Adjustment of foreign-invested company’s investment capital in Vietnam

The investment capital of an FDI company includes the capital that the investor commits to contribute (i.e. the charter capital) and other mobilized capital of the company recorded on the Investment Registration Certificate (IRC) of the company. The investment capital of an FDI company may be equal to or higher than the charter capital that the company registers on the Enterprise Registration Certificate. When changing the investment capital, the company must adjust the IRC. It may or may not have to change the ERC if the charter capital remains unchanged. To clarify the procedure for changing the investment capital of a foreign-invested company, Viet An Law will provide preliminary advice in the following article.

Applied cases of investment capital adjustment of FDI company in Vietnam

The article focuses on projects to establish economic organizations to implement projects, in which the charter capital of the enterprise is usually equal to the investment capital registered in the IRC of the foreign investor. Specifically, the investment capital adjustment of an FDI company in Vietnam may fall into one of the following cases:

Increase investment capital

• Increase capital contribution to implement the project: the existing investors will contribute additional capital to the company or receive additional capital from the new Investor. When increasing this capital contribution, the Company simultaneously changes the charter and investment capital, so the Company must adjust the IRC and Enterprise Registration Certificates.
• Increase mobilized capital: In this case, the Investor borrows additional capital from credit institutions, shareholders, company members, other entities, or other sources. When mobilizing additional capital like this, the company’s charter capital does not change, only the investment capital changes, therefore, the Company only needs to adjust the IRC.

Reduce company investment capital

• Return part of the capital contribution to the contributor;
• The company buys back the capital contribution of the contributor; or
• Charter capital not fully paid

In cases where the conditions for capital reduction are met, the procedures for registering investment capital reduction are also divided into two cases: (i) reducing investor’s contributed capital and (ii) reducing mobilized capital. Accordingly, the implementation procedures are similar to the procedures applied to increasing investment capital.

Conditions for reducing capital of FDI companies

• The company has been in business for at least 02 years, ensuring full payment of property obligations and debts.
• Charter capital is not paid in full and on time as prescribed by the Enterprise Law 2020.

Notes on assets used when raising capital

Assets used to contribute capital can be Money, Gold, Property, Documents, and Property rights. For capital contribution by assets, businesses and investors need to pay attention to the following issues:

Asset valuation:

• Consensus principle: Members and shareholders agree on the value of contributed capital.
• Valuation: Conducted by an independent valuation organization. The valuation results must be approved by the majority of members and shareholders.

Legal procedures:

• Guarantee of ownership: Contributed assets must be legally owned by the contributor.
• Complete documents: Prepare full legal documents related to contributed assets (certificate of ownership, documents proving value,…).
• Registering changes to charter capital: After completing the capital contribution procedure, the enterprise must register changes to charter capital at the business registration authority.

Risks in asset valuation:

• Overvaluation: This can lead to price gouging, tax evasion, and difficulty in managing business assets.
• Undervaluation: Reduces the value of the company’s capital contribution and affects the interests of shareholders.
• Fixed assets: If contributing capital with fixed assets, businesses need to carefully consider the ability to use these assets in the production and business process.
• IP rights: Contributing capital with intellectual property rights requires a clear transfer contract and protection of the owner’s rights.

Prepared document for investment capital adjustment of FDI company in Vietnam

Application for adjustment of Investment Registration Certificate

According to Decree 31/2021/ND-CP, the prescribed documents include:

• Document requesting adjustment of IRC;
• Report on the implementation status of the investment project up to the time of requesting adjustment of the investment project; Investment report (Business report submitted online at dautunuocngoai.gov.vn)
• Decision on adjustment of the investment project of the investor;
• The investment project proposal includes the following contents: investor implementing the project, investment objectives, investment scale, investment capital, and capital mobilization plan, location, duration, investment progress, labor demand, a proposal for investment incentives, assessment of the project’s socio-economic impact and efficiency (for projects that have not been granted an Investment Registration Certificate and Enterprise Registration Certificate);
• 01 certified copy of IRC;
• 01 certified copy of Tax Registration Certificate (for projects that have not been granted IRC and ERC);
• 01 certified copy of ERC;
• Documents confirming full capital contribution at the time of adjustment: 01 certified copy of the Audited Financial Statement closest to the time of adjustment or Confirmation from the bank that the investor has fully contributed capital.
• In case of a change in investment capital: Confirmation of bank balance corresponding to the increased capital or documents proving financial capacity for the increased capital contribution;

Enterprise Registration Certificate adjustment dossier

According to Decree 01/2021/ND-CP, the prescribed documents include:

• Notice of change of business registration content signed by the legal representative of the enterprise;
• Resolutions and decisions of the company owner for a single-member limited liability company; resolutions, decisions, and meeting minutes of the Board of Members for a multiple-member limited liability company, a partnership company, and of the General Meeting of Shareholders for a joint stock company on changing the charter capital;
• List of company members;
• Document of the Investment Registration Authority approving the capital contribution, share purchase, and capital contribution purchase of foreign investors and foreign-invested economic organizations in cases where it is required to carry out procedures for registration of capital contribution, share purchase, and capital contribution purchase according to the provisions of the Investment Law.

Note:

• In case the dossier for carrying out procedures at the competent authority has documents in a foreign language, the investor must have a Vietnamese translation attached to the foreign language document.
• In case documents in the investment procedure dossier are made in Vietnamese and a foreign language, the Vietnamese version shall be used to carry out the investment procedure.
• The investor is responsible in case of any difference between the content of the translation or copy and the original and case of any difference between the Vietnamese version and the foreign language version.

Procedures for increasing and decreasing investment capital for FDI companies

Note on authority to change IRC

• The Management Board of industrial parks, export processing zones, high-tech zones, and economic zones receives and adjusts Investment Registration Certificates for investment projects in industrial parks, export processing zones, high-tech zones, and economic zones.
• The Department of Planning and Investment where the investor has or plans to have its head office or executive office implement the investment project shall receive and adjust the Investment Registration Certificate for the following investment projects:
  • Investment projects implemented in many provinces and centrally run cities.
  • Investment projects implemented inside and outside industrial parks, export processing zones, high-tech zones, and economic zones.

Notes when making changes to investment capital

• In case the investor changes the investment capital and at the same time changes the charter capital on the Enterprise Registration Certificate, the investor shall fully contribute the investment capital within the time limit recorded on the adjusted IRC, then carry out the procedure to change the charter capital on the Enterprise Registration Certificate within 10 days from the date of full contribution of increased capital.
• When changing investment capital, the Investor must make a capital contribution within the time limit recorded in the issued adjusted IRC.

Above is the advice of Viet An Law on investment capital adjustment of FDI company in Vietnam. If there are any other legal problems related to foreign invested investment, please contact Viet An Law for more specific and detailed advice. Sincerely thank you!