know the order, procedures as well as relevant regulations under Vietnamese law. Through this post, we will inform you about foreign investors investing in Vietnam and answer the question of whether foreign investors can contribute capital in cash or not.
Forms of capital contribution by foreign investors?
According to Article 21 of the Investment Law 2020, there are five kinds of foreign investment in Vietnam:
- Investment in establishment of a business organization.
- Investment in the form of capital contribution or purchase of shares or stakes.
- Investment in the form of capital contribution or purchase of shares or stakes.
- Investment in the form of a business cooperation contract.
- New forms of investment and economic organizations according to the Government’s regulations.
Of the four types above, capital contribution is the most popular form because of its diversified investment methods and industries, without having to carry out financial proofing procedures.
There are many ways for investors to make an investment in the type of capital contribution (based on Clause 1, Article 25 of the Law on Investment 2020) :
- Purchase of shares of joint-stock companies through the initial public or additional issuance;
- Contribution of capital to limited liability companies and partnerships;
- Contribution of capital to other business organizations not mentioned in Point a and Point b of this Clause.
Can foreign investors contribute capital in cash?
Pursuant to Article 34 of the Enterprise Law 2020:
“Article 34. Contributed assets”
1 Contributed assets include VND, convertible foreign currencies, gold, land use right (LUR), intellectual property rights, technologies, technical secrets, other assets that can be converted into VND.
According to this regulation, money is an asset used to contribute capital. However, in order to legally contribute capital, foreign investors should pay attention to the form of capital contribution in cash specified in Clause 3, Article 4 of Circular No. 06/2019/TT-NHNN as follows:
“Article 4. General principles
- The investment capital contribution in money of foreign investors, Vietnamese investors must be transferred to the direct investment capital account.
Thus, foreign investors contributing capital to companies in Vietnam to conduct investment and business activities must contribute in the form of bank transfers, not in cash.
Process of capital contribution by foreign investors
Step 1: Foreign investors must register to buy shares and contribute capital to Vietnamese companies.
According to the provisions of the investment law, foreign investors who want to own more than 51% of the charter capital of the company must carry out the registration procedure to buy the contributed capital/shares. The transfer of the company to a foreigner means that this person will hold 100% of the company’s charter capital, so this procedure needs to be done before the transfer.
- A written registration for capital contribution, share purchase or capital contribution, including the following contents: information about the economic organization to which the foreign investor intends to contribute capital, purchase shares or capital contribution; rate of ownership of charter capital of foreign investors after capital contribution, purchase of shares or capital contribution to economic organizations;
- A copy of the identity card, identity card or passport for the investor being an individual; copy of Certificate of Establishment or other equivalent document certifying legal status for investor being an organization.
- A notarized copy of the business registration certificate of a Vietnamese economic organization.
- Foreign investors submit dossiers at the Department of Planning and Investment.
- Within 15 working days after receiving a valid application, the Business Registration Authority shall issue a Notice of satisfaction of conditions for capital contribution, share purchase, contributed capital and Vietnamese enterprises.
After obtaining approval for the purchase of contributed capital/shares, the new transferor company can proceed with the next procedures.
Step 2: Foreign investors buy shares or contributed capital in Vietnamese enterprises.
In case of transferring the company to a foreigner, the Vietnamese company shall open a direct investment capital account. Investors make capital transfer through direct investment capital accounts.
The members and shareholders transferring capital shall declare tax upon transfer according to the law on personal income tax and corporate income tax (if any).
Step 3: Change the Business Registration Certificate submitted at the Business Registration Office – Department of Planning and Investment
Dossier of Vietnamese enterprises and foreign investors need to prepare:
- Notice of change of business registration contents;
- Notice of change of owner (for one member limited liability company);
- Notice of change of legal representative;
- Decision on the change of the company;
- Minutes of meeting on company change (For joint stock companies, limited liability companies);
- The transfer contract and documents certifying that the transfer has been completed, certified by the legal representative of the company;
- Contributing members list; List of foreign shareholders;
- Notarized copy of the foreign investor’s passport;
- Charter (For single-member limited liability companies).
- The enterprise submits 01 application at the business registration agency.
- Within 03 working days from the date of receipt of a valid application, the business registration authority shall issue a new business registration certificate to the enterprise.
- In case the company is transferred to a foreigner, an Investment Registration Certificate is not required. Except for cases where Vietnamese enterprises conduct business lines that are required to issue an investment registration certificate such as education, foreign investors who have completed the above steps need to carry out the procedures for granting an investment registration certificate. investment signing.
- In case a Vietnamese company conducts conditional business lines for foreign investors, after performing the above steps, the foreign investor shall issue a qualified license before carrying out the operation. business.
After the foreign investor completes the procedures for registration of capital contribution, based on the written approval of the Investment Registration Authority, the economic organization in which the foreign investor contributes capital, purchases shares or purchases capital contribute to the implementation of procedures for changing members and shareholders at the business registration agency in accordance with the law on enterprises and other laws relevant to each type of economic organization.
- Enterprise Law No. 59/2020/QH14
- Law on investment No. 61/2020/QH14
- Decree on elaboration of some articles of the law on investment No. 31/2021/ND-CP
- Circular No. 03/2021/TT-BKHDT about prescribing templates for documents and reports related to investment activities in Vietnam, outward investment activities and investment promotion activities.
- Circular No. 06/2019/TT-NHNN on guiding the foreign exchange management for the foreign direct investment in Vietnam.
Above is information about regulations for foreign investors to contribute capital to Vietnam. However, in reality, the administrative procedures in the investment field are often complicated with language barriers, so it will be difficult for foreign investors to do it themselves. Pham Consult with many years of experience in the profession is committed to accompanying and providing professional consulting services on registration contributing capital or buying shares or buying contributed capital of economic organizations quickly, efficiently and with quality helps customers save time, and money as well as feel secure to develop their investment sustainably.
Pham Consult is a unit specializing in providing tax consulting services, financial consulting, accounting services, salary preparation and payment. Contact us via hotline: (84-28) 3930 2487 or our Facebook if you need assistance.