IMPORTANT NOTES ON CAPITAL CONTRIBUTION, CONTRIBUTED CAPITAL OR SHARE PURCHASE

Vietnam is one of the countries attracting lots of foreign direct investment in the region, mainly in the fields of trade and construction. In addition to the advantages of geographical location and natural conditions, our government promotes administrative procedure reform to create favorable conditions for investors in licensing approval in Vietnam. According to current legal regulations, procedures for capital contribution, contributed capital or share purchase, of foreign investors in companies in Vietnam have been somewhat simplified, clearer, and more transparent. However, to ensure smooth operation after the process of capital contribution, contributed capital or share purchase, some contents need to be noted by investors as in the article below.

Foreign investors have rights to implement the capital contribution, contributed capital or share purchase in enterprises in Vietnam, including a diverse range of subjects

Foreign investors are allowed to contribute capital, purchase shares, and contributed capital purchase in enterprises in Vietnam including:

– Individuals with foreign nationality;

– Individuals holding Vietnamese passports and foreign passports use foreign passports to invest in Vietnam;

– Enterprises and organizations established under the laws of foreign countries;

– Enterprises and other economic organizations with foreign capital established in Vietnam, including:

+ Over 50% of its charter capital is held by a foreign investor(s) or, in case of a partnership, the majority of its general partners are foreigners;

+ There is an economic organization with foreign investors holding more than 50% of charter capital or a majority of partners being foreign individuals holding more than 50% of charter capital;

+ There are foreign investors and economic organizations with foreign investors holding more than 50% of charter capital or the majority of partners are foreign individuals holding more than 50% of charter capital.

Foreign investors can implement the capital contribution, contributed capital or share purchase in enterprises in Vietnam by many methods

Contributing capital to a business organization:

– Purchase of shares of joint-stock companies through the initial public or additional issuance;

– Contribution of capital to limited liability companies and partnerships;

– Contribution of capital to other business organizations not mentioned above.

Purchasing shares or contributed capital of a business organization:

– Purchase of shares in a joint-stock company from such company or its shareholders;

– Purchase of stakes of members of a limited liability company to become a member of such limited liability company;

– Purchase of stakes of a capital contributing member of a partnership to become a capital contributing member of such partnership;

– Purchase of stakes of members of other economic entities not mentioned above.

Foreign investors implementing the capital contribution, contributed capital or share purchase in enterprises in Vietnam need to fully meet the legal conditions

The capital contribution, contributed capital or share purchase in economic organizations of the foreign investors must meet the following regulations and conditions to:

– Satisfy market access conditions applied to foreign investors as prescribed in Article 9 of this Law;

– Ensure national defense and security;

– Comply with regulations of the law on land and conditions for receipt of land use rights and conditions for use of land on islands or border or coastal communes.

Note, compliance with capital contribution, contributed capital or share purchase procedures is the premise for transparent, legal, and smooth investment activities.

>> PROCEDURES FOR CAPITAL CONTRIBUTION, CONTRIBUTED CAPITAL PURCHASE REGISTRATION IN LIABILITY LIMITED COMPANY https://linconlaw.vn/procedures-for-capital-contribution-contributed-capital-purchase-registration-in-liability-limited-company/

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Remarks upon transferring investment money for capital contribution, contributed capital or share purchase by foreign investors

Firstly, the foreign investors must open an investment capital account at a bank licensed to operate in Vietnam.

Money for capital contribution, contributed capital or share purchase must be transferred to this account before being transferred to the capital receiving company (in case of capital contribution), or transferred to the capital receiving company transferor’s account (in case of purchasing shares or contributed capital).

Note: In case of non-compliance with the prescribed investment capital transfer process, foreign investors may face the risk of not being able to transfer investment capital and profits abroad during the business process.

Secondly, the shares and contributed capital that are the subject of transfer must be shares and contributed capital fully paid to the company.

Therefore, before signing a contract to transfer shares or capital contributions, foreign investors should request the transferor or the relevant company to provide full documents proving the amount of shares and contributed capital has been paid in full according to the provisions of law.

Thirdly, it is necessary to comply with tax procedures.

To avoid the cases where foreign investors are implicated due to being accused by competent Vietnamese state agencies of tax evasion or violating income tax obligations related to the transfer of shares, contributed capital, foreign investors should require the transferor to carry out procedures to declare and pay income tax arising within 10 days from the date of signing the contract to transfer shares and contributed capital.

In the case of a foreign investor contributing capital to a limited liability company or partnership, purchasing initial offering shares issued or additionally issued by a joint stock company, or a company receiving contributed capital or equity capital part does not have to carry out procedures for declaring and paying corporate income tax.