What is the minimum charter capital of a single-member LLC? What are the current regulations on charter capital and its characteristics? These are issues that many people are interested in and ask us. To clarify the above questions, Viet My Law and Accounting would like to send readers some information through the following article.

1. Regulations on charter capital according to current law

Contributing capital is the activity of bringing one’s own assets into a business to become the owner or joint owners of the business.

We can understand charter capital as the capital contributed or committed to contribute by those who participate in establishing the business (such as company members, shareholders, company owners) when establishing the business and this capital will be recorded in the charter of the business. Based on the charter capital contributed by each member, this will be the basis for dividing profits and risks throughout the business operation of the enterprise. In addition, for some industries and business lines with conditions, charter capital is also one of the bases for determining business conditions.

Charter capital is the capital that an enterprise must have and is allowed to use according to the charter. According to current law, enterprises must register with the competent authority as well as publicly announce the charter capital. During the operation of enterprises, the charter capital can be increased or decreased in certain cases, but it is not allowed to arbitrarily reduce the charter capital to a level lower than the legal capital.

Characteristics of charter capital

– Charter capital is the capital that members commit to contribute within a certain period of time when registering to establish an enterprise. Accordingly, based on the provisions of the current Enterprise Law, each type of enterprise will have a different time limit for capital contribution.

– This type of capital can be formed from many different types of assets: Assets used for capital contribution are quite diverse such as: Vietnamese currency, foreign currency, gold, land use rights, ownership of movable assets, intellectual property rights such as copyright and rights related to copyright, technology ownership rights, etc.

2. What is the minimum charter capital of a single-member LLC?

According to Article 75 of the Enterprise Law 2020:

• The charter capital of a single-member LLC is committed by the company owner and is recorded in the company’s Charter.
• When registering to establish a business, the owner must contribute capital to the company in full and with the correct type of assets as committed within a certain period of 90 days from the date of being granted the Certificate of Enterprise Registration (this period will not include the time for transportation, import or time for carrying out administrative procedures to transfer ownership of assets used for capital contribution).
• In case the company owner does not contribute the full amount of charter capital as committed within the 90-day period, he/she must register to change the charter capital, the registered capital change will be equal to the value of the contributed capital within 30 days from the last day to fully contribute the charter capital.
• For the company’s financial obligations or for damages caused by not contributing, not contributing enough, or not contributing on time the charter capital as prescribed, the company owner must be responsible with all of his/her assets.

Thus, the current law does not have any specific regulations on the minimum charter capital of a single-member limited liability company. Accordingly, the value of this charter capital depends entirely on how much the company owner commits to contribute and will be recorded in the company’s Charter.

3. Legal issues related to single-member limited liability companies

A single-member limited liability company (LLC) is a type of enterprise owned by an individual or organization and is responsible within the scope of the company’s charter capital for the company’s debts and other financial obligations. This is a company with legal status from the date of being granted a business registration certificate, is allowed to issue bonds to raise capital according to regulations but is not allowed to issue shares except in the case of conversion to a joint stock company.

The owner of a single-member LLC can be an individual or an organization, a domestic investor or a foreign investor. The company owner must fully satisfy the regulations on legal capacity as well as civil and business capacity. The company owner is allowed to transfer part or all of his/her capital contribution to another individual or organization. This transfer may change the type of enterprise. At that time, the company owner will have to register the change of business registration with the competent authority according to the provisions of current law.

3.1 Some rights of company owners

Article 76 of the Enterprise Law 2020 stipulates that the rights of company owners will vary depending on whether the owner is an organization or an individual.

– Owners who are organizations:

• Decide on issues related to the company charter such as: charter content, amendments and supplements to the company charter content;
• Decide on the annual business plan as well as the company’s development strategy;
• Decide on the company’s organizational structure: decide on the appointment, dismissal, and removal of the company’s managers or controllers;
• Decide on investment projects;
• Decide on solutions for marketing, market and technology development;
• Approve the company’s contracts such as: loan contracts, lending contracts, asset sales and other contracts, etc.
• Approve the company’s financial statements;
• Decide on a number of issues regarding the company’s charter capital such as: increasing charter capital, transferring part or all of the charter capital, deciding on the issuance of bonds;
• Decide on the establishment of a subsidiary, contributing capital to another company;
• Decide on the reorganization, dissolution and making a request for bankruptcy of the company;
• Other rights as prescribed by the Law on Enterprises and in the Company Charter…

– The owner of the company is an individual with the following rights: Deciding on the content, amending and supplementing the Company Charter; Deciding on a number of issues regarding the company’s charter capital; Deciding on the use of the company’s profits; Deciding on the reorganization, dissolution and making a request for bankruptcy of the company; Recovering the entire value of the company’s assets after dissolution or bankruptcy; Some other rights as prescribed…

3.2 Obligations that the company owner must perform:

The obligations of the company owner are stipulated in Article 77 of the Enterprise Law as follows:

• Make full and timely contributions to the company’s charter capital as prescribed.
• Comply with the contents of the company’s Charter.
• Identify and separate the owner’s personal assets from the company’s common assets. Separate his/her own expenses from the expenses of the Chairman, Director or General Director of the company in the case where the owner is an individual.
• Strictly comply with the provisions of the law on contracts, other relevant provisions such as: buying, selling, borrowing, lending, renting, leasing, contracts, other transactions, etc.
• The owner may only withdraw the charter capital by transferring part or all of the charter capital; In case of withdrawal of contributed charter capital in other forms, the company owner as well as related entities shall be jointly liable for the debts and other property obligations of the company.
• In case the company fails to pay all debts and other property obligations when due, the owner shall not be allowed to withdraw profits
• Perform other obligations as prescribed by the Law and the Company Charter.

4. In which cases is a single-member LLC allowed to increase or decrease its charter capital?

– Increase charter capital: The company owner contributes additional capital or mobilizes additional capital from others through the issuance of bonds. In this case, the company owner will decide on the form and level of increase in charter capital.

– Charter capital decreases in the following cases:

+ In case the company has been operating continuously for 2 years or more from the date of establishment, the company owner will be refunded a part of the contributed capital, this refund must ensure full payment of debts as well as other financial obligations after the refund;

+ In case the company owner does not fully and timely pay the charter capital committed to contribute as prescribed in Article 75 of the Enterprise Law 2020.

Thus, we have provided readers with information on “What is the minimum charter capital of a single-member LLC?” We hope that the above information will answer your questions about capital when establishing a single-member LLC. In addition, if you have any legal questions related to company establishment, please contact VIET MY LAW AND ACCOUNTING for more specific advice.