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Converting foreign loans into investment capital
In the context of deepening international integration, Vietnamese investors need to access foreign capital to implement domestic investment projects. One of the popular channels of raising capital is loans from foreign financial institutions.
However, these loans need to be converted into investment capital to comply with Vietnamese laws. Therefore, investors need to carefully understand the legal procedures to convert loans into contributed capital legally. Siglaw Law Firm is ready to provide advice on converting foreign loans into investment capital.
Legal bases for converting foreign loans into investment capital
Legal bases for the conversion of foreign loans into investment capital include:
- The 2020 Investment Law and documents guiding the legal framework for investment activities, including investment with foreign loans;
- Circular 12/2022/TT-NHNN on foreign exchange management of the State Bank allows the conversion of loans into contributed capital as prescribed in Clause 2, Article 34. Specifically, foreign investors may agree to convert outstanding loans into shares or contributed capital in the borrowing enterprise;
- Circular 12/2014/TT-NHNN stipulates conditions for foreign loans of enterprises.
Thus, investors can completely convert foreign loans into investment capital in enterprises in Vietnam if they comply with current legal regulations, especially the Law on Investment, Circular 12/2022/TT-NHNN and Circular 12/2014/TT-NHNN.
Procedures for converting loans into investment capital of enterprises
Converting foreign loans into investment capital
The order of converting foreign loans into investment contributed capital of enterprises is summarized as follows:
For payday loans
Step 1: Enterprises adjust the Investment Registration Certificate (IRC), Business Registration Certificate (ERC) to increase capital from loan sources.
Step 2: Notify the State Bank of Vietnam of debt repayment by shares/contributed capital.
For medium and long-term loans
Step 1: Enterprises adjust the Investment Registration Certificate (IRC), Business Registration Certificate (ERC) to increase capital from loan sources.
Step 2: Register loan change with the State Bank.
Thus, the main order includes updating changes in investment capital, charter from loans and notifying and registering with the management agency, the State Bank. Enterprises need to strictly follow this process to ensure the legality and effectiveness of converting loans into investment contributed capital.
Procedures for converting loans into charter capital of enterprises
The order of converting loans into charter capital of enterprises is summarized as follows:
For Vietnamese capital companies
Step 1: Carry out procedures for registration of capital contribution of foreign investors according to the Law on Investment.
Step 2: Notify / register loan changes with the State Bank.
Step 3: Change business registration to increase charter capital.
For foreign-owned companies
Step 1: Adjust the Investment Registration Certificate (IRC), Enterprise Registration Certificate (ERC) to increase capital from loan sources.
Step 2: Register loan change with the State Bank.
Note: The loan must be registered with the State Bank and transferred to the correct investment capital account of the enterprise.
Thus, the main order is still to update and adjust charter capital from borrowed sources and carry out procedures with the State Bank. Enterprises need to follow the correct process to ensure the legality of converting loans into charter capital.
The above article has provided detailed information on legal bases, order and procedures for converting foreign loans into investment capital of enterprises. Businesses need to carefully study current regulations to ensure the transition is done legally, avoiding violations.
At the same time, enterprises should seek the advice and support of Siglaw Law Firm for detailed guidance on implementation steps. Hope the article has provided useful information for businesses and foreign investors.
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