IF A FOREIGN COMPANY IS MAKING A LOSS, CAN THE INVESTOR CONTRIBUTE MORE CAPITAL TO THE COMPANY?
QUESTION
Dear TLK Law Firm, we hope that your company will answer the following question: I am a foreign investor who has established a foreign company in Vietnam. Currently, the company has been in operation for more than a year but has continuously lost capital, so I want to contribute more capital to the company. However, I do not clearly understand the legal regulations on this issue. So, lawyers let me ask: If a foreign company makes a loss, can the investor contribute more capital to the company? Looking forward to your company's answer. Thank you!
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2. What documents need to be prepared for an investment project capital increase application?
3. Can foreign investors contribute capital to 100% Vietnamese-owned companies?
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. Decree No. 31/2021/ND-CP issued by the Government on March 26, 2021 detailing and guiding the implementation of a number of articles of the Investment Law;
3. Decree No. 122/2021/ND-CP issued by the Government on December 28, 2021 regulating penalties for administrative violations in the field of planning and investment;
4. Other legal documents providing relevant guidance.
CONSULTATION CONTENT
In recent years, our State has always attached great importance to attracting investment capital from abroad. The Government continuously improves the investment environment, creating favorable conditions for domestic and foreign businesses, with special emphasis on implementing and developing laws on incentives and rights of foreign investors when investing in Vietnam. Currently, there are many foreign investors investing in Vietnam in the form of establishing foreign companies. When these companies go into operation, there will be periods of profitability or periods of losses. When making losses, foreign investors often tend to want to contribute more capital to invest in the company. However, when customers make capital contributions to the company, they are very hesitant, wondering whether Vietnamese law allows it or not? Through the article below, we - TLK Law Firm will help you answer questions related to foreign companies making losses, can investors contribute more capital to the company?
Photo 1. If a foreign company is making a loss, can the investor contribute more capital to the company?_ Hotline: 0972118764
I. SOME IMPORTANT LEGAL ISSUES RELATED TO INVESTORS CONTRIBUTING CAPITAL TO FOREIGN COMPANIES
1. The relationship between investment project capital and company charter capital
In the case of investment in the form of establishing a foreign enterprise in Vietnam by foreign investors, many people often mistakenly believe that the investment project capital and the company's charter capital are the same. However, these two types of capital are completely different but are closely related to each other: Specifically as follows:
Pursuant to the Investment Law 2020, investment project capital is money and other assets according to the provisions of civil law and international treaties to which the Socialist Republic of Vietnam is a member to carry out Business Investment activities.
Pursuant to the Enterprise Law 2020, the company's charter capital is the total value of assets contributed or committed to by company members and owners when establishing a limited liability company or partnership, is the total par value of shares sold or registered to buy when establishing a joint stock company.
In essence, these two types of capital are completely different but have an interaction with each other. Because, for investment projects to establish foreign companies in Vietnam, increasing the company's charter capital (the investor contributes more capital to the company) increases the capital of the investment project.
Thus, when the investor contributes additional capital to a foreign company, he must register to increase the investment capital of the investment project and register to increase the company's charter capital.
=> See more: Consulting on establishing investment projects quickly, professionally and comprehensively
2. What is registration to increase investment project capital?
Pursuant to the Investment Law 2020, during the implementation of an investment project, investors have the right to adjust goals, transfer part or all of the investment project, merge projects or divide or split a project into multiple projects, use land use rights and assets on land under investment projects to contribute capital to establish enterprises, business cooperation or other contents and must be in accordance with the provisions of law.
Investors carry out procedures to adjust the Investment Registration Certificate in case the investment project adjustment changes the content of the Investment Registration Certificate.
Thus, in essence, registering to increase capital of an investment project is the foreign investor making adjustments to the capital content recorded in the previously issued Investment Registration Certificate. Because increasing the capital of an investment project will change the content of the Investment Registration Certificate, it needs to be adjusted to ensure the accuracy of the information on this Certificate.
II. PROCESS OF IMPLEMENTING PROCEDURES FOR CONTRIBUTING ADDITIONAL CAPITAL TO FOREIGN COMPANIES
1. Steps to carry out procedures for contributing additional capital to foreign companies
Step 1: The investor prepares documents to adjust the Investment Registration Certificate regarding the content of increasing capital of the investment project;
Step 2: Foreign investors submit documents to the Investment Registration Authority;
Step 3: The investment registration agency receives and appraises documents or requests amendments and supplements (if necessary);
Step 4: The investment registration agency decides to adjust the Investment Registration Certificate regarding the content of increasing capital of the investment project;
Step 5: The investor carries out procedures to increase charter capital at the Business Registration Office.
2. Document components and procedures for contributing additional capital to foreign companies
A. Document components:
For registration procedures to increase investment capital of investment projects, documents include:
1. Document requesting adjustment of investment project to increase investment project capital;
2. Report on the implementation of investment projects up to the time of adjustment;
3. Investor's decision on adjusting investment projects for institutional investors;
4. Explain or provide documents related to the adjustment
- Documents on the investor's legal status;
- Documents proving the investor's financial capacity include at least one of the following documents: the investor's 02 most recent financial statements; commitment to financial support from the parent company; commitment to financial support from financial institutions; guarantee of the investor's financial capacity; Other documents proving the investor's financial capacity;
- Investment project proposal includes the following main contents: investor or form of investor selection, investment objective, investment scale, investment capital and capital mobilization plan, location, deadline, implementation progress, information on current land use status at the project location and proposed land use needs (if any), labor needs, proposals for investment incentives, socio-economic impact and efficiency of the project, preliminary assessment of environmental impact (if any) according to the provisions of law on environmental protection.
For registration procedures to increase charter capital, documents include:
1. Notice of change in business registration content signed by the legal representative of the enterprise;
2. Resolutions and decisions of the company owner for one-member limited liability companies; Resolutions, decisions and meeting minutes of the Board of Members for limited liability companies with two or more members, partnerships, and the General Meeting of Shareholders for joint stock companies on capital changes regulations;
3. Document of the Investment Registration Authority approving the capital contribution, share purchase, purchase of capital contribution of foreign investors, foreign-invested economic organizations in cases where implementation is required Procedures for registering capital contribution, purchasing shares, purchasing capital contributions according to the provisions of the Investment Law.
Note: In addition to the above documents, the investor needs to prepare the following documents to complete the application in both procedures:
- Power of attorney for the person submitting the application (in case of authorizing someone else to do so);
- Certified copy of personal legal documents (ID card, citizen identification card, valid passport) of the person performing the procedure;
- Other documents required by competent state agencies (if any).
Number of documents: 01 (set).
B. Resolution agency
For registration procedures to increase investment capital of investment projects:
1. Management Board of industrial parks, export processing zones, high-tech zones, and economic zones (for investment projects in industrial parks, export processing zones, high-tech zones, and economic zones); or,
2. Department of Planning and Investment (for investment projects outside industrial parks, export processing zones, high-tech zones, and economic zones); or,
3. Investment registration agency where the investor implements the investment project, places or plans to locate the executive office to implement the investment project for the following investment projects:
- Investment projects implemented in 02 or more provincial administrative units;
- Investment projects implemented inside and outside industrial parks, export processing zones, high-tech parks and economic zones;
- Investment projects in industrial parks, export processing zones, high-tech zones, economic zones where the Management Board of industrial parks, export processing zones, high-tech zones, economic zones have not been established or are not within the scope management of the Management Board of industrial parks, export processing zones, high-tech zones, and economic zones.
For registration procedures to increase charter capital:
Business registration office where the foreign company's head office is located.
C. How to do it
For registration procedures to increase investment capital of investment projects:
- Submit directly at the investment registration agency headquarters; or,
- Submit by post to the Investment Registration Authority headquarters; or,
- Done online through the National Investment Information System.
For registration procedures to increase charter capital:
- Submit directly at the investment registration agency headquarters; or,
- Submit by post to the Investment Registration Authority headquarters; or,
D. Implementation results
- The investment registration certificate has had its content regarding investment project capital adjusted;
- Newly issued business registration certificate.
=> See more: Company providing investment certificate adjustment service
III. SUMMARY OF THE ANSWER SECTION: IF A FOREIGN COMPANY IS MAKING A LOSS, CAN THE INVESTOR CONTRIBUTE MORE CAPITAL TO THE COMPANY?
Dear Customers, from the above synthesis and analysis, TLK Law Firm would like to give the following answer:
Investors can contribute capital to foreign companies when the company is making a loss. However, to legally contribute capital, the investor must carry out procedures for adjusting the Investment Registration Certificate regarding the increase in investment capital at the Investment Registration Agency and procedures for registering an increase in charter capital at the Investment Registration Authority. Business registration office - where the foreign company's headquarters is located.
Photo 2. If a foreign company is making a loss, can the investor contribute more capital to the company?_ Hotline: 0972118764
IV. 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;
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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: Cases of terminating investment project activities? Can a project that has not yet expired be terminated?
V. SOME QUESTIONS RELATED TO INVESTORS CONTRIBUTING MORE CAPITAL INTO FOREIGN COMPANIES
Question 1: Is it okay if the electronic Investment Registration Certificate has different content than the Investment Registration Certificate?
Reply:
The answer is No.
Investors can make a written request to the investment registration agency to correct information on the Investment Registration Certificate pursuant to Decree No. 31/2021/ND-CP, in case the Investment Registration Certificate stored as electronic data in the National Investment Information System has different content than the Registration Certificate investment, the Investment Registration Certificate has the content recorded exactly according to the content in the investment registration dossier and has legal value.
The investment registration agency corrects the information on the Investment Registration Certificate within 03 working days from the date of receiving the investor's request.
Question 2: Will an investor who contributes capital to a foreign company only adjusting the Investment Registration Certificate without registering a change in charter capital be punished?
Reply:
The answer is yes.
Pursuant to Decree No. 122/2021/ND-CP, a foreign company that does not register a change in charter capital when increasing its charter capital due to the investor contributing additional capital will be fined by money from 20,000,000 VND to 30,000,000 VND.
In addition, after being fined, the foreign company is also subject to remedial measures by the competent authority: forced to carry out procedures to register changes in charter capital at the Business Registration Office.
=> See more: How to carry out procedures for terminating investment project activities?
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!
Administrative Procedures Department - TLK Law Firm
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