Failing to fully contribute foreign direct investment (FDI) capital is a serious challenge for foreign-invested enterprises (FIEs) in Vietnam. This issue can lead to legal consequences such as administrative penalties, revocation of the Investment Registration Certificate (IRC), or operational difficulties.
1. Introduction
Failing to fully contribute foreign direct investment (FDI) capital is a serious challenge for foreign-invested enterprises (FIEs) in Vietnam. This issue can lead to legal consequences such as administrative penalties, revocation of the Investment Registration Certificate (IRC), or operational difficulties.
This article provides a comprehensive guide to legal solutions for addressing this situation, based on Vietnam’s current legal framework.
2. Legal Framework
The capital contribution of FIEs is regulated by the following legal documents:
The failure to fully contribute capital may result from various reasons, including:
3.1. Financial Difficulties from Foreign Investors
Foreign investors may encounter cash flow issues or changes in financial strategies, preventing them from fulfilling their capital contribution commitments.
3.2. Obstacles in International Capital Transfers
According to Circular 06/2019/TT-NHNN, FDI capital contribution transactions must comply with foreign exchange management regulations. Some cases may face difficulties due to banking procedures or foreign exchange control policies in the investor’s home country.
3.3. Changes in Investment Strategy
Businesses may adjust their business plans, scale down projects, or restructure finances, making full capital contributions no longer suitable.
4. Remedial Solutions
4.1. Extending the Capital Contribution Deadline
Normally, the capital contribution period is 90 days from the issuance date of the Enterprise Registration Certificate (ERC) for the economic organization implementing the project. Timely capital contribution is crucial because if the deadline stated in the IRC is exceeded, banks will not allow the receipt of investment capital, preventing companies from obtaining investment funds to operate. Therefore, if an investor cannot contribute capital on time, they should apply for an extension.
Extending the capital contribution deadline involves adjusting the IRC to reflect the new contribution timeline. Failure to apply for an extension before the deadline may result in administrative penalties.
According to Decree 31/2021/ND-CP, investors seeking an extension must follow the investment registration adjustment procedure.
Extension Procedure:
Step 1: Prepare Documents
Request for adjustment of the IRC;
Report on the implementation status of the investment project up to the adjustment time;
Investor’s decision on the investment project adjustment;
Explanation of the reasons for adjustment (extension of the capital contribution deadline);
Copy of the decision approving (adjusting) the investment policy or the decision approving (adjusting) the investor or the IRC; copy of the ERC;
Documents related to the adjustment: confirmation of contributed investment capital; proof of financial capacity for the outstanding capital contribution.
Step 2: Submit the Application
Declare investment project information online at the National Foreign Investment Information System (http://fdi.gov.vn/).
Within 15 working days from the online declaration, submit a hard copy of the application to the competent investment registration authority.
⮞ Note: The extension must be applied for before the original contribution deadline expires. If the deadline is missed without an extension, the enterprise may be penalized.
Step 3: Receive the Result
Within 10 working days of receiving a valid application, the investment registration authority will review and adjust the IRC, recording the new contribution deadline for the investor.
4.2. Restructuring Charter Capital
If the investor cannot contribute the full capital, the enterprise can restructure its charter capital through the following methods:
4.2.1. Adjusting and Reducing Charter Capital
According to Article 51 of Decree 01/2021/ND-CP, an enterprise can reduce its charter capital if it cannot contribute the full committed amount, provided that:
The outstanding capital is adjusted accordingly.
The enterprise has no outstanding financial obligations.
4.2.2. Seeking New Investors
The enterprise can seek other investors to replace the existing ones by offering the unfulfilled capital portion or finding investment partners.
4.2.3. Transferring Capital Contribution
According to Article 47 of the Enterprise Law 2020, limited liability company members (LLC) can transfer their unfulfilled capital contributions to another party.
⮞ Note: Foreign investor capital transfers must comply with reporting and registration procedures with the Department of Planning and Investment (DPI).
4.3. Adjusting the Investment License
According to Article 47 of Decree 31/2021/ND-CP, if the full capital contribution is not possible, the enterprise can adjust the IRC to reflect the actual capital contribution situation.
5. Adjustment Procedure:
Step 1: Prepare Documents
Request for investment project adjustment;
Report on the implementation status of the investment project up to the adjustment time;
Investor’s decision on the investment project adjustment;
Copy of the issued IRC;
Proof of the investor’s financial capacity, including at least one of the following documents: the investor’s financial statements for the past two years; financial support commitment from the parent company; financial support commitment from a financial institution; financial guarantee from the investor; other documents proving financial capacity.
Step 2: Submit the Application to the Investment Registration Authority
Processing time: 10 working days from receiving a complete application.
⮞ Note: Failure to adjust the IRC while continuing to violate capital contribution commitments may result in administrative penalties or IRC revocation.
6. Important Considerations
Comply with legal deadlines: Submit applications for extension or capital adjustment before the commitment deadline expires.
Ensure complete and accurate documentation: Errors in the application may lead to rejection or delays in processing.
Regularly update regulatory authorities: Maintain communication with the DPI to avoid violations.
Consider legal consultancy: If unsure about the procedures, seek professional advice to ensure compliance.
7. Conclusion
Insufficient FDI capital contribution can be addressed through various legal solutions. Enterprises must proactively seek appropriate remedies and comply with legal regulations to avoid legal risks and ensure stable business operations.
Need detailed legal assistance? Contact Harley Miller Law Firm for specific guidance tailored to your business situation.
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