Charter capital is one of the important factors that individuals and organizations need to pay attention to when wanting to establish a business. Next, let’s find out with Viet My what charter capital is and how much capital is needed to establish a business, let’s answer these questions through the article below.

1. What is charter capital?

What is charter capital? is a question that anyone who establishes a business needs to find out. Charter capital is the total amount of assets in cash or kind contributed by individuals or organizations to become owners or co-owners when establishing a company.

Charter capital is the amount of capital that a company must have and can use according to the terms of the association. The company must register its share capital with the competent authority and announce it. The share capital of a company with legal capital must not be lower than the share capital. A company may increase or decrease its share capital during its operations, but in no case may it arbitrarily lower its share capital below its legal capital. If a company suffers a loss to the extent that its assets are less than its share capital, the loss may be carried forward to the next fiscal year or its share capital may be reduced. For foreign-invested enterprises in Vietnam, legal capital is also the core capital.

2. The meaning of charter capital

What is charter capital? It is very important when establishing a company that everyone needs to pay attention to.

Charter capital is the total initial registered investment capital of all company members to estimate the company’s business operations. It is an indispensable part of the company’s capital structure.

Charter capital has the meaning of determining the capital contribution ratio as well as the commitment of the owner and employees in providing capital to the company. It is the basis for dividing benefits, rights and obligations among capital contributors.

In addition, charter capital also indicates the scale, capacity and position of the company in the market. For example, a company with a large initial capital can create customer trust in transactions and business.

3. Regulations on cases of increasing and decreasing charter capital in 2024

To address the above issues, the Enterprise Law has unified the initial investment period for all types of enterprises. Accordingly, members and shareholders must pay the company the full amount of contributed capital and shares, the correct type of collateral/registered assets at the time of registration for establishment, within 90 days from the date of registration. The date of issuance of the company registration certificate.

Members and shareholders who have not contributed charter capital as committed or have not contributed in full shall be responsible for the financial obligations of the company arising during the period before the company registered corresponding to the committed capital. In the case of a limited liability company, sign the Charter Capital Amendment Articles and in the case of a public company, sign within the period of full payment of the registered shares.

The Law does not set an upper limit on initial capital. You have full authority to decide the amount of capital contributed to the company to achieve business goals and ensure effective business operations. This means that you can invest as much as you like.

3.1 Cases of increasing or decreasing charter capital in LLCs with 2 or more members in 2024

The charter capital of an LLC with 2 or more members when registering to establish a company is the total value of the capital contribution that the members commit to contribute and is recorded in the Company Charter.

An LLC with two or more members can increase its charter capital in the following cases: increasing the capital contribution of members or receiving additional capital contributions from new members.

A limited liability company with two or more general partners may reduce its share capital in the following cases:

Return part of the capital contribution to members in proportion to their capital contribution in the company’s registered capital if they have been operating continuously for 02 years or more, from the time of business registration and ensure that all debts and other financial obligations are fully paid after returning them to members;

The company is allowed to buy back the capital contribution of members according to the provisions of Article 51 of the Enterprise Law 2020;

The share capital is not fully and timely paid by members as required by Article 47 of the Enterprise Law 2020

3.2 Cases of increasing or decreasing the charter capital of a single-member LLC in 2024

The charter capital of a single-member LLC when registering to establish a company is the total value of assets committed to be contributed by the company owner and recorded in the company’s Charter.

A single-member LLC increases its share capital through the company owner contributing additional capital or mobilizing additional capital contributions from others. The company owner is the person who decides on the form of increase and the rate of increase of share capital.

A single-member LLC is allowed to reduce its charter capital in the following cases:

Returning a portion of the contributed capital to the owner of the single-member LLC if the enterprise has been operating continuously for 02 years or more, calculated from the date of registration of the establishment of the enterprise and ensuring full payment of debts and other financial obligations after the contributed capital has been returned to the enterprise owner;

The equity capital is not fully and promptly paid by the enterprise owner as required by Article 75 of the Enterprise Law 2020.

3.3 Cases of increasing or decreasing the charter capital of a joint stock company in 2024

A joint stock company may increase its charter capital by offering shares.

Share offerings can be made in the form of offering shares to existing shareholders, offering shares privately, offering shares to the public.

A joint stock company is allowed to reduce its share capital in the following cases:

According to the decision of the general meeting of shareholders, the company must return a portion of the contributed capital to shareholders corresponding to the proportion that the shareholders have participated in the company if the company has been operating continuously for 02 years or more from the date of business registration and ensures payment of debts and other financial obligations after returning to shareholders;

3.4 Cases of increasing or decreasing charter capital of a partnership in 2024

The share capital of a partnership is the total value of assets contributed or pledged by the company’s members when establishing the company.

A partnership can increase its share capital by adding more general partners or capital contributing members.

A partnership can reduce its share capital by terminating its general partner status.

Readers can refer to Viet My’s company establishment procedure guide during the company establishment process.

4. Should the charter capital be high or low?

However, industries and business fields that require a minimum capital level when establishing a business are not allowed to participate. The registered capital does not have a significant impact on the company’s operations and is only related to the amount of taxes (fees) that the company must pay, specifically:

• Enterprises/organizations with charter capital/investment capital of over 10 billion VND, the fee is 3,000,000 VND/year
• Enterprises/organizations with charter capital/investment capital of 10 billion VND or less, the fee is 2,000,000 VND/year
• Branch, representative office, business location, public service unit, other economic organization, the fee is 1,000,000 VND/year

However, you also need to note the following: Charter capital is the company’s asset obligation to customers and partners. Therefore:

If the equity capital is low/too low, the company’s liability for assets will decrease and it will be difficult to build a trusting relationship with customers and business partners. In particular, if a company needs to borrow from a bank with too little equity, the bank may find it untrustworthy to lend beyond the company’s capacity and beyond its own capital.

High or excessive registered charter capital also increases the company’s liability and risks related to all assets, but it is easier to build trust with customers and partners, especially in business activities.

Increasing charter capital is easy, reducing charter capital is difficult, so business owners should keep seed capital at a reasonable level and maintain capacity appropriate to the financial situation, business direction and company size. The company’s charter capital will be increased until the company’s business activities become more stable and show signs of growth.

5. Regulations on the time limit for contributing charter capital in 2024

Owner/member/shareholder must fully invest in the company according to the type of assets registered for establishment within 90 days from the date of issuance of the Business Registration Certificate, including the time for transportation and import. The operation of the company’s investment assets and issues of transferring ownership of assets.

If the full capital contribution is not made within the prescribed time limit, the following cases will occur:

The owner of a single-member LLC must register within 30 days from the last day of changing the charter capital according to the contributed capital to fully contribute the charter capital. In this case, the owner will be responsible for the financial obligations of the company arising before the last day of the company changing the charter capital according to regulations, corresponding to the committed capital contribution;

A joint stock company with at least 2 members must register a change in the share capital and the share capital contribution ratio equal to the contributed capital within 30 days from the last day of the share capital contribution. out according to regulations. Members who have not invested capital or have not fully invested their contributed capital shall be responsible for the contributed capital corresponding to the financial obligations of the association arising before the company was registered. share capital and the capital contribution of the members;

A joint stock company must register to change the par value of fully paid shares to change the share capital, except in cases where the unpaid shares have been sold out during this period and register to swap shareholders. establishment Shareholders who have not paid or have not fully paid the registered shares must be responsible for the total nominal value of the registered shares corresponding to the financial obligations of the company performed during the period before the date of registration to adjust the company’s charter capital.

Above, Viet My has provided you with basic information about charter capital in the article “What is charter capital?”. You can find out more information about how to increase charter capital of different types of companies such as joint stock companies, limited liability companies, and foreign-invested companies in particular on the website of VIET MY LAW AND ACCOUNTING. If you need more legal advice or charter capital services from Viet My, please call us for support.