3 misconceptions about charter capital when establishing a company in VN
In recent years, the startup movement in Vietnam grows stronger than ever, shown in statistics when an average of 300 businesses established every day. The ideas and business solutions are rich and diverse. However, in addition to the products and services provided to customers, these days business owners also very concerned about legal issues for their businesses. One of the issues business owners care about as well as many concerns and questions-the charter capital when establishing a business. So, LSX legal firm would like to introduce: “3 misconceptions about charter capital when establishing a company in VN”
Legal grounds
- Law on Enterprise 2020
- Decree 75/2015/ND-CP
- Decree 22/2020/ND-CP
“Cash contributions only”
As shared with you in the previous article about Charter Capital; this can be understood simply as a capital contribution by the assets of a member (in a limited liability company; or a partnership) or a shareholder (in a joint-stock company) who commits to contribute to the enterprise. The commitment to contribute capital of a member or shareholder is shown through the company’s charter and is also reflected in the business registration certificate issued by the competent authority.
A lot of people mistakenly believe that capital contribution can only by money and not anything else. In fact, the law does not provide for this. Specifically, the assets that are allowed to be used to contribute capital to enterprises are prescribed in Clause 1, Article 34 of the Law on Enterprises 2020 as follows:
“Article 34. Contributed assets
1. Contributed assets include VND, convertible foreign currencies, gold, land use right (LUR); intellectual property rights, technologies, technical secrets, and other assets that can be converted into VND.”
Thus, the range of assets used to contribute capital when establishing a business is very wide. In addition to Vietnam Dong and foreign currencies; members can also contribute capital with many other types of tangible assets such as gold, diamonds, technical means; facilities for production and business; vehicles,… Members and shareholders can contribute intangible assets such as the value of land use rights, intellectual property rights, etc.
Besides, assets used to contribute capital to an enterprise must valued and converted to an amount in Vietnam dong. The valuation of assets contributed as capital can carried out by the members, shareholders, or by hiring professional asset valuation organizations (approved by all members).
“Must contribute immediately upon business establishment”
Many people think that when setting up a business, they will have to contribute the full committed charter capital to carry out the business. In fact, the law does not require members and shareholders of an enterprise to contribute the full amount of charter capital when registering for business establishment.
Cash flow means an extremely important issue for every business, so the law allows members and shareholders to have the right to deal and make the capital contribution they have committed when registering to establish the business. However, according to Clause 2, Article 47 of the Law on Enterprise 2020, the capital contribution of members in a limited liability company must complete within a maximum period of 90 days from the date of establishment of the enterprise.
“Article 47. Capital contribution to establishing the company and issuance of the certificate of capital contribution
2. The members shall contribute sufficient and correct assets as promised when applying for enterprise registration within 90 days from the issuance date of the Certificate of Enterprise Registration. The time needed to transport or import the contributed assets and for completing ownership transfer procedures will be added to this 90-day period… “
Thus, the contribution of capital as committed in the business registration certificate means the obligation of each member. However, they will not required to contribute immediately from the time of business registration as prescribed by the law. Within 90 days, members must fully and correctly contribute the capital. Then, if any member has contributed insufficiently or does not contribute capital after the prescribed period, the enterprise must carry out procedures for adjusting the charter capital in the business registration license. This procedure is carried out by the Department of Planning and Investment where the business is registered.
“Must prove the capital amount”
In fact, the law does not require companies to prove their charter capital. The law respects the honesty of businesses.
Most Vietnamese entrepreneurs run small and medium-sized enterprises, so they pay attention to the license fee that based on the registered charter capital that the business must pay annually. According to Decree 139/2016/ND-CP:
“Article 4. Rate of licensing fees
1. The rate of licensing fees for the organizations having the production and business of goods and services is as follows:
a) The organizations with charter capital and investment capital over 10 billion dongs: 3,000,000 dong/year;
b) The organizations with charter capital and investment capital of less than 10 billion dong: 2,000,000 dong/year;
c) The branches, representative offices, business location, public service providers, and other business organizations: 1,000,000 dong/year;
The rate of licensing fees for the organizations specified under points a and b of this Paragraph is based on the charter capital written in the certificate of business registration or on the investment capital written in the certificate of investment registration in case of no charter capital.”
Accordingly, the declaration of charter capital depends on each member of the company. However, charter capital represents the basis for determining the scope of responsibility for the business operations of the company. Therefore, the members must discuss and register the charter capital in the most honest and reasonable way for their enterprise.
LSX legal firm’s service on company establishment
When establishing a company, people must carry out the procedure following the law at the competent business registration authority (under the Law on Enterprise 2020). The process of establishing a business includes many different steps and phases. If you are not familiar with the law, this process may take a lot of time.
With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself, We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.
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Related questions
The Law on Enterprises does not have specific regulations on the minimum or maximum charter capital that an enterprise must register when establishing a company. Therefore, enterprises only have to declare the minimum charter capital appropriate for the industry.
The Law on Enterprise stipulates that when establishing an enterprise, every company must declare and register an appropriate amount of charter capital before the business registration. Therefore, it is impossible to establish a company without charter capital.
Charter capital is the capital that needs to be prepared when establishing a new company. This is the type of capital contributed by members or shareholders of the company or committed to contribute to the enterprise upon its establishment for a certain period of time.
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