Legal Risks and Penalties Related to Capital Contribution Without Using a Direct Investment Capital Account in Vietnam
Question:
When establishing a project in Province Y, the investor made capital contributions—some were deposited into the investment capital account, while others were deposited into the payment account. Are there any risks involved in this, and what are the potential penalties? Please cite the legal basis.
Answer:
First, regarding the entities required to open a direct investment capital account, they include:
- 1. Enterprises with foreign direct investment capital, as stipulated in Clause 2, Article 3 of Circular No. 06/2019/TT-NHNN. According to this regulation, an enterprise with foreign direct investment capital includes:
- Enterprises established in the form of establishing an economic organization, in which foreign investors are members or shareholders and are required to obtain an Investment Registration Certificate in accordance with investment laws;
- Enterprises not falling under point (a) above, but in which foreign investors hold at least 51% of charter capital, including:
(i) Enterprises where foreign investors contribute capital, purchase shares, or acquire capital contributions (operating in sectors with or without investment conditions applicable to foreign investors), resulting in the foreign investor holding at least 51% of charter capital;
(ii) Enterprises newly established after separation, merger, or consolidation, in which foreign investors hold at least 51% of charter capital;
(iii) Enterprises newly established under regulations of specialized laws;
- Project enterprises established by foreign investors to implement PPP projects under investment laws.
- 2. Foreign investors participating in BCC contracts or directly implementing PPP projects without establishing a project enterprise (hereinafter referred to as foreign investors directly implementing PPP projects).
The term “foreign investor” as referred to above is interpreted under Clause 1, Article 3 of Circular No. 06/2019/TT-NHNN, which includes: individuals holding foreign nationality, and organizations established under foreign laws that conduct direct investment activities in Vietnam.
According to the enterprise registration information of A Co., Ltd., SB Law notes that:
- A Co., Ltd. was established through the conversion of company type from B Co., Ltd. into a multi-member limited liability company, with two capital-contributing members: C Co., Ltd. and D Co., Ltd., both of which are enterprises established under Vietnamese law;
- The predecessor of A Co., Ltd.—B Co., Ltd.—was also established as a 100% Vietnamese-owned company by C Co., Ltd., an enterprise incorporated under Vietnamese law.
Therefore, A Co., Ltd. is not subject to the requirement of opening a direct investment capital account as stipulated above.
As such, the capital contribution by C Co., Ltd. and D Co., Ltd. into A Co., Ltd. may be made through ordinary payment accounts and is not required to follow the procedures for capital contribution via a direct investment capital account (DICA).
