Procedures for a “debt-equity swap” that converts overseas borrowings from investors into the charter capital of a local corporation
2023/11/10
I. Procedures at the Planning and Investment Department
The law does not specify the order in which IRCs and ERCs should be changed. However, the ERC change procedure must be completed within 10 days from the date of change, so it is recommended that you complete this procedure first.
Step 1. Registration of changes to the enterprise registration certificate (ERC) (increase in the capital of the articles of incorporation)
・Basis: Article 30 of the 2020 Enterprise Law
・Period: Within 10 days from the date of change (based on the effective date of the debt-equity swap agreement)
・Submission location: Corporate Registration Division, Planning and Investment Department
·Required documents:
| Process | Document | Reference |
| 1 | Corporate registration content change report | Appendix II-1 of Notice 01/2021/TT-BKHĐT |
| 2 | For a one-person limited liability company: Owner’s decision |
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For limited liability companies with two or more members:
① Minutes
② General meeting of members decision document
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| For corporations: ① Minutes ② Resolution of general meeting of shareholders |
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| 3 | Appendix to articles of incorporation | Internal storage |
| 4 | Loan agreement | Notarized copy version |
| 5 | Debt Equity Swap Agreement | Original/notarized copy (if it is created in a foreign language, a translated version in Vietnamese must also be created) |
| 6 | Power of attorney for the person carrying out the procedure | |
| 7 | ID card of the person entrusted with carrying out the procedure |
・Submission method: Submit on the following website
https://dangkyquamang.dkkd.gov.vn/auth/Public/LogOn.aspx?ReturnUrl=%2fonline%2fdefault.aspx
・Processing period: 3 business days from the date of receipt of application
・Result: New company registration certificate
Step 2. Amendment of Investment Registration Certificate (IRC) (increase in total invested capital and charter capital)
・Basis: Article 41, Paragraph 2 of the 2020 Investment Law
・Submission location: Planning and Investment Bureau or Industrial Park Management Committee in the area where the company is located
・Required documents:
| Process | Document | Reference |
| 1 | Investment project amendment application form | Form AI11.h of notification 03/2021/TT-BKHĐ |
| 2 | Investment project implementation status report up to the time of revision | Form AI12 of Notice 03/2021/TT-BKHĐT |
| 3 | Investor’s Decision on Amendment of Investment Project for Investors | |
| 4 | Explanation of correction details | |
| 5 | Audited financial statements of the local subsidiary for the most recent year | Copy version with company seal |
| 6 | Loan agreement | Notarized copy version |
| 7 | Debt Equity Swap Agreement | Original/notarized copy (if it is created in a foreign language, a translated version in Vietnamese must also be created) |
| 8 | New company registration certificate | Result of the process 1 |
| 9 | Current investment registration certificate | Notarized copy version |
| 10 | Power of attorney for the person carrying out the procedure | |
| 11 | ID card of the person entrusted with carrying out the procedure |
・Submission method: Direct submission
・Processing period: 10 business days from the date of receipt of application
・Result: New investment registration certificate
・Note: Companies are required to submit all types of investment reports in accordance with the Investment Law before submitting IRC amendment documents. If an investment report has not been filed, the officer may share the company’s information with the Inspection Division without receiving the IRC amended document. In that case, the inspection department will inspect the company, and if there is a violation, there is a risk of imposing administrative fines.
II. Procedures at the central bank
Article 10 of Notification No. 39/2016/TT-NHNN stipulates that medium- and long-term borrowings are borrowings with a term of more than one year. If the debt subject to a debt-equity swap is a medium- to long-term debt, it will be considered a change in debt repayment format, and the company will need to go through debt conversion registration procedures with the bank.
Step 3. Register loan conversion with bank (applies to loans converted as medium- to long-term loans)
・Compliant with: Notification 12/2022/TT-NHNN Article 17, Paragraph 2, Article 19
・Period: Within 30 days from the date of change (based on the effective date of the debt-equity swap agreement)
・Submission location: Central bank branch in the area where the company is located
・Required documents:
| Process | Document | Reference |
| 1 | Overseas loan conversion registration application form | Appendix 04 of Notice 12/2022/TT-NHNN |
| 2 | Loan agreement | Notarized copy version |
| 3 | Debt Equity Swap Agreement | Original copy/notarized copy (if it is written in a foreign language, a translated version in Vietnamese must also be prepared) |
| 4 | If the borrower’s loan is guaranteed, the Guarantor’s written agreement regarding the changes to the loan. | Notarized copy (this document is not required if there is no guarantor for the loan) |
| 5 | Confirmation letter from the bank that provided account services for capital withdrawal and debt repayment status | |
| 6 | Amended investment registration certificate (result of step 1) | Notarized copy version |
| 7 | Amended business registration certificate (result of step 2) | Notarized copy version |
| 8 | Power of attorney for the person carrying out the procedure | |
| 9 | ID card of the person entrusted with carrying out the procedure |
・Submission method: Direct submission or mail
・Processing period: 15 business days from the date of receipt of application
・Result: Written confirmation of loan conversion registration
-Note: If applying for debt conversion, an amended IRC must be submitted within 30 days from the date of execution of the debt-equity swap agreement. However, in reality, many companies are unable to amend their IRCs within 30 days from the date of signing this agreement and only submit application documents first. In this case, the bank receives the application documents, but in many cases, the company completes the revised IRC before approving the conversion of the loan.
In practice, there are many cases where different documents are required to be supplemented depending on the regulations of each region. In order to proceed smoothly with the process, we recommend checking with the relevant authorities and seeking support from a consulting company, etc. We hope that this report will help you understand the procedures for debt-equity swaps and will help you manage your company efficiently.
Reference laws and regulations
・2020 Corporate Law
・2020 Investment Law
・Notification 01/2021/TT-BKHĐT issue
・Notification 03/2021/TT-BKHĐT issue
・Notification 39/2016/TT-NHNN
・Notification 12/2022/TT-NHNN
*This article was translated by Yarakuzen.
