Capital is an indispensable element in business activities of enterprises. For certain industries, the legal capital is subject to the regulation of the competent state agency. So what is legal capital? Which business lines that do not require legal capital in Vietnam?
Legal grounds
Decree 89/2019/ND-CP
Legal capital concept
Legal capital is the minimum capital required by law to establish an enterprise. Legal capital is fixed by a competent authority. It is considered possible to implement the project when establishing a business. Legal capital will vary depending on the business sector and industry.
The Government shall prescribe specific capital levels for each type of domestic enterprise operating in each field and industry of the national economy. For example: The legal capital level for state-owned enterprises operating in the air transport business is VND 50 billion; The legal capital level for cooperatives dealing in ocean freight and air transportation is 10 billion VND…
For foreign-invested enterprises, the legal capital is determined not depending on the business line but on the basis of the total investment capital. The 1996 Law on Foreign Investment in Vietnam (amended in 2000) stipulates that the legal capital level for establishing a foreign-invested enterprise is not less than 30% of the total investment capital, except for special cases where it is necessary to encourage investment.
The regulation of legal capital is to ensure the minimum assets of the enterprise with its customers, especially for businesses operating in fields that pose risks to customers; limiting the widespread establishment of enterprises without working capital.
Legal capital characteristics
– Scope of application: Only regulated for certain professions. (The occupations are listed in the list). Legal capital is based on business lines, or in other words, depending on different industries and professions, corresponding to it is a different level of legal capital.
– Subjects of application: Legal capital is granted to business entities. Including individuals, legal entities, organizations, cooperative groups, individual business households, etc.
– Legal meaning: To help enterprises carry out business activities after establishment. And avoid, prevent risks.
– Time of issuance: The certificate of legal capital is issued before the enterprise issues the license for establishment and operation.
- Legal capital is different from the contribution of other owners than business capital. The contributed capital or business capital must be greater than the legal capital or equal to the legal capital.
- Legal capital is mainly regulated in specialized legal documents or sub-law documents such as decrees, circulars, etc.
During business operations, the amount of equity capital must be consistent with the legal capital and must not be lower than the legal capital.
Currently, in order to ensure compliance with the spirit of the 2013 Constitution with the aim of realizing the freedom to do business in all professions that are not prohibited by law, legal capital is no longer an approved provision regulated in the enterprise law and applied only in a number of industries and professions.
For example:
Real estate business: legal capital 20 billion VND
Auditing for an entity with a public interest of 6 billion
Credit information activities 30 billion VND
Ship demolition company 50 billion VND
Some professions require legal capital and must also make a deposit:
Business in domestic travel services 100 million, enterprises deposit 100 million VND
Business travel services for international tourists to Vietnam 250 million, enterprises deposit 250 million VND
Labor sub-lease, enterprises deposit 2 billion VND
Employment services, businesses deposit 300 million VND
Providing services of sending workers abroad as a deposit of 1 billion VND
Signs to identify legal capital
Legal capital is the minimum capital required by law to establish an enterprise. The Government shall prescribe specific capital levels for each type of domestic enterprise operating in each field and industry of the national economy. Example: The legal capital level for a state-owned enterprise operating in air transport business is VND 50 billion; The legal capital level for cooperatives dealing in ocean freight and air transportation is 10 billion VND…
For foreign-invested enterprises, the legal capital is determined not depending on the business line but on the basis of the total investment capital. The 2014 Investment Law in Vietnam stipulates the level of legal capital to establish a foreign-invested enterprise with total investment capital, except for special cases where it is necessary to encourage investment.
The regulation of the legal capital is to ensure the minimum assets of the enterprise with its customers, especially for those operating in the fields that pose risks to customers; limiting the widespread establishment of enterprises without working capital.
Which business lines require legal capital?
The legal capital requirements are also different depending on the industry. Then there is the legal capital of some popular industries:
Real estate business: 20 billion VND (According to Clause 1, Article 3 of Decree 76/2015/ND-CP);
Airport and airport business: From 100 to 1300 billion VND (According to Article 8 of Decree 92/2016/ND-CP);
Aviation service business: 30 billion VND (According to Article 17 of Decree 92/2016/ND-CP);
Debt trading business: 100 billion VND (According to Article 7 of Decree 69/2016/ND-CP);
Debt trading floor services: VND 500 billion (According to Article 8 of Decree 69/2016/ND-CP);
Securities trading: 10 to 165 billion VND (According to Decree 58/2012/ND-CP and Decree 86/2016/ND-CP);
Health insurance business: 300 billion VND (According to Decree 73/2016/ND-CP);
Debt collection service business: The legal capital requirement for conducting this business is two billion dong and in the course of operation must not be lower than the legal capital in Article 13 of Decree 104/2007/ND -CP;
Retail business by multi-level method: To be eligible to register for this business line, an enterprise must meet the capital level of 10 billion VND or more specified at Point b, Clause 1, Article 7 of Decree 40/2018. /ND-CP;
Multimodal transport service business: Legal capital for this business line, point a, Clause 1, Article 5 of Decree 144/2018, after obtaining a business license, business entities must satisfy the following requirements: minimum asset amount is 80,000 SDR….
Business lines that do not require legal capital
Petroleum transportation service business
Trading in fertilizers (Inorganic fertilizers)
Business of passenger transport by contract vehicles and tourism
Railway infrastructure business
Car warranty and maintenance
Organize training and retraining on bidding
Business of video games with prizes for foreigners
Film business
Meaning of legal capital
The fact that the law regulates legal capital in certain industries and fields is not a regulation that infringes upon the freedom of doing business in all industries that are not prohibited by law of business entities. The purpose and meaning of the law when regulating legal capital is to protect the legitimate rights and interests of consumers, customers and partners operating in that field. It can be said that the industries where the law sets regulations on legal capital are sensitive industries that directly affect the economy of the country and have a great influence on people’s daily lives such as: insurance business, banking, real estate business, ..
The regulation of legal capital is one of the measures for enterprises to prove to the state agencies that they have enough economic potential to do business in this field, enough potential to ensure the security of their enterprises. safety, legitimate rights and interests of customers when participating in transactions with their business. In addition, the agency certifying the level of legal capital must always monitor the enterprise’s equity to warn consumers and creditors when the enterprise’s equity is in danger of being reduced below the capital level. regulations and promptly take necessary management measures when the owner’s equity of the enterprise falls below the legal capital as well as consumers, creditors, and partners consider when performing transactions with these enterprises. to ensure the safety of their own money and assets.
Legal capital does not depend on the type of business but is determined by specific business lines.
If a company intends to establish a business that requires legal capital, the contributed capital must be at least equal to the legal capital.
The level of legal capital is fixed for each business line.
Related articles:
Change of business registration to increase charter capital of the company in Vietnam
Regulations on assets to contribute capital to establish a company in Vietnam
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Frequently asked questions
According to Clause 34, Article 4 of the Enterprise Law 2020, charter capital is the total value of assets contributed or committed to by members of the company or the company owner when establishing a limited liability company or a partnership company. name; is the total par value of shares sold or registered for purchase upon the establishment of a joint stock company.
Although both are required capital when establishing an enterprise, there are some basic differences between charter capital and legal capital as follows:
Charter capital is applied according to the type of enterprise, while legal capital is only applicable to a number of industries and fields (such as banking, insurance, …).
Charter capital has no minimum or maximum level, while legal capital is a fixed number for each industry.
Charter capital must be fully contributed within 90 days from the date of issuance of the Enterprise Registration Certificate, while the legal capital must be fully contributed from the date of business operation.
According to the law, the legal capital of a life reinsurance business or both life reinsurance and health reinsurance: is 700 billion VND.
Conclusion: So the above is Business lines that do not require legal capital in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
