WHAT IS INVESTMENT CAPITAL? CAN THE COMPANY’S LOAN CAPITAL FROM INVESTORS BE CONVERTED INTO CONTRIBUTED CAPITAL?
QUESTION
Dear TLK Law Firm, I currently have a question and hope that you can answer the problem as follows: I am a Russian citizen investing in the Vietnamese market. However, the company I am cooperating in investing in will borrow me a sum of money and I want to convert the loan capital the company is borrowing me into contributed capital? Looking forward to your company's answer. Thank you!
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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
Currently, Vietnam is a potential market attracting foreign investors to invest and do business. When foreign investors invest in Vietnam, they will invest in one or several certain forms of capital contribution according to the provisions of Vietnamese law. During operations, many investors need to mobilize capital from abroad through loans. Due to the practical situation and operational needs, investors want to convert the borrowed capital into contributed capital of the business. However, investors do not clearly understand whether it is possible to convert the company's loan capital from investors into contributed capital? This is a question that many customers sent to TLK Law Firm.
Therefore, through this article, we will answer your questions about "What is investment capital? "Can the company's loan capital from investors be converted into contributed capital? ”.
Photo 1. What is investment capital? Can the company's loan capital from investors be converted into contributed capital?_Hotline: 0972118764
I. SOME IMPORTANT LEGAL ISSUES RELATED TO INVESTMENT CAPITAL, CONVERTING LOAN CAPITAL FROM THE COMPANY IS LOANING FROM INVESTORS INTO CONTRIBUTED CAPITAL
1. What is investment capital? What is contributed capital? What is converting loan capital into contributed capital?
Pursuant to the Investment Law 2020, investment 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 investment activities business. Assets include objects, money, valuable papers, property rights and assets including real estate and movable assets that can be existing assets or assets formed in the future.
Contributed capital represents capital contribution to the company. According to the provisions of the Enterprise Law 2020, capital contribution is understood as the contribution of assets to form the company's charter capital. This capital contribution is made when establishing a new enterprise or contributing additional charter capital of an established enterprise.
Converting loan capital into contributed capital means that instead of recovering the debt, the lender will use that receivable debt to "buy" the company's own shares/capital contribution. At that time, the lender will become the owner/shareholder/member of the company.
2. 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.
3. Cases where the procedure for granting an investment registration certificate is not required
Pursuant to the Investment Law 2020, cases where the procedure for granting an investment registration certificate is not required include:
(1) Investment projects of domestic investors;
(2) Investment projects of economic organizations do not fall into 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;
- There is an economic organization specified in the Investment Law 2020 that holds more than 50% of charter capital;
- There are foreign investors and economic organizations specified in the Investment Law 2020 holding more than 50% of charter capital.
(3) Investment in the form of capital contribution, share purchase, purchase of capital contribution of economic organizations.
Thus, when investors fall into the above cases according to the provisions of Vietnamese law, they will not have to carry out the procedure for granting an investment registration certificate.
=> See more: Comprehensive investment project termination and consulting services
Photo 2. What is investment capital? Can the company's loan capital from investors be converted into contributed capital?_Hotline: 0972118764
II. SUMMARY OF THE ANSWER SECTION: WHAT IS INVESTMENT CAPITAL? IS IT POSSIBLE TO CONVERT LOANS A COMPANY IS LOANING FROM INVESTORS INTO CONTRIBUTED CAPITAL?
Dear Customers, from the above synthesis and analysis, TLK Law Firm would like to give the following answer:
Investment capital is money and assets that parties carry out business investment activities. In addition, 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 outstanding loan balance into shares or capital contribution in the borrower.
=> See more: How long does it take to dissolve an investment project?
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.
IV. SOME QUESTIONS RELATED TO INVESTMENT CAPITAL, CONVERTING LOAN CAPITAL FROM THE COMPANY IS LOANING FROM INVESTORS INTO CONTRIBUTED CAPITAL
Question 1: How long does an investment project outside an economic zone have an operating term?
Reply:
Pursuant to the Investment Law 2020, the operating term of investment projects outside economic zones must not exceed 50 years. However, investment projects implemented in areas with difficult socio-economic conditions, areas with particularly difficult socio-economic conditions or investment projects with large investment capital but recovered If the capital is slow, the operating term of the investment project may be longer but not more than 70 years.
Question 2: What are the cases in which an investor must stop or partially stop the operation of an investment project?
Reply:
Pursuant to the Investment Law 2020, the state management agency in charge of investment decides to stop or partially stop the operation of an investment project in the following cases:
(1) To protect relics, relics, antiquities, and national treasures according to the provisions of the Cultural Heritage Law;
(2) To remedy violations of the law on environmental protection at the request of the state environmental management agency;
(3) To implement measures to ensure labor safety at the request of state labor management agencies;
(4) According to court judgments, decisions, and arbitration awards;
(5) The investor does not comply with the investment policy approval and Investment Registration Certificate and has been sanctioned for administrative violations but continues to violate them.
Thus, when an investment project falls into the above cases, the investor must seriously suspend or partially stop the operation of the investment project according to the decision of the state management agency.
Question 3: In what cases does an investor terminate the operation of an investment project?
Reply:
Pursuant to the Investment Law 2020, investors will have to terminate the operation of investment projects in the following cases:
(1) The investor decides to terminate the operation of the investment project;
(2) According to the conditions for termination of operations specified in the contract and charter of the enterprise;
(3) Expiration of the investment project's operating term.
Thus, when falling into one of the above cases, investors must terminate their investment activities according to the provisions of law.
=> See more: Is it possible for an enterprise to carry out steps of dissolving procedures simultaneously at multiple agencies?
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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