Change representative managing capital contribution of FDI company in Vietnam

Vietnam is one of the most prominent developing economies, which is increasingly attracting more foreign capital into our country. The provisions of our country’s law on FDI companies and domestic companies currently have some differences. Therefore, the provisions of the law on foreign invested companies are increasingly receiving more attention from individuals and business organizations. In the article below, Viet An Law would like to introduce to clients the regulations to change representative managing capital contribution of FDI company in Vietnam.

What is a capital contribution representative?

Currently, there is no specific regulation defining the representative managing the capital contribution, but we can base it on the definition of an authorized representative to explain. According to Clause 1, Article 14 of the Enterprise Law 2020:

“Authorized representatives of the owner/members/partners/shareholders that are organizations shall be authorized in writing by the owner/members/partners/shareholders in accordance with this Law.”

Therefore, the representative managing the capital contribution of an FDI company is authorized to represent part or all of the capital contribution of an FDI company to represent the company in exercising the rights, responsibilities, and obligations in business activities.

The representative managing the capital contribution must not be subject to the provisions of Clause 2, Article 17 of the Enterprise Law 2020 and must meet other standards and conditions according to the company’s charter.

Characteristics of the representative managing the capital contribution of FDI companies

Due to the nature of authorization as property rights (capital contributions), the representative managing the capital contributions of an FDI company is usually a foreign individual or a Vietnamese individual who is the legal representative of the FDI company.

Legal barriers are also one of the difficulties that FDI enterprises have to overcome because the laws in the investor’s home country and Vietnamese law will have certain differences. Therefore, the representative managing the capital contribution of the FDI company will help the FDI company overcome these difficulties;

In addition, because foreign investors have differences in business culture, working style, and business thinking, they will have difficulty adapting and integrating into the Vietnamese business environment. Therefore, the representative managing the capital contribution of the FDI company will help the FDI company overcome this challenge.

Which entities are usually appointed as representatives to manage the capital contribution of enterprises?

Because the representative managing the enterprise’s capital contribution must take on important responsibilities, the following entities are often appointed as representatives managing the capital contribution:

• Company manager;
• Legal representative of the company;
• Head of the company’s finance and accounting department;
• Representative of the management of capital contribution from the foreign parent company in FDI company (usually a foreign individual in charge of the business in Vietnam market).

Rights and obligations of the representative managing the capital contribution

The representative managing the capital contribution of an enterprise in general and of an FDI company in particular must assume extremely important responsibilities, affecting the operation of the enterprise.

In the case of the manager for state capital contribution, according to Article 49 of the Law on Management and Use of State Capital in Production and Business at Enterprises 2014, the capital contribution manager has the following rights and responsibilities:

• Report and seek opinions from businesses before participating in giving opinions, voting, and making decisions at the General Meeting of Shareholders, meetings of the Board of Directors, and Board of Members on issues related to business lines, business activities, charters, charter capital, disciplinary or reward issues, etc. and other issues under the authority of the General Meeting of Shareholders, Board of Directors, and Board of Members.
• Report on the company’s operating losses;
• Synthesize, and report on production, business, and financial situation and recommend solutions periodically on a quarterly, annual, and ad hoc basis;
• Be responsible before the law for violations causing loss of business capital.

Change representative managing capital contribution of FDI company in Vietnam

Changing the representative managing the capital contribution of an FDI company is not an internal activity of the company. Although it is carried out depending on the needs and actual operating situation of the enterprise, it is necessary to carry out the procedure of notifying the change of business registration related to the content of the representative managing the capital contribution in the enterprise to the business registration agency.

According to the provisions of Article 60 of Decree 01/2021/ND-CP, within 03 days from the date of the change, the enterprise must send a notice of supplementing and updating business registration information to the Business Registration Office where the enterprise has its head office.

Notice according to Form No. II-1 issued with Circular 01/2021/TT-BKHĐT.

In addition, the enterprise also needs to prepare documents and notify relevant departments in the FDI company. In particular, it is necessary to ensure the following main contents:

• Name, business registration number, and head office address of the owner, member, and shareholder;
• Number of authorized representatives and corresponding share ownership ratio and capital contribution of each authorized representative ;
• Full name, contact address, nationality, legal document number of each authorized representative;
• The respective term of authorization of each authorized representative; clearly stating the date of commencement of representation;
• Full name and signature of the legal representative of the owner, member, shareholder, and authorized representative.

The difference between a legal representative and a representative managing capital contributions

Although they are all representatives, each representative holds a different position and performs a different function in the company.

Legal representative

• According to Clause 1, Article 12 of the Law on Enterprises 2020, the legal representative of an enterprise is an individual who represents the enterprise in exercising the rights and obligations arising from the enterprise’s transactions, represents the enterprise as a person requesting settlement of civil matters, plaintiff, defendant, person with related rights and obligations before the Arbitration, Court and other rights and obligations as prescribed by law.
• The legal representative of an enterprise is specifically defined in terms of title, rights, and obligations in the company charter. In addition, the personal information and title of the legal representative will also be shown in the Business Registration Certificate.
• The responsibility of the legal representative is very large, being the head, responsible for all activities of the enterprise and representing the enterprise in carrying out legal activities with state agencies and business transactions with partners and clients.
• When a business changes its legal representative, it is necessary to carry out procedures to change business registration with the business registration authority.

Representative of capital contribution management

• Unlike the legal representative, the capital contribution management representative exercises the rights, responsibilities, and obligations of the company in business activities within the scope of the capital contribution it manages.
• The appointment of this representative will be expressed in writing and kept within the company. Therefore, there is no need to carry out registration procedures or change the representative managing the capital contribution with the business registration agency.

The above is the advice of Viet An Law. Clients who require advice or have questions about investment law in general and foreign investment in Vietnam, in particular, can contact Viet An Law directly to get timely answers and use the best services.

Update: 9/2024