Investment Capital for Foreign Companies in Vietnam: Regulations, Adjustments, and Compliance
Vietnam’s thriving economy and business-friendly environment make it a top choice for foreign investment. To succeed, foreign companies must fully understand the legal framework surrounding investment capital for foreign companies in Vietnam, including regulations, capital adjustments, and compliance requirements. This comprehensive guide explores essential aspects to help investors navigate Vietnam’s legal landscape.
1. Regulations on Capital for Establishing a Business
Foreign investors in Vietnam must comply with the Law on Enterprises 2020 and the Law on Investment 2020 when defining their capital structure. Key types include:
Charter Capital
- Purpose: Registered capital that forms the financial foundation of the business.
- Contribution: Must be provided fully within a specific timeframe in cash or assets, as outlined in Article 47 of the Law on Enterprises 2020.
- Usage: Covers operational costs such as machinery, equipment, and other necessary investments.
Contributed Capital
- Definition: Actual funds or assets contributed by shareholders or members.
- Usage: Can increase charter capital, fund projects, or supplement working capital.
- Compliance: Article 75 and Article 112 mandate accurate recording based on ownership ratios.
Mobilized Capital
- Purpose: Non-fixed financial resources raised to support business operations and expansion projects.
- Usage: Complements contributed capital for investment purposes.
Investment Capital
- Definition: Total planned capital allocated for investment phases, including charter and mobilized capital.
- Legal Provisions: Governed by Article 4 of the Law on Enterprises 2020 and Article 3 of the Law on Investment 2020.
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2. Restrictions on Capital Ownership for Foreign Investors
Ownership ratios for foreign investors are regulated to maintain balance in strategic industries, safeguard national interests, and comply with WTO commitments.
- Examples: In advertising services (CPC 871), foreign investors must form joint ventures due to ownership restrictions under Vietnamese law.
3. Responsibilities When Capital Changes Occur
Foreign-invested enterprises often need to adjust capital to align with growth strategies. Such changes require strict adherence to the Law on Enterprises 2020 and the Law on Investment 2020.
Capital Increase/Decrease
- Purpose: Increase investment capital to fund expansion or decrease capital when downsizing operations.
- Compliance: Report all adjustments to investment and business authorities. Updates must be reflected in the Enterprise Registration Certificate and Investment Registration Certificate.
Capital Transfer
- Definition: Members or shareholders transferring contributed capital to others.
- Regulations: Governed by Article 51 of the Law on Enterprises 2020, ensuring legality and protection of existing members’ and shareholders’ interests.
Foreign Investor Contributions and Purchases
- Procedure: Registration with authorities is required when foreign investors contribute capital, purchase shares, or acquire ownership stakes under Article 24 of the Law on Investment 2020.
- Documentation: The company must update ownership information and member/shareholder details with the Business Registration Authority upon approval.
4. Strategic Importance of Compliance
Compliance with regulations on investment capital for foreign companies in Vietnam ensures smooth operations and legal security. Foreign enterprises should proactively report adjustments, align with sector-specific ownership limits, and adhere to financial reporting requirements for sustained growth.
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