After the company earns a profit, we wish to distribute the profit to the capital-contributing members. Are there any regulations we should be aware of?
Answer:
The distribution of profits in a limited liability company with foreign investment must comply with the following principles:
1.1. Conditions for Profit Distribution:
According to Article 69 of the 2020 Law on Enterprises, a company may only distribute profits after meeting the following conditions:
- Fulfillment of financial obligations to the State (e.g. corporate income tax);
- Allocation to mandatory funds in accordance with the law and the company's charter (e.g. financial reserve fund, development investment fund);
- Ability to fully pay due debts and other financial obligations.
1.2. Distribution Ratio:
Profits are distributed based on the actual capital contribution ratio of each member, unless otherwise agreed in the company charter.
1.3. Remittance of Profits Abroad:
Foreign investors may remit their share of distributed profits abroad after the company submits the required documents to the bank, including:
- Audited financial statements;
- Minutes of the meeting approving profit distribution;
- Resolution on profit distribution;
- Certificate of fulfillment of tax obligations;
- Documents proving that the profits are eligible for distribution and remittance.
