1. What is the establishment of a company with foreigners contributing capital?

Incorporation of a foreigner-contributed capital means the creation of a business in which capital contributions from foreign shareholders, members, or partners are foreigners. This process involves determining the capital structure and interests of each party involved in the new business.

2. Process of steps to establish a foreign-invested company in Vietnam

2.1. In case foreigners contribute capital to establish a company with 100% Vietnamese capital

Step 1: Foreigners contributing capital submit an application for an investment license at the Investment Department – Department of Planning and Investment where the economic organization’s head office is located, carry out procedures for registration of capital contribution to a 100% Vietnamese capital company. Procedures for applying for an investment license include:

– An application for an investment license.

– Proposal on investment project.

– Identity card, passport, identity card accompanied by documents verifying legal status with consular receipts.

– Documents proving the financial capacity of the investor such as financial statements, bank account verification …

– Proposal on land use demand if the enterprise uses leased land in Vietnam.

– If there is a limited use of technology when doing business, it is necessary to explain specifically about the technology to be used

If the foreign investor’s capital contribution meets the conditions, the Department of Planning and Investment shall notify in writing within 15 days from the date of receipt of sufficient dossiers for foreigners to carry out procedures for changing shareholders or members. If the conditions are not met, the Department of Planning and Investment shall notify the foreign investor in writing and clearly state the reasons for refusal.

Step 2: After obtaining the approval of the Investment Department – Department of Planning and Investment on the approval for foreigners to contribute capital to establish the company, the investor shall carry out the following procedures: Carry out procedures for changing shareholders and members on the Business Registration Certificate at the Business Registration Office under the Department of Planning and Investment.

2.2. In case a foreigner contributes capital to establish a company or a foreign-invested company

Step 1: Foreigners contributing capital submit the application at the Investment Department – Department of Planning and Investment where the economic organization is headquartered to carry out procedures for registration of capital contribution to the foreign-invested company.

Step 2: After obtaining the approval of the Investment Department – Department of Planning and Investment on the approval for foreigners to contribute capital. If the company has not separated the investment certificate into an investment registration certificate and an enterprise registration certificate, this person must carry out procedures for separation and issuance of an enterprise registration certificate, make a new legal entity seal at the Department of Planning and Investment.

Step 3: After separating the investment registration certificate and the enterprise registration certificate, the adjustment of the investment registration certificate must be made at the investment licensing agency.

3. Forms of foreigners contributing capital to establish Vietnamese companies

• One-member limited liability company: As a one-member company, ie only one owner is responsible for all obligations and works of the company, foreigners buy all contributed capital to become the company owner.
• Limited liability company with two or more members: There are two or more members, each member is responsible for the obligations and work of the company according to the amount of capital he contributes.
• Joint stock company:There may be multiple shareholders and shareholders are only liable for their obligations to the company based on the number of shares they hold.
• Cooperative enterprise:A cooperative enterprise is a type of enterprise with 02 or more members, carrying out production and trading activities of goods and services to share profits or share other benefits.
• Foreign company branches:Foreign companies can set up branches in Vietnam to carry out business activities.
• Joint ventures and business links:It is possible to cooperate with Vietnamese partners through joint ventures or business associations.

Each type of company has its own characteristics and legal requirements, and the incorporation process can also vary. The choice between these types often depends on business goals, project size, and other factors of the business.

4. Dossier of registration for capital contribution to establish the company

• Foreigners contributing capital to establish an enterprise must carry out procedures for registration of capital contribution in the following cases:
• Foreigners contributing capital to Vietnamese companies operating in conditional investment and business lines applicable to foreign capital contributors;
• The capital contribution results in foreigners holding 51% or more of the charter capital of the company in Vietnam.
• A dossier of registration for capital contribution of foreigners to a Vietnamese company includes:
• A capital contribution registration document includes the following contents: information on economic organizations to which foreigners plan to contribute capital; the percentage of ownership of charter capital of foreigners after contributing capital to economic organizations;
• A copy of a valid identity card, identity card or passport for individual investors; a copy of the Certificate of Incorporation or equivalent document confirming the legal status for investors being organizations.

5. Conditions for establishing a company with foreigners contributing capital

Foreigners contributing capital to establish a company must ensure the following conditions:

• Foreigners must comply with the form of investment, scope of operation, Vietnamese partners participating in investment activities and other conditions prescribed by treaties to which the Socialist Republic of Vietnam is a contracting party.
• The percentage of ownership of charter capital of foreign investors is not limited except for the following cases:
• The percentage of ownership of foreigners in equitized state-owned enterprises or other forms of ownership conversion shall comply with the provisions of law on equitization and transformation of state-owned enterprises;

• The percentage of ownership of foreigners in listed companies, public companies, securities trading organizations, securities investment funds in accordance with the law on securities;
• If investors invest in conditional business lines, they need to prepare all the requirements that such industries need to meet in order to apply for certificates of eligibility, sublicenses and register margin capital, legal capital and charter capital on time, in accordance with regulations, must ensure conditions on security, order and environment…
• Foreign investors are nationals belonging to WTO countries or countries that have signed trade treaties with Vietnam. Regulations on foreign investors must be ensured, with documents verifying legal status.
• Investors are not allowed to invest in prohibited fields, not invest in projects that harm the health of Vietnamese people or affect the environment and resources. It is forbidden to invest in projects that adversely affect the fine customs, culture, historical relics and morals of Vietnamese people. Do not implement projects harmful to national security, national defense and security and interests

6. Benefits from the establishment of a company with foreigners contributing capital in Vietnam

• Allow foreign businesses to expand their markets and reach Vietnamese customers.
• Foreign shareholders contribute capital to help share business risks and at the same time also share profits from business activities.
• Increase investment capital: Provides new capital and can help businesses scale, upgrade technology, and invest in new projects.
• Help businesses have the opportunity to access international financial resources, including loans from international financial institutions.
• Provide opportunities to share techniques, effective management, and advanced management methods from foreign enterprises.
• Help create jobs for workers and contribute to the development of human resource capacity in the country.
• Contribute to promoting the development of industry and economy through production and business activities.
• To create favorable conditions for economic and trade cooperation between Vietnam and foreign countries.

However, in order to fully enjoy the benefits, enterprises need to comply with the laws and conditions set forth in the process of establishment and operation in Vietnam.

7. Consulting services on the establishment of companies with foreigners contributing capital of KALF

• Initial legal consultancy: The team of lawyers will advise on legal regulations related to the establishment of companies with capital contributions from foreigners in Vietnam.
• Assessment of requirements and conditions: Identify specific client requirements and assess conditions to ensure that the application and investment process meets the legal requirements.
• Business registration procedures:Guide and support customers in preparing and submitting business registration documents according to regulations of local management agencies.
• Capital structure adjustment support:Advising on capital structure in accordance with clients’ business requirements and objectives.
• Preparation of contracts and legal documents:Preparation and signing of contracts and legal documents related to the establishment and investment process.
• Support in tax administration:Advising on tax-related matters and helping clients with full tax compliance.
• Dialogue and communication with authorities:Represent customers in communicating and communicating with authorities, ensuring a smooth process.
• Post-Incorporation Support: Provide ongoing support after the company has been incorporated, especially in legal and tax matters.

KALF’s foreign capital consultancy service helps you reduce your legal burden and focus on your main business.

8. Frequently Asked Questions

What are the costs and taxes incurred during the operation of the enterprise after buying contributed capital in Vietnam?

Expenses and taxes incurred during business operations after foreigners purchase contributed capital in Vietnam can include a variety of factors, depending on the type of business, industry and applicable tax regulations. Here are some common costs and taxes:

Corporate income tax, personal income tax, value-added tax, business registration fee and other administrative expenses, legal consulting and tax costs, foreign income tax,…

How to ensure the validity of capital contributed from foreigners when establishing a company in Vietnam?

To ensure the validity of contributed capital when establishing a company in Vietnam, the following steps and measures should be taken:

• Mastering the provisions of Vietnamese law on foreign investment capital, especially in the field in which the enterprise is operating.
• Select the type of company that suits the requirements of capital contribution.
• Make a detailed and clear capital contribution contract and reflect the commitments of foreigners.
• Request to provide proof of origin and validity of the capital contribution amount.
• Ensure compliance with the capital registration process and terms as prescribed by the regulator.
• Authenticate the contract and translation into Vietnamese (if necessary) to ensure accuracy and legality.
• Carry out tax and financial reporting fully and on time as prescribed.
• Work with experienced legal and tax professionals to ensure that all processes and documentation are compliant.
• Organize periodic internal inspection of all processes on investment capital.

What is the policy of profit distribution among shareholders, especially foreigners who buy contributed capital?

• Before signing the contract, both parties should discuss and negotiate fairly on the profit sharing policy.
• Determine the ratio of profit distribution among shareholders, including foreigners, according to the degree of their capital contribution.
• The company incorporation contract should clearly stipulate how profits will be distributed, including the basis of calculation and the time of payment.
• Consider having special incentives for foreigners such as a higher profit split or other benefits.
• Consider adopting bonus and penalty policies to motivate shareholders to actively participate in the business.
• If there are special conditions (for example, achieving certain revenues), the contract should clearly stipulate how and at what rate the profit will be distributed in these cases.
• The profit sharing policy needs to comply with the provisions of Vietnamese law and general provisions in the contract.

The profit-sharing policy is mainly based on agreements between stakeholders and needs to be formulated in the specific context of each business. Close cooperation and fair negotiation between the parties will help achieve a profit-sharing policy that benefits all.

What are the terms and conditions related to the purchase of contributed capital, including the possibility of withdrawing capital if necessary for foreigners buying contributed capital in Vietnam?

• Clearly stipulate the time limit within which foreigners can purchase contributed capital. This period can be determined by stage or by specific agreement.
• A detailed description of the foreigner’s ability to withdraw funds, if any, and specific conditions when deciding to withdraw funds.
• Prescribe specific conditions that foreigners need to comply with when they want to withdraw funds, including giving notice in advance of a certain period of time.
• If there is a priority right to withdraw funds, it is necessary to clearly describe the rights and conditions of foreigners in case of capital withdrawal.
• Describe how and how funds are withdrawn, including transfers, legal procedures, and other steps involved.
• Determine the method of notification and agreement between the parties when there is an intention to withdraw funds.
• If there are special conditions, e.g. bound by market conditions or emergency events, it should be specified in detail.
• Prescribe dispute settlement mechanisms, determine applicable laws in case of capital withdrawal and settle all arising disputes.

If possible, you should consult a professional lawyer to ensure that the contract complies with legal regulations and fully meets the needs and desires of the parties involved.

During the research process, if you have any questions, please contact us through the following information:

K & ASSOCIATES LAW FIRM

Address : 4th Floor, No. 05 Nguyen Thi Nhung, Van Phuc Urban Area, Thu Duc City, HCMC.

Email : info@k-associates.vn

Phone : (+84) 338747705 (Zalo, facebook, viber, Instagram)

Hotline : (+84) 937298177