A capital increase is where a joint venture strains most easily: the project needs money to expand, but the Vietnamese partner cannot fund its pro rata share in time. The question is not whether capital can be raised, but how to design the increase so the company gets funded on schedule without turning one side’s temporary cash problem into a permanent ownership fight.
The legal framework
An increase of charter capital in a limited liability joint venture is decided by the members’ council under the charter, and members hold rights and duties to contribute pro rata to their existing stakes unless the charter or the increase resolution sets a different mechanism; the additional capital must be fully contributed within the committed period, with the 90-day contribution frame of Law on Enterprises 59/2020/QH14 as the reference point.
Where a member fails to fund its committed share of an increase, the unfunded portion is handled under the charter and the rules on incomplete capital contributions: the company may offer the shortfall to other members or outsiders under the agreed mechanism, and ownership ratios are recalculated on the charter capital actually contributed.
A capital increase by a foreign-invested enterprise may also trigger an adjustment of the investment registration certificate if the project’s total investment capital changes, and any shift in ratios between the foreign investor and the Vietnamese partner must be reflected consistently across the investment file, enterprise registration and the members’ register.
Applied analysis and a practical example
Dilution in a capital increase is arithmetic, not punishment: if charter capital rises from 100 to 150 while the Vietnamese partner stays at 40, its ratio falls from 40 percent to about 26.7 percent. What partners actually fight over is not the maths but whether the increase was genuinely needed or engineered as a squeeze-out of the cash-poor side.
To guard against coercive increases, the charter should attach three conditions: the increase must tie to an approved use-of-proceeds plan, valuation and funding deadlines must be realistic enough for both sides to arrange finance, and a member that cannot follow may transfer its contribution right to a third party instead of simply forfeiting the corresponding ratio.
Workable deferred-funding designs include contributions staged to the project’s spending schedule within the committed period, the other side lending the shortfall to the company instead of contributing in its place immediately, or the funded side taking the extra ratio with a buy-back right for the partner once it arranges money within an agreed window.
Practical example: A logistics venture in Can Tho needed to raise capital to build a second warehouse while its Vietnamese partner’s cash was locked in a delayed land project. The foreign partner funded the shortfall as a registered shareholder loan rather than taking extra equity, the warehouse stayed on schedule, and the loan was converted into the Vietnamese partner’s delayed contribution eighteen months later at the originally agreed ratio.
Action checklist
- Tie the increase to an approved use-of-proceeds plan
- Allow a funding deadline long enough for both sides to arrange finance
- Grant a right to transfer the contribution entitlement to third parties
- Design a shareholder loan alternative for a slow-funding partner
- State the dilution formula and the date ratios are recalculated
- Synchronise investment adjustment and enterprise registration filings
Deeper notes
Legally, failing to fund initial charter capital differs from failing to follow a capital increase: the first can trigger the statutory handling of unpaid contributions and member liability under the Law on Enterprises, while the second is mainly a matter of the increase resolution and charter mechanics, and the same sanction should not be assumed for both.
If the increase pushes the foreign investor’s ratio across a market-access threshold in a conditional sector, the increase may first need capital contribution registration under Investment Law 143/2025/QH15 before it is implemented; skipping that step is what leaves many increases stuck at the member-change registration stage.
Frequently Asked Questions
What happens if capital is raised and the Vietnamese partner cannot follow?
Yes. If the Vietnamese partner contributes nothing further while charter capital still rises, its percentage falls by simple arithmetic: its nominal stake stays the same but the denominator is the new, larger charter capital. The exact dilution follows the ratio between what it has contributed and the total after the increase, and the new ratio is recorded when the company completes registration of the charter capital change, so the resolution should state the formula and the cut-off date expressly.
Will its ownership ratio be diluted?
Several lawful mechanisms exist: stage contributions to the project’s actual spending schedule, let the other side advance the shortfall as a loan to the company, let the funded partner take the extra stake with a buy-back right for the diluted partner within an agreed period, or allow the contribution entitlement to be transferred to a third party. The common requirement is that the chosen mechanism sits in the increase resolution and the charter, not in a verbal understanding.
Is there a mechanism allowing it to contribute late?
The venture can still raise capital from the remaining members if the increase resolution passes at the charter’s voting threshold and the unfunded portion is handled under the agreed mechanism. The safe sequence is to approve the use-of-proceeds plan, fix the funding deadline and shortfall rules, move the money through the investment capital account, then register the charter capital change and adjust the investment file if total project capital changes.
This article has been quality-reviewed by the FLAW AI Legal Council
