When applying for an Investment Registration Certificate (IRC) in Vietnam, investment capital is one of the critical factors that investors must pay close attention to in order to avoid rejection. Below, DNP Vietnam Law Firm outlines key points regarding investment capital:
1. Definition
1.1 Definition of Investment Capital
According to Clause 23, Article 3 of the 2020 Law on Investment:
- “Investment capital includes money and other assets in accordance with civil law and international treaties to which the Socialist Republic of Vietnam is a signatory, used to carry out investment and business activities.”
- Thus, investment capital refers to money and other assets utilized to conduct investment and business activities. In other words, it encompasses all expenses, including cash and legally permissible assets, that an investor contributes to implementing an investment project according to the approved plan.
1.2 What is an Investment Registration Certificate?
- In Vietnam, the Investment Registration Certificate (IRC) is a crucial legal document that represents the State’s official recognition of an investment project conducted by domestic or foreign investors. Under Clause 11, Article 3 of the 2020 Law on Investment, an IRC is a document (in either paper or electronic form) issued by a competent state authority to investors executing an investment project in Vietnam.
- The issuance of an IRC is not merely an administrative procedure but also a prerequisite for investors to officially commence project implementation according to legal regulations.
2. Ensuring Investment Capital Complies with Legal Regulations and Project Feasibility
- Investment capital is determined based on the total contributions by investors, including cash, contributed assets (machinery, equipment, intellectual property rights, technologies, land use rights, and other lawful assets), mobilized capital, and retained earnings for reinvestment (if any).
- Licensing authorities will evaluate the feasibility of the project based on the investor’s financial capacity. Insufficient or unreasonable investment capital may lead to the rejection of the application.
3. Preparing Documents to Prove Financial Capacity
- According to Point d, Clause 1, Article 33 of the 2020 Law on Investment, an investor’s financial capacity is a key factor for authorities to assess the feasibility of the project. Investors must submit documents proving their financial capacity, such as audited financial statements, bank account balance confirmations, or loan agreements with certifications from credit institutions.
- Failure to provide sufficient documents proving financial capacity is a common reason for delays or rejections in issuing the Investment Registration Certificate.
4. Investment Capital Must Match the Industry and Investment Planning
- Investment capital must align with the scale, business sector, and objectives of the registered project. Authorities will assess the compatibility between the registered business sectors and the local socio-economic development plan. If the industry or capital scale is not suitable, the application may be rejected or require adjustments.
- Foreign investors, in particular, must pay attention to the list of sectors subject to market access restrictions and conditions on capital contributions and joint ventures under Clause 1, Article 33 of the 2020 Law on Investment. If the registered business sector is inappropriate or restricted in the intended location, the application may be rejected or require adjustments.
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5. Contributed Capital May Consist of Cash or Lawfully Appraisable Assets
- Under Article 34 of the 2020 Law on Enterprises, contributed capital is not limited to cash but may also include assets such as land use rights, machinery and equipment, intellectual property rights, technology, and technical know-how, provided that these assets are appraised and accompanied by a written agreement on value among the contributing parties.
- The owner of the contributed asset must have lawful ownership; otherwise, contributing with unlawful assets may lead to application rejection.
6. Clear Capital Mobilization Plan and Capital Contribution Schedule
- According to Article 28 of Decree No. 31/2021/ND-CP, regulations on determining investment capital value are specified. Investors must prepare a detailed and realistic capital mobilization plan aligned with the project implementation schedule. Investment capital must ensure the project’s sustainability at various stages.
- Failure to provide a clear mobilization plan or evidence of the ability to mobilize sufficient funds may also result in application rejection.
The information above is for reference only. If you require further details, please contact us using the information below.
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