Disputes in Capital Contribution and Capital Transfer in FDI Enterprises in Vietnam: Legal Regulations & Resolution Strategies

When engaging in foreign direct investment (FDI) in Vietnam, capital contribution and capital transfer are among the areas most prone to legal disputes. To protect their rights and minimize risks, businesses and investors must understand the applicable legal framework, common causes of disputes, and effective resolution methods. Below is a comprehensive overview of the latest information from reputable law firms and current legal documents to help clarify disputes related to capital contributions and transfers in FDI enterprises in Vietnam.

1. Latest Legal Regulations on Capital Contributions and Transfers in FDI Companies

1.1 Investment Law 2020, Enterprise Law 2020 & Decree 31/2021/ND-CP

Investment Law No. 61/2020/QH14 clearly defines the rights and obligations of foreign investors when contributing capital, purchasing shares, or acquiring equity interests. In specific situations (e.g., increasing foreign ownership in sectors subject to market access restrictions or acquiring more than 50% of the charter capital), the investor must complete capital contribution/share acquisition registration procedures.

Decree 31/2021/ND-CP, which guides the implementation of the 2020 Investment Law, provides specific instructions on changing shareholders/members, timelines, documentation, and cases requiring registration.

The 2020 Enterprise Law also regulates capital contributions, equity transfers, and share transfers, including the rights and obligations of capital owners, payment responsibilities, and the acceptance of new members/shareholders in FDI enterprises.

1.2 Legal Disputes and Dispute Resolution Mechanisms

According to Article 14 of the Investment Law 2020, in case of disputes related to business investment activities in Vietnam, parties may first attempt negotiation or mediation. If unsuccessful, the dispute may be resolved through arbitration or court litigation.

In practice, disputes over capital transfer agreements are common. Many court rulings show that parties often fail to fulfill contractual commitments (e.g., payment, capital handover, management transfer, or pre-transfer conditions), leading to disputes.

Additionally, special regulations apply when capital or shares relate to sensitive sectors such as national security, defense, coastal land, islands, border areas, and the environment—requiring approval and oversight by relevant authorities.

2. Common Causes of Disputes & Effective Resolution Strategies

2.1 Causes of Disputes

• Lack of clarity or transparency in capital contribution/transfer agreements
  Contracts may lack detailed provisions on contribution timelines, asset types, payment methods, transfer conditions, rights of incomplete contributors, or management rights—leading to disputes when obligations aren't met.

• Failure to contribute capital on time or using incorrect asset types
  Under the Enterprise Law, investors must contribute the full amount of capital in the agreed asset type within the legal deadline (typically 90 days from the issuance of business registration/investment certificate). Otherwise, the transfer or membership acceptance may be contested.

• Violation of market access and investment licensing regulations
  When a capital transfer leads to a foreign investor holding more than 50% of the charter capital or accessing a restricted business line, registration and approval by the investment authority are required. Non-compliance may render the transaction invalid or subject to penalties.

• Disputes over payment & managerial control
  Some investors, after contributing capital or acquiring equity, are not granted control or not properly registered as new members/shareholders, leading to disputes over perceived unfulfilled rights.

• Delays or inefficiencies in administrative procedures
  Examples include delays in amending investment certificates, slow responses from licensing agencies, or rejected submissions due to missing documents—causing losses for either party in the transfer.

2.2 Dispute Resolution & Prevention Strategies

• Draft detailed, clear agreements from the outset
  Clearly define: asset types, contribution deadlines, grace periods (if any), transfer conditions, control and management rights.

  If foreign investors are involved, include provisions ensuring compliance with the Investment Law, Enterprise Law, and relevant decrees concerning market access, registration, and licensing.

  Include a dispute resolution clause (e.g., mediation, arbitration, court, governing law).

• Comply with legal deadlines for capital contribution, investment registration, and capital transfer
  Contribute within the deadline and in the correct asset form. If an extension is needed, amend the investment registration certificate accordingly.

  Register shareholder/member changes with the Business Registration Office. If foreign ownership crosses certain thresholds or involves conditional sectors, register with the investment authority.

• Select appropriate dispute resolution mechanisms
  Start with negotiation/mediation to save time, costs, and reputation.

  If unresolved, opt for arbitration or litigation. Arbitration is faster and more confidential, while court litigation may be mandatory if the contract lacks a valid arbitration clause or if a party refuses arbitration. The Investment Law 2020 permits such choices.

  For international elements (foreign investors), review if the contract allows foreign law, international arbitration, or foreign courts—ensuring alignment with Vietnam’s public policy.

• Prepare complete evidence and documentation
  Include original contracts, capital contribution undertakings, investment and business registration certificates, meeting minutes, transaction records, correspondence, payment documents, and shareholder resolutions.

  If there were amendments or extensions to investment licenses, maintain all application files, decisions, and notifications from authorities.

• Work with experienced lawyers and legal professionals
  Engage FDI and dispute resolution specialists to assess contracts, identify risks, and evaluate litigation/arbitration options.

  If choosing arbitration, evaluate the chosen arbitration center's procedures, costs, and timelines.

Conclusion

Disputes over capital contribution and capital transfer in FDI enterprises are common and diverse—stemming from unclear contracts, registration violations, and unfulfilled commitments. However, with a solid legal framework including the Investment Law 2020, Enterprise Law 2020, and Decree 31/2021/ND-CP, along with careful contract drafting, compliance with administrative procedures, strategic dispute resolution choices, and proper documentation, businesses and investors are well-positioned to protect their legal interests when disputes arise.

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