When the foreign partner in a joint venture fails to contribute committed capital, the remaining members face not only the corporate-law question but also an investment-law layer: the capital contribution schedule stated on the Investment Registration Certificate (IRC), IRC amendment, and foreign-investor procedures. For general remedies when shareholders/members default (litigation, mediation), see capital contribution disputes; this article covers only the JV-specific layer.
1. Two parallel obligation layers
- Corporate layer (Law on Enterprises): Article 47 (Consolidated Document 67/VBHN-VPQH, effective 1 July 2025) — members must fully contribute within 90 days; uncontributed portions lose corresponding membership status; the company must register capital reduction within 30 days.
- Investment layer (2025 Investment Law): the IRC records investment capital and the project implementation schedule. A defaulting foreign partner may simultaneously cause the project to breach the IRC capital schedule — and any change in capital or member structure triggers the duty to amend the IRC.
2. Options for the remaining members
### Option A: Take over the defaulting partner’s stake
The remaining members (or a new investor) receive transfer of the uncontributed capital portion under a Members’ Council resolution. FDI-specific point: if the transferee is a foreign investor falling into one of the three cases under Article 21.3 of the 2025 Investment Law, it must complete the capital contribution / share purchase registration with the investment registration agency before the member change:
- Increasing foreign ownership in a business line subject to conditional market access;
- Resulting in foreign investors holding over 50% of charter capital (rising from ≤50% to >50%, or further increasing above 50%);
- The company holds land use rights on islands, in border or coastal areas, or zones affecting national defense/security.
Then register the member change with the business registration agency and amend the IRC.
### Option B: Dilution via capital increase
The company increases charter capital and offers the new portion to the remaining members (Article 47.3) — diluting the defaulting foreign partner’s ratio accordingly. Suitable where the JV still needs capital for project implementation.
### Option C: Capital reduction + IRC amendment
Register charter capital reduction down to actually contributed capital within 30 days (Article 47.4), while carrying out investment project amendment procedures (Article 33.3(d) of the 2025 Investment Law) to update investment capital and structure on the IRC.
### Option D: Claim damages
The defaulting foreign partner must compensate losses caused by the shortfall — particularly losses from project delays against the IRC schedule.
3. Other FDI-specific notes
- Investment capital account: foreign investors’ capital contributions must flow through the investment capital account (Circular 38/2026/TT-NHNN, effective 18 August 2026) — account statements are key evidence of contribution/default.
- The JV charter may provide its own mechanisms (mandatory buyback, penalties) — apply first if lawful.
- Project transfer (if part of restructuring): under Article 34 of the 2025 Investment Law.
FAQ
Q: Can the remaining members automatically remove the defaulting foreign partner?
A: No. The sequence is required: Members’ Council resolution, offer/transfer of the uncontributed portion or capital reduction registration, member change registration, and IRC amendment.
Q: Does a Vietnamese member buying out the foreign partner’s stake need investment procedures?
A: A domestic investor acquiring the stake normally only registers the member change with the business registration agency; the contribution/share purchase registration (Article 21.3) applies when the acquirer is a foreign investor in the three listed cases.
Q: What if we skip the IRC amendment after restructuring capital?
A: The IRC no longer reflects reality — exposing the project to violations of investment reporting/supervision rules and complications in subsequent procedures.
Legal sources
- Law on Enterprises — Consolidated 67/VBHN-VPQH (Article 47) — effective 1 July 2025
- Investment Law No. 143/2025/QH15 (Articles 21, 33, 34) — effective 1 March 2026 — thuvienphapluat.vn
- Decree 96/2026/ND-CP — thuvienphapluat.vn
- Circular 38/2026/TT-NHNN — effective 18 August 2026
This article is for general information only and does not constitute legal advice for any specific case. Drafted by AI and pending review by the QA Council (FLAW AI Legal Council); not reviewed by a human lawyer.
Read more: Capital contribution disputes: litigation and mediation · Charter capital shortfall: risks and remedies · Contact FLAT Law Firm
