Procedures for extending capital contribution of foreign capital company in Vietnam

For foreign capital companies, after being granted an Investment Registration Certificate, foreign investors must open a foreign direct investment account (capital transfer account) at the Bank and contribute capital through that account within the time limit prescribed by the Enterprise Law and in the Investment Registration Certificate.

The timely contribution of capital is considered extremely important because if it overdue according to the time limit for capital contribution specified on the Investment Registration Certificate, the Bank will not allow to receive investment capital, the company will not be able to receive investment capital to conduct operations. However, being able to contribute capital on time depends on many factors and does not always happen on time. At this time, foreign investors are required to carry out procedures for extending the time limit for contributing investment capital (contents are recorded on the Investment Registration Certificate) or procedures for adjusting the Investment Registration Certificate. In this article, Viet An Law Firm would like to give some legal opinions related to  the procedures for extension of capital contribution of foreign capital companies as follows:

Legal bases

• Investment Law 2020
• Enterprise Law 2020
• Decree 31/2021/ND-CP dated Martch 26^th 2021
• Decree 01/2021/ND-CP dated January 4^th 2021
• Decree 50/2016/ND-CP dated December 01^st 2020

Time limit for investment capital contribution and charter capital in Vietnam

Investors should note the regulations on capital contribution as follows:

On the Investment Registration Certificate of the enterprise, there are criteria of Total investment capital, which includes contributed capital and other types as registered. For capital contributions in accordance with the Law on Enterprises, investors must contribute in full within 90 days from the date of issuance of the Certificate of Business Registration.

The total investment capital on the Investment Registration Certificate shall be transferred from abroad to the investment capital account in accordance with the time limit for capital contribution recorded in the Investment Registration Certificate. If the time limit stated on the Investment Registration Certificate is exceeded, the bank opening the capital account will refuse to accept the capital transferred to the account. Thus, at this time, in order to transfer capital to an investment account, investors need to carry out procedures for adjusting the Investment Registration Certificate, extending the time limit for capital contribution.

The process of extending the time limit for capital contribution

Extension of the time limit for capital contribution is the adjustment of the Investment Registration Certificate, capital contribution progress item. The procedure is as follows:

Step 1: Make a dossier for adjustment of the Investment Registration Certificate

A dossier of adjustment of the Investment Registration Certificate includes:

• A written request for adjustment of an investment project
• Report on the implementation of investment projects
• Decision of the Owner/Members’ Council/General Meeting of Shareholders on adjustment of the Investment Registration Certificate
• Documents proving the capital contribution (if a part of the capital has been contributed)
• A certified copy of the issued Investment Registration Certificate
• Power of attorney for Viet An to carry out the procedure on behalf of

Within 7 working days, the Department of Planning and Investment will examine the dossier and issue a notice of transfer of the dossier to the Inspection Department of the Department for work related to the failure to comply with the capital contribution schedule.

Step 2: Handling administrative violations at the Inspection Department

After the application is transferred to the Inspection Department, the investor waits to receive the Job Offer. When coming to work, investors need to prepare documents as follows:

• Letter of invitation from the Inspection Department;
• Copy of investment registration certificate, enterprise registration certificate;
• Documents proving the investor’s capital contribution;
• An explanation for failure to contribute sufficient capital on time
• Other documents required by the Inspection Department.
• Power of Attorney for Viet An Law on behalf of work

Deadline for settlement:

The person competent to sanction administrative violations must issue a decision to sanction administrative violations within 07 days from the date of making a record of administrative violations.

Penalties for administrative violations due to late capital contribution:

According to Article 13, Decree 50/2016/ND-CP stipulates violations of regulations on investment activities in Vietnam. Depending on the profile and seriousness of the violation, investors may be subject to the following penalties:

• A fine of VND 20,000,000 to VND 30,000,000 shall be imposed for one of the following acts:
  • Failing to carry out procedures for registration of capital contribution, purchase of shares or capital contribution to economic organizations;
  • Failure to carry out procedures for adjustment of investment projects;
  • Extend the project implementation schedule, extend the investment schedule but do not propose in writing to the investment registration agency or have notified but have not been approved in writing by the investment registration agency;
  • Suspending operation of an investment project without notifying in writing the investment registration agency or notifying it without the written approval of the investment registration agency;
  • Procedures for termination of operation of investment projects or procedures for liquidation of investment projects shall not be carried out.
• A fine of VND 30,000,000 to VND 40,000,000 shall be imposed for one of the following acts:
  • Failing to carry out investment activities in accordance with the contents of the investment registration dossier (for cases where they are not eligible for the issuance of an Investment Registration Certificate) or an Investment Registration Certificate, Investment Registration Certificate, Decision on investment policies;
  • Failing to satisfy investment conditions in the form of capital contribution, share purchase or capital contribution of foreign investors;
  • Failure to fully meet the conditions when transferring investment projects;

Based on the explanation dossier and consideration of the violating contents, the inspection agency will decide on the appropriate fine.

After receiving the Decision on sanctioning administrative violations, the investor goes to the State Treasury to pay the fine and provide back documents proving the payment of the fine so that the Inspection Department can complete the dossier and transfer it back to the Foreign Economic Department for further processing of the dossier of extension of the time limit for capital contribution.

Some questions related to procedures for extension of capital contribution of foreign capital companies in Vietnam

What is the time limit for capital contribution in a foreign capital company regulated?

The time limit for capital contribution in a foreign investment company is specified in the Enterprise Law and on the Investment Registration Certificate.

How long is the term of capital contribution in a foreign company?

According to the Law on Enterprises, the time limit for capital contribution in a newly established foreign investment company is 90 days from the date  of issuance of the enterprise registration certificate  of the economic organization implementing the project.

Can the investment capital contribution term expire?

Before the expiry of investment capital contribution, investors need to submit an application for extension of the time limit for capital contribution. In case of expiry of capital contribution, the extended investor may not be approved by the investment registration agency and must carry out inspection and sanction procedures for failure to comply with the project implementation schedule and failure to adjust the investment registration certificate.

Services of establishing foreign capital companies of Viet An Law Firm

• Advising on conditions for establishing a foreign capital company: capital contribution ratio of foreign investors in Vietnam; business conditions for trades; project implementation location; note the procedures before and after the establishment of a foreign capital company;
• Advising on choosing the right type of company for investors: Limited company or joint stock company;
• Advising on opening a capital transfer account, capital contribution duration;
• Consulting and guiding investors to prepare necessary documents to establish a foreign capital company;
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• Representing investors to work with competent state agencies of Vietnam in the process of carrying out company establishment procedures for investors (Application for Investment Registration Certificate, Business Registration Certificate, Business License,  License according to specialized requirements,  make legal entity seals, announce seal samples, procedures after company establishment,…;
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