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Foreign investors cannot contribute capital on time under Vietnamese law

The integrated economy is increasingly developing, 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, capital contribution does not take place on time. So what are the consequences of that? To answer questions from clients, Viet An Law firm published an article below about the consequences when foreign investors cannot contribute capital on time under Vietnamese law.

investment capital

Legal basis

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

Who are foreign investors ?

Foreign investors are individuals who do not have Vietnamese nationality, and organizations established under foreign law that conduct business investment activities in Vietnam.

Forms of foreign investment capital contribution in Vietnam

Forms of foreign investment capital contribution include:

  • Purchasing initial issued shares or additional issued shares of a joint stock company through purchasing shares of a joint stock company from the company or shareholders;
  • Contributing capital to a limited liability company through purchasing the capital contributions of members to become members of this company;
  • Contributing capital to a partnership company through purchasing the capital contribution of a capital contribution member in the partnership company to become a capital contribution member of the partnership company;
  • Contribute capital to Vietnamese companies in other forms.

Term of capital contribution by foreign investors

Vietnamese Investment Law 2020 does not stipulate the time limit for fully contributing registered investment capital, nor does it stipulate the maximum investment capital contribution period. Based on each form of investment, the time limit for full capital contribution is prescribed as follows:

  • For capital contribution to establish a company, the time limit for full capital contribution is 90 days from the date of issuance of the Enterprise Registration Certificate. Or the investor can request the investment management agency for a longer term but it must be consistent with the progress of the registered project.
  • For investment under contract, the capital contribution period is mutually agreed upon by the parties.
  • For capital contribution and share purchase, the time of capital contribution and receipt of capital transfer is also the time of capital contribution. Enterprises can allow shareholders and members to delay capital contribution, and exchange capital contribution obligations,… but this must be expressed through signed documents to serve the completion of enterprise accounting books.

Consequences when foreign investors cannot contribute capital on time under Vietnamese law

The consequences when foreign investors do not contribute capital on time are that foreign investors must be subject to administrative sanctions specified in Clauses 3 and 5, Article 46 of Decree No. 122/2021/ND-CP.

Specifically, based on Article 46:

  • A fine ranging from VND 20,000,000 to VND 30,000,000 shall be imposed for failure to contribute capital for enterprise establishment or register capital contribution or purchase of shares/stakes of another business organization in the correct form prescribed by law;
  • A fine from 30,000,000 VND to 50,000,000 VND will be imposed for failure to follow procedures for changing capital or changing members or founding shareholders as prescribed at the business registration authority upon expiry of the time limit for capital contribution and time limit for capital change because members or founding shareholders fail to fully contribute capital but there is not any member or founding shareholder that undertakes to contribute capital;

Additionally, as point b, Clause 5, Article 46 stipulates:

  • Forced to carry out capital adjustment procedures or change members and founding shareholders for violations specified in the above point.

Thus, the penalty that foreign investors may be subject to when not comply with the procedure of capital contributions under Vietnamese law can be up to 50,000,000 VND.

After receiving the transactions, the enterprise pays the fine and fully contributes capital according to the time limit recorded in the decision of the Inspection Department or adjusts the Investment Registration Certificate to extend the capital contribution period or reduce capital if they are unable to contribute capital according to the time limit recorded in the decision of the Inspection Department.

Regulations on capital contribution extension for foreign investors

According to current law, if the investment capital contribution time limit is overdue, the enterprise must carry out procedures to extend capital contribution. The Enterprise Law 2020 stipulates that foreign-invested companies have an Investment Registration Certificate. The term for contributing charter capital to establish a new company is 90 days as mentioned or a longer period recorded by the Investment Registration Certificate.

Procedures for extending capital contribution for foreign investors

According to Decree 31/2021/ND-CP guiding the Investment Law 2020, when investors need to extend the investment capital contribution period, they must carry out procedures to adjust the Investment Registration Certificate.

Dossier for extension of capital contribution

To carry out capital contribution extension procedures for foreign investors, the dossier includes the following documents:

  • Written request for adjustment of 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 Board of Members/General Meeting of Shareholders/Owner of the foreign-invested company on adjusting the investment project;
  • Documents confirming investment capital account information;
  • Copy of issued Enterprise Registration Certificate and Investment Registration Certificate;
  • Power of Attorney in case the investor does not directly submit the application.

Process for extension

Step 1: Prepare documents to adjust the Investment Registration Certificate (including documents listed above.)

Step 2: Submit an application to extend the capital contribution time limit.

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

Investors declare information about investment projects online at the National Information System on Foreign Investment and submit it directly to the competent Investment Registration Agency.

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 receive the results.

Within 10 days from the date of receipt of valid documents, the Investment Registration Authority adjusts the Investment Registration Certificate for the investor to record the adjusted capital contribution period for the investor.

Some related questions

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

The Investment Law 2020 does not restrict foreign investors from adjusting their investment registration certificates without fully contributing capital. Therefore, the enterprise can register to adjust the investment registration certificate at the same time as requesting to extend the capital contribution period.

Where is the term of capital contribution in a foreign-invested company regulated? In how long?

The term for capital contribution in foreign-invested companies is prescribed in the Enterprise Law 2020.

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

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

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