In a market economy, capital mobilization is the lifeblood of businesses and the entire economy. In Vietnam, this concept is sometimes associated with “financial pyramid schemes”, “fraud” or “illegal mobilization”. This article clarifies the legal boundaries: when businesses are allowed to mobilize capital, and when the behavior becomes a violation.
Capital mobilization is the legitimate right of enterprises.
The Enterprise Law 2020 recognizes the right of enterprises to choose the method of mobilizing, allocating and using capital (Article 7). This means that enterprises can issue shares, bonds or enter into capital contribution/investment cooperation agreements according to the current legal framework, with the condition of information transparency and proper use of capital.
When does mobilization become “illegal”?
Capital mobilization is only considered illegal or shows signs of crime when it falls into one (or more) of the following acts:
- Receive “deposits” from individuals/organizations when not a licensed credit institution. The right to receive deposits belongs to scope of banking activities according to the current Law on Credit Institutions (Law No. 32/2024/QH15, effective July 1, 2024).
- Offering securities to the public without registration or disclosure according to the Securities Law 2019 (for example, issuing shares/corporate bonds to the public).
- Commitment to virtual profits, using later people's money to pay earlier people (Ponzi scheme) or operation multi-level marketing disguised → can be handled according to Decree 88/2019/ND-CP (administrative sanctions in the field of currency - banking) and/or crimes in the 2015 Penal Code (amended 2017) such as Article 174 (fraudulent appropriation of property), Article 217a (violation of regulations on multi-level marketing), Article 290 (using computer networks, telecommunications networks... to appropriate property).
Distinguish between deposit mobilization and capital mobilization
Deposit mobilization: business only for licensed banks/credit institutions; the nature is receiving money - paying principal and fixed interest.
Capital raising: Enterprises call for resources for production and business; the capital contributors are investors/partners, sharing risks and profits according to the results of operations, without automatically having fixed profits. The method can be issuing shares, bonds or investment cooperation contracts, but must comply with the information disclosure and registration regime when it is a case of public offering according to the Securities Law.
Popular mobilization channels and legal "rails" to follow
Shares/stocks: If offered to the public, it must be registered and announced according to the Securities Law 2019 before the offering.
Individual corporate bonds (TPDN): must comply with Decree 153/2020/ND-CP and amendments in 65/2022/ND-CP and 08/2023/ND-CP (investor conditions, documents/information disclosure, distribution; some regulations are adjusted, temporarily suspended for a certain period).
Crowdfunding: There is no specific law regulating “all” models. Therefore, businesses need a standard legal structure to avoid becoming deposit-taking and not falling into the scope of public offerings if they do not meet the conditions/registration under the Securities Law.
Standard practices for transparent and legal capital mobilization
Correctly explain the nature of the capital product: clearly state the profit-risk sharing mechanism; do not use the language of "guaranteed profit/fixed interest" if it is an investment contribution.
Fully disclose information (purpose of capital use, cash flow, collateral - if any), comply with registration/approval obligations when subject to the Securities Law/adjusted by the Decree on Corporate Bonds.
Absolutely avoid receiving deposits in any form without a credit institution license.
Honest communication: risk warning, avoid all forms of financial pyramid/Ponzi schemes; violations may be subject to administrative sanctions under Decree 88/2019 or criminal prosecution under the Penal Code.
Conclude
Raising capital is not a crime. Enterprises have the right to raise capital if they follow the legal "rails": not accepting illegal deposits, complying with the Securities Law when offering, implementing regulations on individual bonds, and disclosing information transparently. Violations occur when abusing trust, promising false profits or using capital for the wrong purpose. Understanding the right boundaries helps protect investors and enterprises and promote capital flows for innovation.
