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Increase invested capital by loans of FDI company in Vietnam

Increasing capital by loans is an activity of FDI companies to expand business scale, improve financial capacity, and meet the development needs of the enterprise. When implementing capital increase procedures, enterprises must strictly comply with the provisions of the law. Therefore, the following article will inform enterprises about the legal regime to increase invested capital by loans of FDI company in Vietnam.

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    Conditions for increasing invested capital by loans in Vietnam

    First, the Investment Registration Certificate (IRC) must ensure that the capital contribution by loans is recorded. Then, to carry out the capital increase process, other conditions include:

    • Explain the proposed investment project in case of capital increase and ensure feasibility, practical application of the project, and compliance with the contents recorded on the IRC;
    • Investors need to have documents proving and explaining their financial capacity in case of increasing total invested capital and commit to properly and fully implementing regulations related to civil obligations as prescribed by law;
    • When carrying out the capital increase procedure, the Investment Registration Certificate must ensure that the investment registration authority approves the increase in invested capital by issuing an adjusted investment certificate.

    Forms of increasing invested capital

    Increasing invested capital is when investors add capital to a project or company. Forms of capital increase for foreign-invested enterprises are as follows:

    • For FDI companies operating under Investment Registration Certificates and Enterprise Registration Certificates (ERC), there are two forms of increasing invested capital in foreign-invested companies as follows:
    • Firstly, increase capital contribution to implement the project: Existing investors contribute capital to the company or receive additional capital contribution from new investors. When increasing capital contribution, the charter capital and invested capital will change, therefore, the company must adjust the IRC and ERC.
    • Second, increase mobilized capital: Investors loan more capital from credit institutions, shareholders, company members, and other entities. When mobilizing capital by loans, the invested capital changes, and the company’s charter capital does not change, so the company needs to adjust the IRC.
    • For FDI companies, only operate under the ERC. The company’s invested capital is also the company’s charter capital. The company increases its capital in the same way as increasing the capital contribution of a domestic company.

    Dossier to increase invested capital by loans of FDI company in Vietnam

    Dossier to increase invested capital by loans of FDI company in Vietnam

    Dossier for increasing invested capital of FDI enterprises by loans, including:

    • Document requesting adjustment of investment project;
    • Report on the implementation status of the investment project up to the time of adjustment;
    • Decision on adjusting the investor’s investment project;
    • 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, proposal for investment incentives, assessment of the project’s socio-economic impact and efficiency (for projects that have not been granted an IRC and ERC);
    • A copy of one of the following documents: financial statements of the last 2 years of the investor; financial support commitment of the parent company; financial support commitment of a financial institution; guarantee of the investor’s financial capacity; documents explaining the investor’s financial capacity;
    • Documents proving that the investor has made the additional capital contribution.

    What documents are required to prove the financial capacity of the investor in a foreign company’s capital increase application using borrowed money?

    • Copy of Confirmation of foreign loan registration;
    • Copy of FDI account statement regarding receipt of loan;
    • Notarized translation of the agreement to convert the loan into invested capital.

    Procedures for increasing invested capital of FDI companies

    Procedures for increasing invested capital of FDI companies

    Step 1: Online declaration of investment project information

    • Pursuant to Clause 1, Article 38 of Decree 31/2021/ND-CP, before carrying out the procedure for adjusting capital in the IRC, the investor shall declare online information about the investment project on the National Investment Information System.
    • Within 15 days from the date of online application, the investor shall submit the capital adjustment dossier in the IRC to the investment registration agency.
    • After 15 days from the date of the online application, if the investment registration agency does not receive the application, the online application is no longer valid.

    Step 2: Submit application for capital increase by loans

    • Investors submit their application to the Department of Planning and Investment where the company is headquartered (if the company is located outside of an industrial park, export processing zone, high-tech zone, or economic zone) or the Management Board of Industrial Parks of the province or city (if the company is located in an industrial park, export processing zone, high-tech zone, or economic zone).
    • Processing time: 10 working days from the date of receipt of valid documents.

    Step 3: Notice of increased invested capital

    When increasing invested capital, enterprises must notify changes in capital levels to the national registration portal within 30 days from the date of change.

    Notes when increasing invested capital of FDI companies by loans

    In the process of carrying out procedures for increasing foreign invested capital, the company needs to pay special attention to the following issues:

    • Submit the business license fee declaration before December 31 of the year in which the procedure is carried out and add the additional fee (if any).
    • Adjust margin after capital increase (if any).
    • Propose to adjust the investment policy if the total capital increases by 20% or more, changing the scale of the project.
    • Account for transfer of loans into capital of FDI company in Vietnam under Vietnamese law.

    Above is the consulting content of Viet An Law for clients how to increase invested capital by loans of FDI company in Vietnam. If you need to use legal services, please contact us for timely support.

    Update: 8/2024

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