CONDITIONS FOR CONVERTING LOANS INTO PROJECT CAPITAL?
QUESTION
Dear TLK Law Firm, I currently have a question and hope to hear from you as follows: I am the owner of a private enterprise which specializes in fish sauce production. I lent a lot of money to a partner company. However, that company cannot afford to repay its debt, so I want to convert the loan into capital to contribute to that company's project, and what conditions must be met? Looking forward to your company's answer. Thank you!
RELATED ARTICLES
1. Conditions for converting loans into project capital?
3. What do documents for converting loan into investment capital include?
Thank you for your trust and sending questions to TLK Law Firm. Based on legal regulations and practical solutions, we would like to send you the following consulting content:
LEGAL BASIS
1. Investment Law No. 61/2020/QH14 passed by the National Assembly on June 17, 2020;
2. Circular No. 12/2022/TT-NHNN issued by the State Bank of Vietnam on September 30, 2022 providing guidance on foreign exchange management for foreign borrowing and debt repayment of enterprises;
3. Other legal documents providing relevant guidance.
CONSULTATION CONTENT
During operation, businesses do not always have capital available to maintain investment project operations. In many cases, it is necessary to borrow capital to meet the project's operating needs. However, the business does not always repay that loan but it may be due to the needs of both parties and the parties can agree to use that loan to convert into project capital. However, what are the conditions for converting loans into project capital? This is a question that many customers sent to TLK Law Firm.
Therefore, through this article, we will answer your questions about "Conditions for converting loans into project capital?".
Photo 1.Conditions for converting loans into project capital?_Hotline: 0972118764
I. SOME IMPORTANT LEGAL ISSUES RELATED TO CONDITIONS FOR CONVERTING LOAN INTO PROJECT CAPITAL
1. Cases of debt repayment not being made through foreign loan or debt repayment accounts
Pursuant to Circular No. 12/2022/TT-NHNN, cases of debt repayment not through foreign loan or debt repayment accounts include:
(1) Repayment of debt in the form of providing goods and services to the lender;
(2) Debt repayment through the lender and the borrower agreeing to convert the outstanding debt into shares or capital contribution in the borrower;
(3) Debt repayment through the lender and the borrower agreeing to exchange the loan balance into shares or capital contribution owned by the borrower;
(4) Repayment of medium and long-term foreign loans through clearing receivables directly with the lender;
(5) Repay debt through the borrower's account opened abroad (in case the borrower is allowed to open an account abroad to make a foreign loan).
Thus, with the above forms of debt repayment, economic organizations can choose to convert in accordance with the lender according to the provisions of law.
2. Conditions for converting the loan into project capital
Pursuant to Circular No. 12/2022/TT-NHNN, when converting a loan into project contribution capital, the following conditions must be met:
(1) Within 05 working days from the date of repayment by converting the loan into project capital, the lender is responsible for notifying and sending documents proving that debt repayment has been made in the following forms. Not using foreign loan accounts to pay each other's debt;
(2) Notify and send supporting documents to let the bank providing account services know and continue to monitor the borrower's foreign loan;
(3) Is a legal loan and has been registered with the State Bank.
Thus, when all the conditions for converting the loan into investment capital are met, the borrower and lender will carry out conversion procedures according to the provisions of law.
3. Implementation of investment activities of economic organizations with foreign investment capital
Pursuant to the Investment Law 2020, when carrying out investment activities of economic organizations with foreign investment capital, economic organizations must meet the conditions and carry out investment procedures according to regulations for foreign investors as follows:
(1) Investing in establishing other economic organizations;
(2) Investing in capital contributions, purchasing shares, purchasing capital contributions from other economic organizations;
(3) Investment in the form of BCC contract if that economic organization falls into one of the following cases:
- There are foreign investors holding more than 50% of the charter capital or the majority of partners are foreign individuals for economic organizations that are partnerships;
- Having an economic organization holding more than 50% of charter capital;
- There are foreign investors and economic organizations holding more than 50% of charter capital.
Thus, for economic organizations that do not fall into the above cases, they need to meet the investment conditions and procedures for domestic investors and established foreign-invested economic organizations. Established in Vietnam, if there is a new investment project, procedures for implementing that investment project are carried out without necessarily establishing a new economic organization.
=> See more: Fast and reputable investment capital reduction service for foreign companies.
Photo 2.Conditions for converting loans into project capital?_Hotline: 0972118764
II. SUMMARY OF THE ANSWER SECTION: CONDITIONS FOR CONVERTING A LOAN INTO PROJECT CONTRIBUTION CAPITAL?
Dear Customers, from the above synthesis and analysis, TLK Law Firm would like to give the following answer:
According to the provisions of Circular No. 12/2022/TT-NHNN, the parties can completely agree to convert the loan into contributed capital by repaying the debt through the lender and the borrower agreeing to convert the debt balance into shares or capital contribution in the borrower when the following conditions are met:
1. Within 05 days, the borrower is responsible for notifying and sending documents proving the conversion of the loan into project capital to the borrower;
2. Notify and send documents proving the conversion of the loan into project capital to the bank providing account services and continue to monitor the borrower's foreign loan.
=> See more: Can foreign investors withdraw from Vietnam by transferring 100% of the project to Vietnamese investors?
III. HOW SHOULD YOU BEST CHOOSE AN ORGANIZATION THAT PROVIDES LEGAL SERVICES?
An organization providing quality and reputable legal services should have the following criteria:
First: Must be an official legal organization with a legal operating license;
Second: It is better if the Board of Directors must be lawyers, experienced and have high degrees;
Third: Have a team of lawyers and a systematic, professional, and thoroughly trained human resources system;
Fourth: Friendly, dedicated and make every effort for the benefit of customers. Consider customer satisfaction and work quality as your own honor;
Fifth: Professional, thoughtful, flexible and logical service provision process to optimize work performance and save customers' time;
Sixth: Reasonable and competitive service prices;
Seventh: Rich services in both fields of supply and service packages in the same field for customers to choose the appropriate service package, as well as comprehensive support for customers throughout the operation process. movement;
Eighth: Have the ability to Connect - Promote commercial relationships for customers if customers have needs,...
Finding a comprehensive, professional and reputable legal consulting organization is what every customer wants. Because no one wants to risk losing both money and time while the results are not as expected. However, finding such an organization is not easy because the number of service providers in the Vietnamese market today is very large with varying quality.
A suggestion for you: Although our TLK Law Firm does not dare to claim to be the company providing the best legal services on the market, we satisfy all of the above criteria and more will definitely be a good choice for you.
=> See more: When withdrawing capital, in what ways do foreign investors receive their contributed capital back?
IV. SOME QUESTIONS RELATED TO CONDITIONS FOR CONVERTING LOAN INTO PROJECT CAPITAL
Question 1: What is the purpose of opening and using a payment account in Vietnam Dong for non-residents at credit institutions and foreign bank branches in Vietnam?
Reply:
Pursuant to Circular No. 12/2022/TT-NHNN, lenders open and use payment accounts in Vietnam Dong of non-residents at 01 credit institution or foreign bank branch in Vietnam to fulfill the following purposes:
(1) Disbursement and debt recovery of foreign loans in Vietnam Dong in cases where the borrower is a foreign direct investment enterprise borrowing from profits from direct investment activities in the territory The lender's Vietnam is the foreign investor contributing capital to the borrower;
(2) Debt recovery of loans subject to registration according to the provisions of Circular No. 12/2022/TT-NHNN but not eligible for registration confirmation;
(3) Debt recovery of outstanding foreign loans but the written confirmation of registration or change registration is invalidated due to the dossier containing fraudulent information or fake documents as prescribed in the Circular No. 12/2022/TT-NHNN.
Thus, to easily collect debt, the lender needs to open and use a payment account at a credit institution or foreign bank branch in Vietnam.
Question 2: What types of foreign investment are there?
Reply:
Pursuant to the Investment Law 2020, investors carry out investment activities abroad in the following forms:
(1) Establish an economic organization according to the laws of the investment receiving country;
(2) Investment in the form of contracts abroad;
(3) Contribute capital, buy shares, buy capital contributions from economic organizations abroad to participate in the management of that economic organization;
(4) Buy and sell securities and other valuable papers or invest through securities investment funds and other intermediary financial institutions abroad;
(5) Other forms of investment according to the laws of the receiving country.
Thus, with the above types of overseas investment, domestic investors can choose and invest when they meet all the conditions prescribed by law in the field of investment.
Question 3: What is the borrower's foreign loan and debt repayment account?
Reply:
Pursuant to Circular No. 12/2022/TT-NHNN, foreign loan and debt repayment account is the borrower's payment account opened at the bank providing account services to withdraw capital and repay debt. foreign loans. In addition, derivative transactions are also carried out to prevent risks on foreign loans and other money transfer transactions related to foreign borrowing and debt repayment activities, and security for foreign loans.
=> See more: What documents need to be prepared for an investment capital reduction application?
Above is some general advice that we would like to offer to our customers. As a service provider, we always understand and are ready to accompany and solve the needs and difficulties that customers are facing. If you still have questions or need more in-depth advice, please contact the hotline: 0972118764 to receive direct advice from a lawyer (completely free consultation).
Thank you very much!
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