Foreign Investment Through Charter Capital Contribution in Vietnam: Comprehensive Guide

Investment 22/09/2023

Vietnam has rapidly emerged as a preferred destination for foreign investors looking to capitalize on that robust economic growth and favorable business environment. The Vietnamese government has implemented various policies and regulations to attract foreign capital, and one of the key avenues for foreign investment is through charter capital contribution. In this article, we will explore the legal framework and requirements for foreign investment through charter capital contribution based on Vietnamese law.

Foreign Investment Through Charter Capital Contribution in Vietnam: Comprehensive Guide

Vietnam has rapidly emerged as a preferred destination for foreign investors looking to capitalize on that robust economic growth and favorable business environment. The Vietnamese government has implemented various policies and regulations to attract foreign capital, and one of the key avenues for foreign investment is through charter capital contribution. In this article, we will explore the legal framework and requirements for foreign investment through charter capital contribution based on Vietnamese law. In this article, Apolo Lawyers - Solicitors & Litigators (Tel:(+84) 903. 419. 479) will inform about the issues about investment fields.

1. Understanding Charter Capital Contribution

Charter capital refers to the total value of assets that shareholders or members contribute to establish a limited liability company (LLC) or joint-stock company (JSC). In the context of foreign investment, charter capital contribution is the amount of capital that foreign investors inject into a Vietnamese company to establish or expand investor business operations.

Foreign Investment Through Charter Capital Contribution in Vietnam: Comprehensive Guide

2. Legal Framework for Foreign Investment

Foreign investment in Vietnam is governed by various laws and regulations, with the primary one being the Law on Investment and the Law on Enterprises. These laws provide the legal basis for foreign investors to contribute charter capital and participate in the Vietnamese market.

3. Charter Capital Requirements for Foreign Investors

To contribute charter capital in Vietnam, foreign investors must adhere to the following key requirements:

3.1. Business Lines and Sectors

Foreign investors should identify and select business lines and sectors that are open to foreign investment. While Vietnam has generally opened up many sectors to foreign investors, there are still some restricted or prohibited areas.

3.2. Minimum Charter Capital

The minimum required charter capital varies depending on the type of business entity:

For a limited liability company (LLC), the minimum charter capital requirement is generally not specified in the Law on Enterprises but should be sufficient for the planned business activities.

For a joint-stock company (JSC), the minimum charter capital requirement is stipulated by law and can vary depending on the sector and scale of the business.

3.3 Contribution Methods

Foreign investors can contribute charter capital in various forms, including cash, assets, intellectual property, technology transfer, and land use rights. The contribution must be made in accordance with the investment license and relevant laws.

3.4. Registration and Approval

Foreign investors must obtain an Investment Registration Certificate (IRC) from the local Department of Planning and Investment (DPI). The IRC serves as proof of the investment and specifies details such as capital, business lines, and duration.

Profit Repatriation: They can repatriate profits and transfer funds abroad in compliance with foreign exchange regulations.

Access to Incentives: Depending on the sector and location, foreign investors may be eligible for investment incentives, including tax breaks and preferential land use.

Foreign Investment Through Charter Capital Contribution in Vietnam: Comprehensive Guide

4. Procedures for Charter Capital Contribution of Foreign Investors

Foreign investors looking to contribute charter capital in Vietnam must navigate a well-defined set of procedures in accordance with Vietnamese law. These procedures are designed to ensure transparency, legality, and the protection of both foreign investors and the interests of the Vietnamese state. Below, we outline the key steps and processes involved in charter capital contribution by foreign investors:

4.1. Investment Registration

Foreign investors must start by obtaining an Investment Registration Certificate from the local Department of Planning and Investment. This certificate is a fundamental document that validates the foreign investors intention to contribute charter capital for investor business venture in Vietnam. The application for the IRC typically involves the following steps:

Submission of the investment application: The foreign investor submits an investment application to the DPI, providing details about the proposed investment, including the amount of charter capital, business activities, and the location of the investment.

Review and evaluation: The DPI reviews the application to ensure it complies with legal requirements and assesses is feasibility.

Issuance of the IRC: Once the DPI approves the investment application, they issue the IRC to the foreign investor. This certificate serves as legal proof of the investment and outlines specific conditions and obligations.

4.2. Opening a Capital Account

After obtaining the IRC, the foreign investor must open a capital account at a licensed bank in Vietnam. This account is essential for conducting financial transactions related to the charter capital contribution. The investor should provide the bank with the IRC and any other required documents.

4.3. Contribution of Charter Capital

Foreign investors can contribute charter capital in various forms, including:

Cash: Depositing the capital amount into the capital account opened in step 2.

Assets: Transferring assets such as machinery, equipment, or real estate to the company as part of the charter capital.

Each contribution form must adhere to specific legal requirements and valuation standards. The contribution should be made in accordance with the terms and conditions stipulated in the companys charter and relevant laws.

Foreign Investment Through Charter Capital Contribution in Vietnam: Comprehensive Guide

4.4. Obtaining the Enterprise Registration Certificate (ERC)

After the charter capital has been contributed, the next step is to apply for the Enterprise Registration Certificate (ERC). This certificate officially establishes the business entity in Vietnam. The application for the ERC typically involves the following steps:

Submission of the application: The investor submits the application to the DPI, providing details about the companys operations, charter capital, and organizational structure.

Review and verification: The DPI reviews the application and verifies that the companys charter capital has been contributed in compliance with the law.

Issuance of the ERC: Upon approval, the DPI issues the ERC to the company. This certificate is essential for commencing business activities in Vietnam.