In the context of growing foreign direct investment (FDI) in Vietnam, the issue of FDI investors failing to contribute sufficient capital has become a significant challenge. This situation not only affects the progress and efficiency of projects but also directly impacts the rights of the involved parties.

1. Rights of FDI Investors

According to the Law on Investment 2020, FDI investors are guaranteed the following fundamental rights:

• Right to adjust the capital contribution schedule in case of difficulties, provided they notify and obtain approval from the competent authority (Article 41 of the Law on Investment): Investors can adjust project objectives, transfer, merge, or split projects, and use land rights and assets to contribute capital, establish enterprises, or engage in business activities as per legal regulations.
• Right to protection of asset ownership, investment capital, and other legal rights (Article 10 of the Law on Investment): Investor assets cannot be nationalized or confiscated, but if requisitioned for national defence or security, compensation will be provided as per legal regulations.
• Guarantee of business investment activities (Article 11 of the Law on Investment): Investors are not required to prioritize purchasing or using domestic goods and services, achieve a localization rate for domestically produced goods, establish headquarters in specific locations, or meet other conditions not prescribed by law. This provision aims to create favourable and equitable conditions for investors in their business operations in Vietnam.
• Right to apply investment protection measures under Vietnam’s international commitments (Clause 6, Article 5 of the Law on Investment): If Vietnam has signed bilateral or multilateral agreements on investment protection with other countries, foreign investors from those countries will benefit from investment protection measures under these agreements. These include rights such as asset ownership protection, profit repatriation, and dispute resolution mechanisms as stipulated in the agreements.

2. Protection of Domestic Partners

2.1 Legal Provisions

1. Equity ownership ratio of foreign investors in economic organizations: Foreign investors are allowed to own unlimited charter capital in economic organizations, except in the following cases (Clause 1, Article 23 of the Law on Investment):
   • The ownership ratio of foreign investors in listed companies, public companies, securities trading organizations, and securities investment funds must comply with securities laws.
   • The ownership ratio of foreign investors in state-owned enterprises undergoing equitization or ownership conversion follows the laws on equitization and state-owned enterprise conversion.
   • The ownership ratio of foreign investors must not exceed the limits outlined in international treaties of which Vietnam is a member.
2. Market access conditions for foreign investors: Foreign investors must comply with market access conditions such as (Clause 3, Article 9 of the Law on Investment):
   • Equity ownership ratio in economic organizations.
   • Investment forms.
   • Scope of investment activities.
   • Investor capability and participating partners in investment activities.
   • Other conditions as prescribed by law and international treaties to which Vietnam is a member.

2.2 Necessary Measures

1. Developing a detailed capital contribution contract with clear security clauses and penalties:
   • Clearly define the rights and obligations of each party.
   • Establish profit-sharing and loss-handling mechanisms.
   • Include contract performance guarantees.
   • Specify penalties in case of violations.
2. Establishing a monitoring mechanism for compliance with capital contribution commitments:
   • Require periodic financial reports from foreign partners.
   • Conduct independent audits when necessary.
   • Participate in the management and operations of joint ventures to ensure transparency.
3. Defining the right to claim damages when the FDI partner breaches commitments:
   • Identify specific contractual breaches.
   • Establish methods for calculating damages and corresponding compensation.
   • Set up clear procedures for filing claims and dispute resolution.

3. Capital Contribution Dispute Resolution

3.1 Forms of Dispute Resolution:

When disputes arise regarding capital contributions, the parties may:

• Negotiation: The parties meet and negotiate to resolve conflicts based on a spirit of cooperation and goodwill. This method saves time and costs, but its effectiveness depends on the voluntariness and goodwill of the parties.
• Mediation: A neutral third party (mediator) is invited to assist the parties in reaching an agreement. The mediator acts as an intermediary, helping the parties understand each other’s perspectives and proposing solutions. However, the outcome of mediation is not legally binding unless the parties comply.
• Commercial Arbitration: The parties agree to bring the dispute to a center or an arbitrator of their choice. The arbitrator’s decision is final and enforceable, and the resolution process is typically quick and confidential.
• Court: If the above methods do not yield results, the parties can file a lawsuit in a competent court. The court’s decision is enforceable and guaranteed by state authority. However, court proceedings can be lengthy and public, potentially affecting the reputation of the involved parties.

3.2 Dispute Resolution Process:

1. Identify the Cause of Insufficient Capital Contribution:
   • Analyze the Capital Contribution Agreement: Review clauses related to capital contribution obligations, timelines, methods, and other commitments.
   • Assess the Financial Situation of the Breaching Party: Determine the financial capacity and reasons leading to the failure to meet capital contribution obligations fully.
   • Consider Objective and Subjective Factors: Evaluate whether the insufficient capital contribution is due to force majeure events, legal changes, or the breaching party’s fault.

To understand more about the causes leading to insufficient capital contribution, please refer to the article: Legal Consequences of Failing to Contribute Full FDI Capital: A Detailed Guide 2025 

2. Assess Arising Damages:
   • Identify Types of Damages (Articles 589, 592 of the Civil Code): Including direct damages (such as loss of investment capital, and incurred expenses) and indirect damages (such as loss of business opportunities, and reputation).
   • Calculate Damage Value: Use appropriate valuation methods to determine the extent of financial loss.
   • Collect Evidence: Store related documents and records to prove actual damages incurred.
3. Propose Resolution Methods:
   • Negotiation and Mediation
   • Commercial Arbitration
   • Court Litigation

4. Charter Capital Adjustment Negotiation

In cases where charter capital adjustment is necessary, the parties should:

1. Organize a Meeting Among Capital Contributing Parties:
   • For Limited Liability Companies with Two or More Members: Hold a Members’ Council meeting to discuss and approve the charter capital adjustment.
   • For Joint-Stock Companies: Hold a General Meeting of Shareholders to discuss and decide on the charter capital change.
2. Draft an Adjustment Agreement Minutes:
   • Fully record the meeting content, including reasons for capital adjustment, adjustment methods (increase or decrease), implementation timeline, and amendments to the company’s charter related to charter capital.
   • The minutes must be signed by the attending members or shareholders.
3. Carry Out Procedures to Change Business Registration:
   • Prepare Dossier, Including (Article 51 of Decree 01/2021/ND-CP):
     • Notification of changes in business registration content signed by the legal representative.
     • Resolution, decision, and meeting minutes of the Members’ Council (for limited liability companies with two or more members) or the General Meeting of Shareholders (for joint-stock companies) regarding the charter capital change.
     • The latest financial statement close to the time of the charter capital reduction decision (if reducing capital).
     • Commitment to ensure the payment of all debts and other asset obligations after the capital reduction (if reducing capital).
   • Submit Dossier: Send to the Business Registration Office where the company is headquartered within 10 days from the date of the change.
   • Processing Time: Within 03 working days of receiving a valid dossier, the Business Registration Office will issue a new Enterprise Registration Certificate.

5. Preventive Measures

To mitigate risks, the parties should:

Thoroughly Assess the Financial Capacity of Partners Before Cooperation:

• Evaluate Reputation and Financial History: Review credit history, current and past debts, as well as the partner’s reputation in the business field.
• Analyze Financial Statements: Request and examine audited financial statements to assess the partner’s financial capacity and cash flow.
• Consult Third Parties: Contact previous business partners or financial institutions to gather information about the partner’s reliability and financial strength.

Develop Contingency Plans for Insufficient Capital Contribution:

• Establish Protective Clauses in the Contract: Include provisions on penalties for breaches, compensation for damages, or reduction of ownership percentage for the party failing to contribute sufficient capital.
• Prepare Alternative Funding Sources: Identify alternative funding sources such as bank loans, attracting new investors, or using reserve funds to ensure uninterrupted business operations.
• Plan Responses: Determine specific measures to minimize negative impacts on business activities in case of capital shortages, such as cost-cutting or postponing non-essential projects.

Establish Regular Reporting and Monitoring Mechanisms:

• Require Capital Contribution Progress Reports: Set clear schedules for reporting on capital contribution progress and the financial status of the involved parties.
• Organize Regular Meetings: Establish regular meetings to assess capital contribution progress and promptly address arising issues.
• Utilize Financial Monitoring Systems: Apply tools and financial management software to monitor capital contributions and early detect any anomalies.

Conclusion

Protecting the rights of parties in cases where FDI fails to contribute sufficient capital requires close coordination among involved parties and strict adherence to legal regulations. The parties should build effective preventive and dispute-resolution mechanisms to safeguard their interests.

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