At the time of establishing an investment project, registering establishment of an enterprise, foreign-invested companies had their projections of investment capital and capital allocation, thereby registering a certain amount of capital with investment registration agency for project execution.
What is investment capital?
Pursuant to Law on Investment 2014, ‘investment capital’ means money and other assets used invested in business. Capital investment includes the investor’s capital and raised capital. Raised capital may come from different sources such as banks, investors, or other organizations and individuals. The capital contribution schedule and raised capital are proposed by investors and shown on the investment registration certificate.
During the process of operating in Vietnam, foreign enterprises always have to adjust the initial capital investment to make it compatible with the company's orientation, business scale, or market fluctuations. Enterprises, for example, can increase or decrease the investment capital, adjust the amount of capital contribution, loan capital in the total investment capital or change the type of assets for contributed capital, etc.
- It is necessary for an investor to increase its investment capital in order to expand its business:
Are there any forms of increasing investment capital?
As we have analyzed, ‘investment capital’ consists of investor's capital and raised capital, so investors can choose the following ways to increase investment capital:
- Increasing the investor's capital
- Employ capital mobilization from other organizations and individuals.
- Combining both methods specified above.
Do investors have to prove their financial capacity when raising loans?
Investors must prove their financial capacity regardless of types of investment.
- For the increase of contributed capital: The investor must prove his financial capacity by confirming the investor's account balance (the investor is an individual or a legal entity) or financial statements for the last 2 years with earnings at least equal to the expected additional investment (if the investor is a legal entity).
- For raising capital: Investors must prove their financial capacity via the following documents based on the form of loan:
- In case the capital is mobilized from the bank there should be a commitment to provide financial support from the intended bank.
- In case the capital is mobilized from other organizations or individuals a loan contract is required between investors and organizations and individuals.
- For the increase in both contributed capital and raised capital: the investor proves his financial capacity by providing two types of documents specified above.
- In case of narrowing the scope of production and business activities, investors may reduce their investment capital in the following forms:
- Decrease contributed capital
- Reduce raised capital
- Reducing both contributed capital and raised capital.
That investors decide to reduce capital must be in line with capital contribution schedule and loan schedule.
The investor proves the full contribution of the reduced registered capital in the following documents:
- Statement of investment capital accounts proving that the cash has been fully contributed
- Contracts for buying and selling machinery or papers, customs documents proving that the machines have been fully contributed
- Documents proving borrowed capital.
For further advice on adjustment of investment capital in the project, please contact Naci Law for assistance.
NACI LAW,
Hanoi Office: 6th Floor, office area 169 Nguyen Ngoc Vu, Cau Giay, Hanoi.
Ho Chi Minh Office: 4th Floor, Lot A No. 974, Truong Sa Street, Ward 12, District 3, Ho Chi Minh City, Vietnam.
South Korean lawyer: + 84. 904 537 525.
Vietnamese lawyer: + 84. 9789 38 505
Commitments of Naci Law when performing legal services for customers:
1. Always comply with Vietnamese law and International law.
2. Update, notify the progress of the stage to customers.
3. Always look for ways to minimize risks and fully resolve them if they arise.
4. Make a refund in case the job cannot be completed despite all our efforts.
