Procedures for capital reduction of foreign-invested companies in Vietnam
If a company only has Vietnamese capital, that company only needs to register charter capital. This means a foreign-invested company has 2 types of capital including invested capital and charter capital.
The investment capital of a foreign-invested company (FDI company) is the capital that the investors commit to contributing according to the regulations and the term is written on the Investment Registration Certificate through the public capital account. The direct investment capital account is required as a capital account to the FDI company. The purpose is for investors to contribute to this account and then transfer the money from this account to the charter capital to operate.
Charter capital is the total value of assets contributed or committed to contributing by the company’s members or owners when establishing a limited liability company: is the total value of shares sold or registered for purchase when establishing a joint-stock company. The charter capital of the FDI company may be equal to or less than the investment capital registered by the company on the Investment Certificate.
Changing capital of a foreign-invested company process:
Change the charter capital on the Business Registration Certificate;
Adjust the investment capital on the Investment Registration Certificate.
Changing the Business Registration Certificate dossier when changing charter capital:
01 notarized copy of the Investment Registration Certificate;
Notice of changes to the company registration company signed by the company’s legal representative;
A resolution, decision of the company owner for one-member limited liability companies; A resolution, decision and meeting report of the members’ council for limited liability companies with two or more members; A resolution, decision and meeting report of the general meeting of shareholders for joint-stock companies on the change of charter capital;
For limited liability companies with two or more members, these documents are required:
A list of members of a limited liability company with two or more members;
01 notarized copy of the latest financial statement close to the time of the decision to reduce the charter capital.
Adjustment of the investment registration certificate dossier when changing investment capital:
01 notarized copy of the Business Registration Certificate;
A proposal for investment project adjustment;
A report on the implementation of the investment project up to the time of adjustment;
An investment report submitted through the foreign investment registration system;
A decision of the investor on the investment project adjustment;
01 notarized copy of the latest financial statement close to the time of adjustment.
Conditions for the capital reduction of a foreign-invested company:
An FDI company is entitled to reduce its charter capital if it meets the following requirements:
The company has been in business for 2 or more consecutive years from the date of company establishment registration and has ensured full payment of all debts and other property obligations after being repaid to members;
The charter capital is not paid in full and on time by the members/owners/shareholders under the provisions of the Law on Enterprise 2020.
According to the Law on Investment 2020 and guiding documents, there is no regulation on conditions for FDI companies to reduce their investment capital. However, from the regulations on the charter capital reduction, to reduce the investment capital, the FDI company must explain that the investment capital has not been fully disbursed to return it to the investors; the financial statement has not recorded losses; the investors ensure that all debts and other property obligations are fully paid after the capital reduction.
Notices when changing the charter capital of a foreign-invested company:
The company reduces the capital which is one of the cases: the company has been doing business for 2 years or many consecutive years from the date of company establishment registration and that company has guaranteed to pay all debts and other property obligations after the refund payment to members: The company must fully contribute investment capital, charter capital on time and be recorded in the financial statements of the business. The company is only entitled to return partially to members/shareholders in proportion to their contributed capital in the company’s charter capital.
Capital reduction company which is one of the cases: the charter capital is not paid in full and on time by the members/owners/shareholders as stipulated in the Law on Enterprise 2020: The company carries out capital reduction within 30 days.
In case a joint-stock company reduces its charter capital and the shareholder has not contributed charter capital in full within the time limit as stipulated in the Law on Enterprise 2020: Before the enterprise applies capital reduction, the management shall make a plan and sell unpaid shares to existing shareholders. In case no existing shareholders buy, the management offers a private offer under the provisions on share offering and private share offering in the Law on Enterprise 2020.
Customers wishing to perform procedures to reduce capital for foreign-invested companies (FDI companies) please contact Viet An Law for the fastest support!