Consequences when foreign investors fail to contribute capital on time in Vietnam

The integrated economy is growing, leading to many foreign individuals establishing companies in Vietnam. After being granted the Investment Registration Certificate, the investor needs to contribute enough investment capital as registered to implement the project. However, in some cases, the capital contribution takes place on time. So what are the consequences of that? And to answer customers’ questions , Viet An Law Firm offers an article on the consequences when foreign investors do not make capital contributions on time below.

Legal bases

• Investment Law 2020.
• Enterprise Law 2020.
• Decree 31/2021/ND-CP on guiding the Law on Investment.
• Decree No. 122/2021/ND-CP provides for sanctioning administrative violations in the field of planning and investment.

Who are foreign investors?

Foreign investor means an individual who does not have Vietnamese nationality but has foreign nationality, an organization established under foreign law that carries out business investment activities in Vietnam.

Forms of foreign investment capital contribution in Vietnam

Forms of foreign investment capital contribution include:

• First-issue shares purchase or additional issued shares of a joint-stock company through the purchase of shares of a joint-stock company from the company or shareholders;
• Contribute capital to a limited liability company through the purchase of contributed capital of members of a limited liability company to become a member of a limited liability company;
• Capital contribution to a partnership through the purchase of capital contribution of a capital contributor in a partnership to become a capital contributing member of the partnership;
• Contribute capital to Vietnamese companies in other forms.

Time limit for capital contribution of foreign investors in Vietnam

The Law on Investment 2020 does not stipulate how long the time limit for contributing sufficient registered investment capital does not stipulate the maximum time limit for investment capital contribution. Based on each form of investment, the time limit for sufficient capital contribution is prescribed as follows:

• For the capital contribution to establish the company, the time limit for full capital contribution is 90 days from the issuance date of the Business Registration The investor may request the investment management agency for a longer term but must match the progress of the registered project.
• For contractual investment, the time limit for capital contribution shall be agreed upon by the parties themselves.
• For capital contribution or share purchase, the time of capital contribution and receipt of capital transfer is also the time of capital contribution. Enterprises may allow shareholders and members to delay capital contribution or swap capital contribution obligations,… but must be expressed through signed documents to serve the completion of corporate accounting books.

Consequences when foreign investors fail to make capital contributions on time in Vietnam

As a consequence when foreign investors fail to make capital contributions on time, foreign investors are subject to administrative sanctions specified in Clauses 3 and 5, Article 46 of Decree No. 122/2021/ND-CP on sanctioning administrative violations in the field of planning and investment.

Specifically, pursuant to Point a, Clause 3, Article 46, a fine ranging from VND 30,000,000 to 50,000,000 shall be imposed for:

• Failing to carry out procedures for capital adjustment or change of founding members and shareholders as prescribed at the business registration agency when the capital contribution term has expired but the capital adjustment period expires because the founding members or shareholders do not have enough capital but no members, Founding shareholders who make capital contribution commitments.

Point b, Clause 5, Article 46 stipulates:

• Forcibly carry out procedures for capital adjustment or change of founding members and shareholders for violations specified at the above point.

Thus, the penalty that foreign investors may be imposed when they fail to extend their capital contribution in time can be up to VND 50,000,000.

After receiving the decision, the enterprise shall pay a fine and contribute sufficient capital according to the time limit recorded in the decision of the Inspection Department or amend the Investment Registration Certificate to extend the time limit for capital contribution or reduce capital if it is unable to contribute capital according to the time limit recorded in the decision of the Inspection Department.

Regulations on extension of capital contribution for foreign investors

According to the current law, if the investment capital contribution is overdue, the enterprise must carry out procedures for extension of capital contribution. The Enterprise Law 2020 stipulates that foreign-invested capital companies have an Investment Registration Certificate: The time limit for charter capital contribution for a newly established company is 90 days as mentioned or a longer time recognized by the Investment Registration Certificate.

Procedures for extension of capital contribution for foreign investors

According to Decree 31/2021/ND-CP guiding the Investment Law 2020, when investors need to extend the time limit for investment capital contribution, procedures for adjustment of the Investment Registration Certificate shall be carried out.

Dossier of extension of capital contribution

In order to carry out procedures for extension of capital contribution for foreign investors, the dossier shall include the following documents:

• A written request for adjustment of the investment registration certificate;
• Report on the implementation of investment projects up to the time of adjustment;
• Decision and valid copy of meeting minutes of the Members’ Council/General Meeting of Shareholders/Owner of a foreign capital company on the adjustment of investment projects;
• Documents confirming investment capital account information;
• A copy of the enterprise registration certificate, the granted investment registration certificate;
• Written authorization in case the investor does not directly submit the application.

Order and procedures for renewal

Step 1: Make a dossier for adjustment of the Investment Registration Certificate (including the documents listed above.)

Step 2: Submit an application for extension of capital contribution time limit

After preparing the dossier, the investor submits the dossier to the competent investment registration agency.

Investors shall declare information about investment projects online at the National Foreign Investment Information System and submit them directly to the competent Investment Registration Office.

Within 15 working days from the date of online declaration, investors must submit an extension application to the investment registration agency.

Step 3: Process the application and get the results

Within 10 days from the date of receipt of a valid dossier, the Investment Registration Agency shall amend the Investment Registration Certificate for the investor to record the time limit for contributing new charter capital to the investor.

Some related questions

Can I apply for an extension of the time limit for capital contribution at the same time as adjusting the investment certificate?

The 2020 Investment Law does not restrict foreign investors from adjusting investment certificates without sufficient capital contribution. Therefore, the enterprise may register to amend the investment registration certificate simultaneously with the request to extend the time limit for capital contribution.

How is the time limit for capital contribution in a foreign capital company regulated? For how long?

The time limit for capital contribution in foreign capital companies is specified in the Enterprise Law 2020.

The Law on Investment 2020 does not stipulate the time limit for contributing sufficient investment capital. For capital contribution to establish a company, the time limit for full capital contribution is 90 days from the issuance date of the Business Registration Certificate. Or the investor has requested the investment management agency for a longer term but must be consistent with the implementation schedule of the registered project.

If you need advice on capital contribution extension documents, please contact Viet An Law Firm for the best support.