For a Limited liability company increasing capital contribution can be an important decision in the process of business development and expansion. Increasing capital contribution not only benefits the enterprise but also creates new opportunities, enhances competitiveness and meets financial needs.
In this article, Pham Consult will explain in detail the process and important factors to consider when increasing the contributed capital of a foreign-invested two or moremember limited liability company (hereinafter referred to as is a limited enterprise).
Cases in which charter capital can be increased
A decision on capital increase of a limited liability company with two or more members must be approved when the attending member owns 65% of the total contributed capital of all attending members or more. Beside that, a report must be sent to the Department of Planning and Investment where the enterprise’s head office is located within 10 days from the date on which the increase in charter capital of the enterprise is approved.
Pursuant to Article 68 of the Enterprise Law 2020, there are two cases where the charter capital can be increased:
- Increase in the member’s capital contribution. In which, if a member opposes the decision to increase charter capital, this member may not contribute more capital to a limited liability company with 2 or more members. In this case, the additional capital contributed by such member shall be divided among other members in proportion to their contributed capital in the enterprise’s charter capital, unless otherwise agreed upon by the members.
- Receipt of capital contribution from new members. However, according to the provisions of Clause 1, Article 46 of the Enterprise Law 2020, a limited liability company with two or more members can only have a maximum of 50 members who are organizations or individuals. Therefore, when the number of capital contributing members exceeds 50 members, the enterprise needs to convert the form into a joint stock enterprise and will no longer be limited to the maximum number.
- For capital contributors being Vietnamese enterprises, they are not allowed to contribute capital in cash as prescribed in Article 3 of Circular 09/2015/TT-BTC:
“Article 3. Modes of payment in capital contribution transactions and in the purchase, sale and transfer of capital contributions at other enterprises
- Enterprises may not make cash payment (in banknotes and coins issued by the State Bank of Vietnam) in capital contribution transactions and in the purchase, sale and transfer of capital contributions at other enterprises.
- When conducting capital contribution transactions and when purchasing, selling or transferring capital contributions at other enterprises, enterprises shall:
a/ Pay by check;
b/ Pay by payment order – money transfer; or
c/ Pay by other non-cash payment modes in accordance with current regulations.
- Enterprises using assets (other than money) to contribute capital or purchase, sell or transfer capital contributions at other enterprises shall comply with the law on enterprises.”
- For capital-contributing members being foreign investors (including individuals and economic organizations), before making capital contributions, foreign investors need to carry out procedures for registration of purchase and purchase of shares or capital contributions to capital contribution. Vietnamese companies, in the case of economic organizations doing business in lines of business with conditional market access to foreign investors in Clause 2, Article 26 of the Law on Investment 2020:
“Article 26. Procedures for making investment by contributing capital, purchasing shares or purchasing stakes
A foreign investor shall follow procedures for registration of capital contribution or purchase of shares or stakes of a business organization prior to change of members or shareholders in one of the following cases:
- a) The capital contribution or purchase of shares or stakes increases the ownership ratio by foreign investors in a business organization conducting business in the restricted business lines;
- b) The capital contribution or purchase of shares or stakes results in a foreign investor or business organization specified in Points a, b and c Clause 1 Article 23 of this Law holding over 50% of the charter capital of the business organization in the following cases: The holding of charter capital by the foreign investor is increased from less than or equal to 50% to over 50%; the holding of charter capital by the foreign investor is increased while such foreign investor is holding over 50% of the charter capital of the business organization.
- c) The foreign investor contributes capital, purchases shares or stakes of a business organization that holds a certificate of rights to use land on an island or in a border or coastal commune, or in another area that affects national defense and security.”.
The contribution of investment capital in cash by foreign investors or Vietnamese investors must be made through a transfer to the direct investment capital account. The process and details can be found in Pham Consult’s previous article “Can foreign investors contribute capital in cash?”
Procedures for increasing contributed capital of a limited liability company with two or more members
Step 1: Prepare documents to increase the enterprise’s charter capital
- Notice of increase in charter capital of the enterprise signed by the legal representative (according to the form in Appendix II-1 issued together with Circular No. 01/2021/TT-BKHDT);
- A written decision on the increase of the enterprise’s charter capital of the chairman of the Members’ Council;
- A copy of the meeting minutes of the Members’ Council/Board of Directors on the increase of the enterprise’s charter capital;
- List of members of the enterprise after increasing charter capital;
- Written approval of capital contribution or purchase of capital contributions from foreign investors (if capital contributors are foreign investors);
In case there are new capital contributors, the enterprise needs to prepare additionally:
- Papers certifying capital contribution of new members of the enterprise;
- A valid copy of one of the new member’s valid personal or legal identity papers (for Vietnamese citizens, a valid Vietnamese citizen identification card, identity card or Vietnamese passport); for foreigners, it is a foreign passport or a valid document replacing a valid foreign passport; for an enterprise, an enterprise registration certificate, an investment registration certificate or other documents. other equivalent);
For new members as an organization, in addition to the above documents, the application will need to add:
- Decision on the investment of the enterprise contributing capital;
- A document appointing a representative to contribute capital;
- List of authorized representatives.
Step 2: Submit your application
Place of submission: Directly at the one-stop shop of Business Registration Office – Department of Planning and Investment or online through the national portal on business registration.
Processing time: 03 working days from the date of receipt of valid application.
Fee: 100,000 VND (fee for publishing business registration contents).
Step 3: Get the result
Enterprises can receive the result of a new enterprise of registration certificate directly at the one-stop shop of Business Registration Office – Department of Planning and Investment. However, now all enterprises are encouraged to receive by post by registering through the home registration portal (http://22.214.171.124/vie/webappDN/TNHHCPQM/ )
Enterprise Law 2020
Decree 01/2021/ND-CP on business registration
Circular No. 01/2021/TT-BKHDT guiding business registration
Above is information on procedures to increase capital in a limited liability company with two or more foreign-invested members. However, in reality, administrative procedures can be complicated and require expertise and work experience. Understanding this, Pham Consult provides customers with services on adjusting business licenses. Besides, there are other professional services related to investment licenses, enterprise of registration certificate, etc.
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.