Vietnam continues to attract both local and foreign investors looking to establish and expand businesses. One of the fundamental aspects of setting up a company in Vietnam is determining and contributing charter capital. Understanding how charter capital works, its legal requirements, and the contribution process is essential for compliance and smooth business operations.

1. What Is Charter Capital?

Charter capital, also known as registered capital, is the amount of capital that company founders commit to contribute during business registration. This capital determines the company’s financial capacity and initial operations. It is declared in the Enterprise Registration Certificate (ERC) and must be fully contributed within a specified timeframe.

Unlike some countries with strict paid-up capital requirements, Vietnam does not impose a fixed minimum for most businesses. However, specific industries, such as banking, real estate, and education, have legal capital requirements.

2. Charter Capital Contribution Deadline and Methods

Vietnamese law mandates that business owners contribute the declared charter capital within 90 days from the issuance date of the ERC. Failure to meet this deadline may result in penalties or required adjustments to company registration.

Accepted Contribution Methods:

• Cash deposits into the company’s corporate bank account.
• Non-cash assets, including machinery, land, intellectual property, or other valuable contributions.
• Foreign capital contributions must be made through a Direct Investment Capital Account (DICA) in Vietnam, ensuring compliance with foreign exchange regulations.

3. Foreign Capital Contribution Process

For foreign-owned businesses, capital contributions must follow strict banking regulations to ensure legal compliance.

• Step 1: Open a Capital Bank Account
  Foreign investors must establish a DICA with a Vietnamese bank. This account is used exclusively for receiving charter capital and foreign loans.
• Step 2: Transfer Funds from Overseas
  The capital contribution must be made via an international bank transfer from the shareholder’s personal or corporate account abroad to the DICA. Using third-party accounts may lead to compliance issues.
• Step 3: Ensure the Exact Capital Amount is Received
  The transferred amount should match the capital declared in the ERC. However, due to intermediary bank fees, the received amount may be slightly lower. Vietnamese authorities typically acknowledge these minor discrepancies, but it is advisable to confirm transfer details with the receiving bank in advance.

4. Adjusting Charter Capital After Incorporation

Companies may adjust their charter capital after incorporation, either increasing or decreasing it, depending on business needs.

• Increasing Charter Capital
  Requires additional contributions from existing or new shareholders, followed by a formal amendment to the business registration.
• Decreasing Charter Capital
  Subject to strict regulations and requires clearance of outstanding debts. Approval from the Department of Planning and Investment (DPI) is mandatory.

5. The Importance of Charter Capital in Business Operations

• Legal Compliance: Ensuring timely and accurate capital contributions prevents legal penalties and operational disruptions.
• Business Credibility: Higher charter capital enhances trust among partners, banks, and government agencies.
• Tax and Financial Planning: Declared charter capital can impact tax obligations and financing opportunities.

Conclusion

Determining and contributing charter capital is a critical step in business formation in Vietnam. Ensuring compliance with legal requirements, banking regulations, and operational needs will help businesses establish a strong foundation. If you need expert guidance on charter capital and company incorporation, our team is here to assist you.

Get in touch today to streamline your business registration in Vietnam!

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