The current Vietnamese legislation has regulations that are very open for business establishments. Therefore, many individuals and organizations aim to build their own business. However, when establishing a company, people must met certain conditions prescribed by the law. Charter capital is among the most questioned problems. Follow this article to have an answer for “Can I establish a company without charter capital?”
Legal ground
- Law on Enterprise 2020
Establishing a company
When establishing a company, capital is one of the decisive conditions for the success of the company. You may not need capital to register with the business registration office when you startup. However, in the process of business, your company must have some actual capital. Without capital, your company can not go into operation. Because capital means assets, and without assets, you cannot run a company to pay for employees, machines, costs related to government agencies, and some other costs during operation.
If your company has no capital, sooner or later it will quickly go bankrupt.
Can a company established 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, shareholders of the company, or committed to contributing to the enterprise upon its establishment for a certain period of time.
However, 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. Specifically:
- In case the enterprises conduct and register the business lines that do not require minimum capital, then they can prepare an amount of capital according to their financial ability and economic conditions. Because this case does not require the enterprise to prove the minimum capital or legal capital.
- In case an enterprise registering for a business line has requirements and conditions on legal capital and escrow capital, the enterprise needs to prepare an amount of capital as prescribed. Specifically, if that business line requires the enterprise to have legal capital of 500 million VND, then the enterprise needs to have at least 500 million VND and must provide verification papers of this capital to the Department of Planning and Investment.
How much charter capital needed to establish a company?
The answer is: based on the business line and industry you registered.
- If an enterprise registers for a normal business line that does not require legal capital, the law does not stipulate a minimum capital level to establish a company.
- In fact, there are many enterprises that have registered the company’s charter capital of 1 million VND, this is not prohibited by law. But when registering such a low charter capital, when dealing and working with partners, banking, and tax agencies, they often don’t trust this business. So, registering the charter capital too low may cause limitations. Therefore, enterprises shall register the charter capital at a relative level and appropriate with reality to make it convenient for businesses.
- On the other hand, if an enterprise registers a business line that requires legal capital to operate; the minimum capital required to establish a company is equal to the prescribed amount of that business line.
LSX legal firm’s service on business 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.
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Related questions
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.
It isn’t. Business household does not have a seal, cannot open branches or representative offices, do not have the rights that enterprises have such as import-export activities or apply the Law on Bankruptcy when the business makes a loss.
Contact LSX
Finally, hope this article is useful for you to answer the question about “Legal age to establish a business household in Vietnam”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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