Transferring capital contribution to foreigners: Details of procedures

Transferring capital contributions to foreigners is a popular transaction in the context of current international economic integration. However, the legal procedures related to this capital transfer require an understanding of the provisions of Vietnamese law to ensure legality and effectiveness. Long Phan’s article below will provide details about conditions, procedures and important notes when performing this transaction.

Conditions for transferring capital contributions to foreign investors

The transfer of capital contributions to foreign investors must comply with the provisions of Vietnamese law, especially the Law on Enterprise 2020 and the Law on Investment 2020. Below are the necessary conditions that both businesses and investors must comply with. Foreign investment must meet:

For businesses

Enterprises that want to transfer capital contributions to foreign investors need to meet the following conditions:

1. Business line of the transferring enterprise: The enterprise must operate in an industry that the law allows foreign investors to participate in. There are industries that prohibit or limit the capital contribution ratio of foreign investors. For example, the air transport industry has regulations on the maximum ownership ratio of foreign investors.
2. Ownership ratio of foreign investors: Transfer of capital contribution must not change the ownership ratio of foreign investors beyond the allowed limit.
3. Other conditions: The enterprise must have a healthy financial situation, have no legal disputes, and meet other relevant legal regulations.

For foreign investors

When investing in Vietnam, foreign investors need to consider and meet the following conditions:

1. Legal capacity conditions: Foreign investors must have sufficient legal capacity to participate in transactions according to the provisions of host country law and Vietnamese law.
2. Investment conditions: Foreign investors must meet investment conditions in Vietnam, including conditions on nationality, investment field, investment capital…

Procedures for transferring capital contributions to foreigners

Procedures for transferring capital contributions to foreigners include the following steps:

Prepare documents

For procedures to register capital contribution to Vietnamese enterprises, documents that need to be prepared include:

• The registration document for capital contribution, share purchase, or capital contribution includes the following contents: information about the business registration of the economic organization to which the foreign investor intends to contribute capital, buy shares, or contribute capital; business lines and occupations; List of founding shareholders, list of shareholders who are foreign investors (if any); Charter capital ownership ratio of foreign investors before and after capital contribution, share purchase, capital contribution to economic organizations; transaction value of capital contribution contract, share purchase, capital contribution; information about investment projects of economic organizations (if any);
• Minutes of agreement on capital contribution, share purchase, capital contribution purchase;
• Power of attorney in case of authorizing a third party to represent a foreigner to carry out investment registration procedures;
• Consular Legalization of Decision, Establishment License of foreign organization or enterprise (if any);
• Authenticated copy of passport of the legal representative and the representative managing the capital contribution of the foreign investor;
• Authenticated copy of the Business Registration Certificate of the transferor of capital/shares;
• Authenticated copy of investor’s passport.

After being approved by the competent authority to contribute capital. Enterprises need to complete procedures to change business registration. Accordingly, documents that need to be prepared include:

• Notice of change in business registration content.
• Decision of the owner/Board of members/Board of directors.
• Minutes of meetings of the Board of Members/Board of Directors.
• Company charter (if any changes).
• Certified copy of the Owner’s CCCD.
• Authorization letter to submit documents and copy of CCCD of the person authorized to submit documents (if any).

Implementation procedures

Procedures for transferring capital contributions to foreigners include the following steps:

Step 1: Legal appraisal:

Foreign investors need to perform legal due diligence on the transferring enterprise to ensure the legality and transparency of the transaction.

Step 2: Negotiate and sign the contract:

The parties (enterprises and foreign investors) negotiate and sign a capital transfer contract. The contract needs to clearly stipulate the terms of transfer value, payment method, rights and obligations of the parties.

Step 3: Apply for approval (if necessary):

Depending on the business line and capital ownership ratio, the enterprise may have to seek approval from a competent state agency before making the transfer.

Step 4: Register to contribute capital:

Foreign investors carry out capital contribution registration procedures at the Department of Planning and Investment.

The capital contribution registration documents are as we have presented above.

Step 5: Change shareholders/capital contributing members and disclose information:

Enterprises carry out procedures for changing shareholders/capital contributing members according to the provisions of Vietnamese law. Then proceed to publish information about the capital transfer transfer.

Step 6: Change business registration:

After completing the transfer procedure, the enterprise must carry out the procedure of notifying changes in business registration at the Business Registration Office under the Department of Planning and Investment where the enterprise is headquartered to update information about the new member/shareholder.

Processing time for notification of change in business registration content is 3 working days from the date the competent authority receives the valid application.

Some issues to note when transferring capital contributions to foreigners

When transferring capital contributions to foreigners, the transferor and transferee need to pay careful attention to the following issues to avoid unnecessary risks:

• It is necessary to carefully review the regulations on foreign investment restrictions in the enterprise’s business lines.
• Foreign investors should conduct a thorough appraisal of the financial and legal situation of the enterprise before deciding to invest.
• The transfer contract needs to be drafted clearly, in detail, and with all the terms to avoid future disputes.
• Pay attention to tax regulations related to capital transfer transactions.
• Foreign investors need to open an investment capital account at a licensed bank to carry out transactions related to investment activities in Vietnam.

Consulting services for transferring capital contributions for foreigners

Long Phan provides in-depth consulting services on capital transfer for foreigners. With experience and expertise, we will support customers:

• Consulting on conditions and procedures for transferring capital contributions to foreigners.
• Consulting on forms of capital transfer for foreigners.
• Representative to negotiate terms and conditions in the transfer contract.
• Draft and review transfer contracts.
• Prepare documents, represent and carry out capital contribution registration procedures at the Department of Planning and Investment.
• Prepare documents and notify changes to business registration content.

Transferring capital contributions to foreigners is a transaction with many potential risks if not carried out in accordance with regulations. To ensure your rights and avoid arising disputes, customers should carefully study the law and seek advice from experts. Long Phan with an experienced team is ready to accompany customers in this process. Contact the hotline 0906735386 immediately for detailed advice.