How can foreign investors contribute capital in cash to Vietnamese enterprises?

Can investors contribute capital in cash to Vietnamese enterprises? How does that process take place? These concerns are a constant impediment to foreign investors prior to their investment in Vietnam. In this article, HTC Vietnam Law Firm would like to clarify the legal provisions on capital contribution in cash to Vietnamese enterprises.

1. Understanding the capital contribution.

Capital contribution is the assets contribution to form the enterprises’ charter capital, including initial capital contribution to establish an enterprise or additional contribution to the charter capital of an established enterprise. Assets contributed as capital are specified as follows:

- Money as Vietnam Dong, fully convertible foreign currencies, gold, the use of lands, intellectual property rights, technology, technical know-how, other assets that are valued in Vietnam Dong

- Only individuals, organizations that are lawful owners or have lawful rights to the above assets have the right to use such assets to contribute capital as prescribed by law.

Therefore, the contributed capital must be the assets listed above or other assets valued in Vietnam Dong.

2. Can foreign investors contribute capital in cash to enterprises?

Foreign investors are individuals with foreign nationality, foreign - established organizations that conduct investment activities in Vietnam. Foreign investors' capital contribution to enterprises shall be conducted through the grant of investment licenses in accordance with the provisions of the investment law.

Clause 3, Article 4 of Circular 06/2019/TT-NHNH stipulates: “The capital contribution in cash of foreign investors, Vietnamese investors must be done through direct money transfer to the capital bank account.” Thus, when foreign investors contributing capital in cash to a company in Vietnam to conduct investment and business activities must contribute in the form of bank transfer, not in cash. The capital contribution in cash includes the capital contribution in Vietnam dong or in a fully convertible foreign currency.

NOTE: In case foreign investors fail to comply with regulations on the form of capital contribution, namely capital contribution in cash, they will be imposed administrative sanction with a sum between 50 and 70 million VND (according to Decree 122/2021/ ND-CP).

In addition to contributing capital in cash to the enterprise, foreign investors can also contribute capital with other assets as prescribed by law.

3. Obligations of enterprises receiving capital contributions in cash from foreign investors

The State Bank promulgated Circular 06-2019-TT-NHNN guiding foreign exchange management for direct foreign investment in Vietnam, accordingly, enterprises receiving capital contribution in cash must open and use direct investment capital bank account. Specifically:

- Must open 01 (one) bank account for direct foreign currency investment at 01 (one) authorized bank to conduct lawful foreign currency revenue and expenditure transactions related to foreign direct investment activities in Vietnam; corresponding to the foreign currency in which capital contribution is made, only open 01 (one) bank account for direct foreign currency investment at 01 (one) authorized bank

- In case investment conducted in Vietnam Dong, investors shall open 01 (one) bank account for direct investment in Vietnam Dong at the authorized bank where the bank account for direct foreign currency investment has been opened to perform the following transactions: lawful revenue and expenditure transactions in Vietnam Dong related to foreign direct investment activities in Vietnam;

Legal consultation services related to foreign investment

HTC Vietnam Law Firm provides consultation services related to capital contribution by foreign investors as follows:

- Matters related to choosing the right type of business for foreign investors;

- Investment registration procedures for foreign investors;

- Guide customers to draft and complete the documents related to the procedures for registration of capital contribution, purchase of shares, purchase of contributed capital of economic organizations;

- Guide customers to draft and complete the documents related to the procedures for changing shareholders and members;

- Representing the Client to work with the competent authority.

Service Quality Commitment

The following are HTC Vietnam Law Firm’s Principles of Operation: Conscientious - Effective - Reliable. HTC Vietnam Law Firm assures quality, specifically as follows:

Ensure that the work is carried out according to the agreed schedule, in accordance with the law, and in accordance with the code of ethics and Codes of Conduct of Vietnamese lawyers.

Give priority to customers' interests, and make every effort to provide customers with the best quality of service.

Respect the confidentiality of information that clients provided and information pertaining to the clients.

We are looking forward to a long-term cooperation.

Best Regards!

(Writer: Trinh Minh Phuong/200; Date: 02/05/2022

Translator: Vu Ngoc Anh)