What is Charter Capital?

According to Clause 29, Article 4 of the Law on Enterprises 2014, Charter Capital is the total value of assets contributed or committed to be contributed by members when establishing a limited liability company or a partnership company; it is the total value of shares already sold or registered for purchase when establishing an enterprise for a joint-stock company.

Assets contributed as capital can be:

- Vietnamese Dong;- Freely convertible foreign currencies;- Gold;- Value of land use rights, value of intellectual property rights, technology, technical know-how;- Other assets recorded in the company's charter contributed by members to form the company's capital.

According to Clause 13, Article 4 of the Law on Enterprises 2014: Capital contribution is the act of contributing assets to form the charter capital of the company.

Capital contribution includes contributing capital to establish an enterprise or contributing additional charter capital to an already established enterprise.

When contributing capital, the contributor may become the owner or co-owner of the company. Depending on the type of enterprise established, the proportion of contributed capital varies, and the contributor will have different rights and obligations.

Charter capital is a mandatory content recorded in the business registration application.

Organizations and individuals have the right to contribute capital to limited liability companies, joint-stock companies, and partnership companies. Except for the following entities:

- State agencies or units of the armed forces that use state assets and public funds to contribute capital to enterprises for private profit for their agencies or units;- Entities not authorized to contribute capital to enterprises under the law on officials.

Charter capital is significant in determining the ratio of capital contribution or shareholding in the company; thereby serving as the basis for the distribution of rights, interests, and obligations among investors within the company.

Capital contribution must be confirmed by written documents from credit institutions or banks if contributed in cash. If the capital is contributed in the form of land use rights, intellectual property rights, technology, technical know-how, etc., the members must draft an agreement or hire independent valuation agencies.

However, it is necessary to distinguish between charter capital and legal capital. Legal capital is the minimum capital required to establish an enterprise. Legal capital is determined by the competent authority and is considered sufficient to execute the project when establishing the enterprise. Legal capital varies depending on the business sector and industry.

Related documents:

Decree 106/2015/ND-CP

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