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The capital structure of the foreign owned companies

The capital structure of the foreign owned companies

The capital structure of the foreign owned companies

(S&B Law) When forming a company in Vietnam, the foreign investors usually raise some questions on the capital for the target company in Vietnam. The capital in the company is a wide range, especially the investment capital. The investment capital is equal to charter capital and loan.
The charter capital is contributed by the investors, while loan is the borrowings from the organizations and individuals to invest in the project.

Under the old Investment Law, the investment capital was divided as the ratio 70:30, meaning that 70 is the charter capital and 30 is the loan.

Under the new Investment Law, this rate has been removed, and the new rate may be up to 90:10, meaning that 90 is the loan and 10 is the charter capital. However, in practice, the ratio 70:30 is the persuasive number to ask for permission of competent authority.

Additionally, when the foreign investors would like to structure the capital in the project, they should predict the loan in the identified rate. Then they will not have to amend the Investment Certificate. The more convenient process will be applied when transferring the profits or interest rate abroad.

Here are the regulations on the structure of capital in the foreign-owned companies. When forming a company, the investor should consult the lawyers and financial advisors to have the regulated capital amount.

» Legal guide to do Investment in Vietnam

Author: Lawyer Nguyen Thanh Ha, S&B Law.

Contact: Law Firm - SB Law in Vietnam
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