Starting a business is a dream for many, but determining charter capital can be a point of concern for most. Charter capital is a crucial factor that directly impacts the registration and operation of a business. This article will help you better understand the regulations on charter capital in Vietnam, allowing you to make more informed decisions for your business.
What is Charter Capital?
Charter capital is the amount of money that members or shareholders commit to contribute when establishing a business. It is an important factor, as it not only reflects the scale and financial capacity of the company, but also serves as a legal basis to determine the financial liabilities of the members within the company.
The role of charter capital in a business
Charter capital is not only a financial commitment from members or shareholders but also the initial funding for a business to start its operations. It also reflects the company’s credibility and reliability to its partners and customers.
Classification of charter capital
It can be classified into two main types:
- Monetary charter capital: This is the cash amount that members or shareholders contribute when establishing the business.
- Asset-based charter capital: This is the value of assets (real estate, equipment, technology, etc.) converted into charter capital.
Regulations on charter capital by type of enterprise
The regulation of charter capital varies depending on the type of enterprise, such as joint stock companies, limited liability companies, or sole proprietorships.
Charter Capital for Single-Member Limited Liability Company (LLC)
According to the Vietnamese Enterprise Law, a Single-Member Limited Liability Company is a business owned by an individual or organization, and the committed charter capital must be fully contributed within 90 days from the date of issuance of the business registration certificate.
Charter capital for Limited Liability Companies with two or more members
For a Limited Liability Company with two or more members, the charter capital is the total amount of capital that the members commit to contribute when establishing the business. Each member must contribute their committed capital within 90 days from the date of issuance of the business registration certificate. If they fail to do so, the members will be subject to penalties according to the law.
Charter Capital for Joint Stock Companies
A Joint Stock Company is a type of enterprise whose charter capital is divided into equal parts called shares. Shareholders must contribute their capital within 90 days from the date the company receives its business registration certificate. If they fail to contribute the full amount, shareholders will be subject to penalties in accordance with the law and the company’s charter.
Charter Capital for Sole Proprietorships
For a sole proprietorship, charter capital is the total amount of capital that the owner invests in the business. The sole proprietor has the full authority to decide on increasing or decreasing the charter capital but must notify the business registration authority.
Requirements and Restrictions Regarding Charter Capital
Requirements for Minimum Charter Capital
Not all types of businesses are required to have minimum charter capital. However, for certain conditional business sectors such as finance, banking, and real estate, the law specifies a minimum charter capital that businesses must possess upon establishment.
Restrictions on Charter Capital for Foreign Enterprises
Foreign-invested enterprises must comply with specific regulations regarding charter capital, such as maximum capital contribution ratios, restrictions on capital transfers, and regulations concerning capital contributions in foreign currencies.
Considerations When Determining Charter Capital
Financial Capability of Members
When determining charter capital, members need to carefully consider their financial capabilities and commitments. Committing to a charter capital that is too high without the ability to contribute fully can lead to various legal risks.
Impact of Charter Capital on Taxes and Fees
Charter capital directly affects the business license tax that a company must pay annually. Therefore, businesses need to carefully consider the charter capital level to ensure it aligns with their size and development plans.
Changing Charter Capital After Company Formation
After establishment, a company can change its charter capital by either increasing or decreasing the capital. However, such changes must comply with legal regulations and must be reported to the business registration authority.
Procedure for Increasing Charter Capital
When a business seeks to expand its scale or enhance its financial capacity, it can carry out the procedure to increase its charter capital. This procedure involves organizing a meeting of the member council or a general meeting of shareholders, followed by passing a resolution regarding the capital increase and carrying out the necessary legal procedures.
Procedure for Reducing Charter Capital
A company can reduce its charter capital if it encounters financial difficulties or needs to adjust its business strategy. The reduction of charter capital must also comply with legal regulations, and the company needs to follow the procedures to notify the business registration authority.
