Administrative liability in cases where foreign investors fail to make or fully make their capital contributions
Under Vietnamese law, where a foreign investor establishes an economic organization or contributes capital to, acquires shares in, or acquires capital contributions in a Vietnamese enterprise, the capital contribution must be made within the time limit committed in the investment registration dossier, the Investment Registration Certificate (“IRC”), and the Enterprise Registration Certificate (“ERC”).
As a general principle, members/founding shareholders of a company are required to complete their capital contribution within 90 days from the date of issuance of the Enterprise Registration Certificate, excluding the time required for transporting and importing contributed assets and carrying out administrative procedures for the transfer of ownership of such assets [1]. For investment projects granted an Investment Registration Certificate, the capital contribution schedule is specified in the Investment Registration Certificate, and investors are required to comply with such schedule.
Vietnamese law requires foreign investors to make capital contributions on time in order to ensure the transparency and substantive nature of investment activities. Timely capital contribution enables competent authorities to effectively supervise foreign investment capital inflows in connection with foreign exchange control and the movement of funds into Vietnam. In addition, contributed capital constitutes the financial basis for project implementation; therefore, delayed capital contribution may result in project delays, inefficient use of land resources and adverse impacts on the investment environment. These requirements are also intended to prevent the practice of registering “fictitious capital”, whereby investors declare a substantial amount of registered capital without actually contributing it in order to enhance credibility or reserve investment opportunities.
Foreign investors in investment cooperation (Illustrative image)
In practice, many foreign investors, after obtaining investment approval, fail to make their capital contributions within the prescribed timeframe due to changes in financing plans, difficulties in remitting funds from overseas, or delays in project implementation. However, such failure may give rise to administrative liability where a foreign investor fails to make or fails to fully make the committed capital contribution within the prescribed time limit.
Decree No. 122/2021/ND-CP dated 28 December 2021 on administrative sanctions in the fields of planning and investment provides that, depending on the nature and severity of each specific violation, foreign investors may be subject to administrative penalties at the following levels:
| No. | Violation | Administrative Penalty | Remedial Measure | Legal Basis |
| I. Administrative Sanctions in the Investment Sector | ||||
| 01 | Failure to implement the investment project in accordance with the contents of the investment policy approval, investment policy approval concurrently with investor approval, investor approval, or the Investment Registration Certificate. | From VND 70,000,000 to VND 100,000,000 | None | Decree No. 122/2021/ND-CP, Article 19.2(a). |
| 02 | Failure to carry out the procedures for amendment of the Investment Registration Certificate where amendments to the investment project result in changes to the contents of the Investment Registration Certificate. | From VND 70,000,000 to VND 100,000,000 | Mandatory implementation of the procedures for amendment of the Investment Registration Certificate. | Decree No. 122/2021/ND-CP, Articles 17.2(b) and 17.3(b). |
| 03 | Failure to carry out the procedures for obtaining approval of amendments to the investment policy, approval of amendments to the investment policy concurrently with investor approval, or approval of amendments to the investor in cases where such approval is required by law. | From VND 70,000,000 to VND 100,000,000 | Mandatory implementation of the procedures for obtaining approval of amendments to the investment policy, approval of amendments to the investment policy concurrently with investor approval, or approval of amendments to the investor. | Decree No. 122/2021/ND-CP, Articles 17.2(c) and 17.3(c). |
| II. Administrative Sanctions in the Enterprise Registration Sector | ||||
| 04 | Failure to register changes to the contents of the Enterprise Registration Certificate within the prescribed time limit. | Warning (delay from 01 to 10 days). From VND 3,000,000 to VND 5,000,000 (delay from 11 to 30 days). From VND 5,000,000 to VND 10,000,000 (delay from 31 to 90 days). From VND 10,000,000 to VND 20,000,000 (delay of 91 days or more). From VND 20,000,000 to VND 30,000,000 (failure to register the changes). | Mandatory registration of the changes to the contents of the Enterprise Registration Certificate. | Decree No. 122/2021/ND-CP, Articles 44.1, 44.2, 44.3, 44.4, 44.5 and 44.6. |
| 05 | Failure to carry out procedures for adjustment of charter capital or changes to members/founding shareholders with the business registration authority after the expiry of the capital contribution period and the period for capital adjustment where members or founding shareholders have failed to contribute the committed capital and no member or founding shareholder has fulfilled the capital contribution commitment. | From VND 30,000,000 to VND 50,000,000 | Mandatory implementation of procedures for adjustment of charter capital or changes to members/founding shareholders. | Decree No. 122/2021/ND-CP, Articles 46.3(a) and 46.5(b). |
| 06 | False declaration of charter capital. | From VND 20,000,000 to VND 30,000,000 (where the falsely declared charter capital is valued at less than VND 10 billion). From VND 30,000,000 to VND 40,000,000 (from VND 10 billion to less than VND 20 billion). From VND 40,000,000 to VND 60,000,000 (from VND 20 billion to less than VND 50 billion). From VND 60,000,000 to VND 80,000,000 (from VND 50 billion to less than VND 100 billion). From VND 80,000,000 to VND 100,000,000 (from VND 100 billion or more). | Mandatory registration of an adjustment to the charter capital so that it corresponds to the actual contributed capital. | Decree No. 122/2021/ND-CP, Articles 47.1, 47.2, 47.3, 47.4, 47.5 and 47.6. |
| 07 | Failure of a general partner or capital-contributing member to contribute the committed capital to the partnership within 15 days from the date of approval, unless a different time limit is decided by the Members’ Council. | From VND 30,000,000 to VND 50,000,000 | None | Decree No. 122/2021/ND-CP, Article 55(c). |
| 08 | Failure to register with the business registration authority before reducing the investment capital to an amount lower than the registered investment capital. | From VND 20,000,000 to VND 30,000,000 | None | Decree No. 122/2021/ND-CP, Article 56.1(c). |
Failure to make, or to fully make, the committed capital contribution upon the expiry of the prescribed capital contribution period constitutes an administrative violation in the field of planning and investment under Decree No. 122/2021/ND-CP. Depending on the nature and severity of the violation, the investor may be subject to corresponding administrative penalties together with remedial measures, including compulsory completion of the capital contribution and adjustment of the capital contribution schedule as recorded in the Enterprise Registration Certificate and/or the Investment Registration Certificate.
In addition, failure to fulfil the capital contribution obligation may give rise to various adverse legal consequences throughout the operation of the enterprise in Vietnam and may directly affect investors’ rights and interests, including restrictions on or the inability to transfer capital contributions or shares, as well as difficulties in carrying out other corporate procedures such as capital increase, capital reduction, or enterprise dissolution.
Accordingly, foreign investors should pay particular attention to the capital contribution schedule and proactively carry out the necessary amendment procedures where required in order to avoid legal violations and mitigate legal risks arising from their investment activities in Vietnam.
[1] Law on Enterprises, Article 47.2.
Should you require further professional assistance, please contact:
Legal Counsel: Vu Ha Van
- – Email: van.vu@bizlawyer.vn
- – Telephone: 086 888 1900
Yours sincerely.
