Capital for company establishment – legal provisions and practical guidance

I. Understanding capital for company establishment

Capital is one of the most essential elements in the formation and operation of a company, serving as the foundation for conducting business activities. Preparing capital not only involves the amount of money or assets registered for business but also requires compliance with legal provisions concerning forms of capital contribution, deadlines, and necessary documents. 

The source of capital is a crucial foundation for establishing and operating a business. It not only determines the company’s financial capacity but also serves as a legal basis for competent authorities to supervise its business activities. Capital may include not only cash but also other valuable assets such as land use rights, intellectual property rights, or fixed assets. As a decisive factor in a company’s development, capital must be prepared thoroughly, transparently, and in full compliance with applicable laws.

II. Legal regulations on capital for company establishment

1. Definition of capital for company establishment

Clause 34, Article 4 of the Law on Enterprise 2020 provides that:

• Charter capital is the total value of assets contributed or committed to be contributed by members or the owner of a limited liability company or a partnership upon establishment; it is the total par value of shares that have been sold or registered for purchase upon the establishment of a joint stock company.

Accordingly, capital for company establishment is understood as the value of assets contributed or committed by the members or owner when establishing the company, or the total par value of shares registered for purchase upon the establishment of a joint stock company.

2. Capital requirements for company establishment

Currently, most business sectors are not subject to a minimum capital requirement when establishing an enterprise. However, for certain conditional business lines requiring legal capital, enterprises must meet the prescribed minimum capital level to obtain business licenses.

Some examples of business sectors requiring legal capital include:

• Security service business;
• Auditing service business;
• Securities business;
• Insurance business.

To determine whether a business line is subject to capital conditions, individuals and organizations should consult relevant specialized legal documents or seek legal advice for specific guidance.

3. Documents required for capital contribution to establish a company

When contributing capital to establish a company, the owner, members, or shareholders must prepare complete legal documents to ensure that procedures are implemented in accordance with the law. The basic documents include:

• Legal documents of the owner, members, or shareholders; power of attorney (if any);
• Documents proving ownership of the contributed assets (e.g., Land Use Right Certificate, Vehicle Registration Certificate, etc.);
• Documents proving the contribution (e.g., Capital Contribution Agreement, Bank Transfer Receipt, or Capital Contribution Contract).

Depending on the type of enterprise, the required documents may differ. To ensure the legality of the process, enterprises are advised to consult with legal experts for timely and accurate guidance.

III. Questions about capital for company establishment

1. Is there a time limit for capital contribution when establishing a company?

The Law on Enterprise 2020 states the capital contribution deadlines as follows:

• For a multi-member and single-member limited liability company: 90 days from the date of issuance of the Enterprise Registration Certificate (Clause 2, Article 47 and Clause 2, Article 75);
• For a joint stock company: 90 days from the date of issuance of the Enterprise Registration Certificate (Clause 1, Article 113);
• For a partnership: 90 days from the date of issuance of the Enterprise Registration Certificate (Clause 1, Article 178).

Thus, individuals and organizations must complete capital contribution within 90 days from the date the company is granted its Enterprise Registration Certificate.

2. What are the legal consequences of improper capital contribution?

Organizations and individuals that violate capital contribution regulations upon company establishment shall be sanctioned under Article 46 of Decree No. 122/2021/NĐ-CP, as follows:

• Contributing capital in an unlawful form: A fine from 20,000,000 VND to 30,000,000 VND;
• Failing to fully contribute committed capital after the prescribed time limit without registering for capital adjustment with the Business Registration Office: A fine from 30,000,000 VND to 50,000,000 VND.

Accordingly, any improper capital contribution shall be subject to administrative sanctions as prescribed above.

3. What procedures are required for approval of capital contribution to establish a joint venture company?

Capital contribution to establish a joint venture is common when expanding business scale or cooperating among enterprises. Depending on each business sector, procedures may differ. The basic steps include:

• Step 1: Verifying the capital contribution conditions, business cooperation requirements, and foreign investor ownership ratios (if any);
• Step 2: Applying for an Investment Registration Certificate;
• Step 3: Applying for an Enterprise Registration Certificate;
• Step 4: Applying for sector-specific licenses (if required).

4. Can a company engaged in accounting services contribute capital to establish another accounting service company?

Clause 3, Article 59 of the Law on Accounting 2015 stipulates:

• An enterprise providing accounting services shall not contribute capital to establish another accounting service enterprise, except where it contributes capital with a foreign accounting service enterprise to establish an accounting service enterprise in Vietnam.

Accordingly, an accounting service company is not permitted to contribute capital to establish another accounting service company, except in cases of joint capital contribution with a foreign accounting service enterprise to form one in Vietnam.

5. Can gold be used as contributed capital to establish a joint stock company?

Clause 1, Article 34 of the Law on Enterprise 2020 provides that: Assets contributed as capital include Vietnamese Dong, freely convertible foreign currencies, gold, land use rights, intellectual property rights, technologies, technical know-how, and other assets that can be valued in Vietnamese Dong.

Thus, gold may be used as contributed capital when establishing a company, including a joint stock company.

6. What documents are required for capital contribution to a multi-member limited liability company using fixed assets?

Under Clause 1, Article 35 of the Law on Enterprise 2020, members of limited liability companies, partnerships, and shareholders of joint stock companies may transfer ownership of contributed assets to the company as follows:

• For assets requiring ownership registration or land use rights, the contributor must implement the transfer procedures for the ownership or land use right to the company under the law. Such transfer is exempt from registration fees;
• For assets not requiring ownership registration, the capital contribution shall be implemented through asset delivery and receipt, confirmed by a written record, unless otherwise conducted via an account.

Accordingly, when contributing capital with fixed assets, proof of ownership transfer must be provided (e.g., transfer contracts, asset delivery records, etc.).

IV. Legal consultancy services on capital for company establishment

The above article by NPLaw provides an overview of capital-related legal issues in company establishment. With a team of experienced lawyers and legal specialists, NPLaw offers reliable and professional legal services to ensure the best protection of clients’ legitimate rights and interests.

For legal assistance or consultation, please contact NPLaw for support.