See details of regulations on contributing charter capital of foreign-invested companies such as capital contribution forms and ownership ratios of foreign investors in enterprises in this article of fdiinvietnam.com.
Legal basis
- Investment Law No. 61/2020/QH14 (hereinafter referred to as the Investment Law);
- Decree No. 31/2021/ND-CP guiding the Investment Law;
- Enterprise Law No. 59/2020/QH14 (referred to as Enterprise Law).
Forms of investment of foreign investors in Vietnam
Foreign investors are individuals with foreign nationality, organizations established under foreign law and these individuals and organizations carry out investment and business activities in Vietnam (Pursuant to Clause 19, Article 3 of the Investment Law);
Foreign investors can invest in business in Vietnam in the forms prescribed in Article 21 of the Investment Law as follows:
- Investing capital to establish economic organizations;
- Investing in capital contribution, buying shares, buying capital contributions of other economic organizations;
- Investment project implementation;
- Investment in the form of BCC contract (Business cooperation contract signed between investors to cooperate in business, divide profits/products according to the provisions of law without establishing an economic organization in Vietnam);
- Investment forms and new types of economic organizations according to Government regulations.
However, among the forms of business investment listed above, the two forms of investment in establishing an economic organization and investment in contributing capital, buying shares, buying capital contributions are the most popular forms in Vietnam. Investors who want to invest in these two forms can refer to the detailed procedures in the article on procedures for establishing a foreign-invested company of fdiinvietnam.com.
Regulations on charter capital contribution of foreign invested companies
Whether a foreign investor establishes a foreign-invested company or contributes capital, buys shares, or contributes capital to a Vietnamese enterprise, the contribution of charter capital by a foreign investor must comply with the following regulations:
1. Forms of charter capital contribution by foreign investors
According to Article 34 of the Law on Enterprises, foreign investors can contribute charter capital/business investment capital by:
- Vietnamese Dong;
- Freely convertible currency;
- Yellow;
- Land use rights;
- Intellectual property rights to intellectual property;
- Technological processes, technical know-how, other assets that we can value in Vietnamese Dong.
Note:
- In the most common case – contributing charter capital/investment capital in Vietnamese Dong or freely convertible foreign currency, foreign investors can only contribute capital by transfer through an investment capital contribution account opened at a commercial bank. The investment capital contribution account can be a direct investment capital contribution account or an indirect investment capital contribution account;
- The deadline for members and shareholders who are foreign investors to fully contribute the charter capital is within 90 days after the company is granted a certificate of business registration.
2. Ownership ratio of foreign investors in Vietnamese enterprises
To invest in establishing an economic organization or to contribute capital, buy shares, or buy capital contributions, foreign investors must meet certain market access conditions.
According to Point a, Clause 3, Article 9 of the Investment Law, one of the conditions for foreign investors to access the Vietnamese market as stipulated in the List of industries and occupations with restricted market access is “The ratio of charter capital ownership of foreign investors in economic organizations”.
Pursuant to Clause 10, Article 17 of Decree 31/2021/ND-CP, the following cases of restrictions on foreign investors’ ownership ratio as prescribed in international treaties on business investment are applied:
- In case there are many foreign investors contributing capital, purchasing shares, purchasing capital contributions in the same economic organization and subject to one or more international treaties on business investment: The total ownership ratio of all foreign investors in the same economic organization must not exceed the highest ratio as prescribed by the international treaty with provisions on the capital ownership ratio of foreign investors for a specific industry or profession;
- In case there are many foreign investors from the same country/territory contributing capital, purchasing shares, or purchasing capital contributions in an economic organization: The total capital ownership ratio of all such investors must not exceed the capital ownership ratio prescribed in the international investment treaty applicable to such investors;
- For public companies, securities companies, securities investment fund management companies or securities investment funds, securities investment companies : Apply according to the provisions of the law on securities (Securities Law 2019 and legal documents guiding its implementation);
- In case an economic organization receiving capital investment has many business lines and professions for which international treaties on investment have different provisions on the capital ownership ratio of foreign investors : The capital ownership ratio of foreign investors in that economic organization must not exceed the foreign ownership ratio restriction for the business line and profession with the lowest foreign ownership ratio restriction.
Thus, we can see that the capital ownership ratio of foreign investors depends on the industry, business investment profession and international investment regulations.
3. Determine the limit on foreign investors’ capital ownership ratio
To determine the foreign investor ownership limit in the company’s charter capital, you need to determine the following factors:
- Investor nationality;
- Scope, field of operation, business lines;
- Investment form.
From the above factors, you will be able to determine the international treaties of which Vietnam and the investor’s country are members, and at the same time determine whether the investor and enterprise are subject to the regulation of that international treaty regarding the capital ownership ratio or not.
If so, it is mandatory to comply with that regulation. If not, we can continue to determine whether the business sector or profession according to the provisions of Vietnamese specialized laws has conditions on capital ratio or not.
If not subject to any international treaties and not included in the List of business investment sectors with limited foreign ownership, the ownership ratio of foreign investors may not be limited and the ownership ratio may be up to 100%.
See more: Procedures for increasing charter capital of foreign invested companies.
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Above are the shares of fdiinvietnam.com about contributing charter capital in a foreign invested company. If businesses or investors need more information or need to adjust investment capital, they can contact fdiinvietnam.com immediately for support.
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Some questions about contributing charter capital of foreign invested companies
1. In what ways can foreign investors contribute charter capital?
Foreign investors contribute capital in Vietnamese Dong, gold, foreign currency, land use rights, intellectual property rights for intellectual properties or technological processes, technical know-how, and other assets that we can value in Vietnamese Dong.
2. Do foreign investors contribute charter capital in cash or by bank transfer?
Foreign investors can contribute capital in Vietnamese Dong or freely convertible foreign currency, but must contribute capital by bank transfer through an investment capital contribution account opened at a commercial bank.
3. In what form do foreign investors usually invest in business in Vietnam?
Foreign investors can contribute capital to do business in Vietnam through the forms prescribed in Article 21 of the Investment Law, of which the two most common forms of investment are: Investment in establishing economic organizations and investment in contributing capital, buying shares, and buying capital contributions.
4. What factors affect the foreign investor’s capital ownership ratio?
The foreign investor’s capital ownership ratio will depend on two factors: industry, business line and regulations of international treaties on investment.
5. In which cases are foreign investors not limited in their capital ownership ratio?
Foreign investors are not limited in their capital ownership ratio if they are not subject to any international treaties and are not included in the List of business lines with foreign ownership restrictions. In that case, the foreign investor’s ownership ratio may not be limited and the ownership ratio may be up to 100%.
Call us at 0978 578 866 (North) – 033 9962 333 (Central) – 033 9962 333 (South) for support.