Current regulations on the charter capital of a joint-stock company

Charter capital is a frequently discussed topic when establishing an enterprise. Each type of enterprise has its own specific regulations regarding charter capital. So how is the charter capital of a joint-stock company currently regulated? NPLaw will analyze some regulations on the charter capital of joint-stock companies in this article.

I. The current state of charter capital in join-stock companies

Charter capital is a crucial factor for an enterprise to operate and maintain its production and business activities. For the joint-stock company model, the regulations on charter capital are more specific than for other types of enterprises because it is divided into equal parts called shares; it is an important basis for determining the capital contribution ratio and the scope of liability of the company’s shareholders.

Understanding the regulations related to charter capital and its impact on a joint-stock company is of great significance, helping relevant entities ensure their rights in the enterprise’s activities.

II. Legal provisions on charter capital of joint-stock companies

1. What is the charter capital in a joint-stock company?

According to Clause 1 Article 112 of the Enterprise Law 2020 regarding to the capital of a joint-stock company, the charter capital of a joint-stock company is the total par value of all issued shares. The charter capital of a joint-stock company when registering for enterprise establishment is the total par value of all share types that have been registered for purchase and are recorded in the company’s charter.

Thus, the charter capital in a joint-stock company is the total par value of shares sold or registered for purchase when the company is established and is recorded in the company’s charter.

2. Procedures for contributing charter capital in a joint-stock company

The basis procedures for contributing charter capital in a joint-stock compnay are as follows:

Step 1: Individuals or organizations sign a capital contribution contract to establish a joint-stock company, notarized/certified (if any).

Step 2: Transfer assets between the parties and complete the procedures for title transfer, pay taxes and fees es prescribed.

Step 3: Receive the certificate of ownership in the name of the company and update changes to the charter capital on the Enterprise Registration Certificate (if any).

Step 4: After contributing the full chater capital, individuals or organizations are recognized as shareholders of the company on the shareholder register.

3. In what cases can charter capital be reduced in a joint-stock company?

According to clause 5 Article 112 of the Enterprise Law 2020, a joint-stock company may reduce its charter capital in the following cases:

- Based on decision of the General Meeting of Shareholders, the company returns part of the capital contribution to shareholders according to their shareholding ratio if the company has been continuously operating for two or more years since the date of enterprise registration and ensures full payment of debts and other asset obligations after the return to shareholders;

- The company repurchases shares sold as prescribed in Article 132 and 133 of this Law;

- The charter capital is not fully and timely paid by shareholders as prescribed in Article 113 of this Law.

Thus, in any of the three cases mentioned above, a joint-stock company can reduce its charter capital. 

4. In what forms can a joint-stock company offer shares to increase charter capital?

Offering shares is the act of a company increasing the number of shares or the types of shares eligible for offering to raise charter capital. According to Clause 2 Article 123 of Enterprise Law 2020, a joint-stock company can offer shares in the following forms:

- Offering shares to existing shareholders;

- Private placement of shares;

- Public offering of shares.

Thus, there are currently three forms of share offerings to increase the charter capital of a joint-stock company.

III. Answers to some questions about charter capital in joint-stock companies

1. Can the charter capital be registered at 10,000 VND?

Current enterprise law does not stipulate a minimum charter capital requirement for joint-stock companies. Therefore, a company can register a charter capital of 10,000 VND or anathor amount depending on its capability and objective.

However, certain business sectors may have specific legal requirements regarding statutory capital. In such cases, the charter capital must not be lower than the statutory capital as prescribed by law.

2. What should be done if the contributed charter capital is not sufficient as registered? Is it necessary to amend the information on the Enterprise Registration Certificate?

According to Article 113 of Enterprise Law 2020, if shareholders do not fully contribute the number of shares they have registered to purchase within the payment period, the following shall apply:

- Shareholders who have not paid for the shares they registered to purchase will automatically cease to be shareholders of the company and cannot transfer the right to purchase those shares to others;

- Shareholders who have only partially paid for the shares they registered to purchase have voting rights, dividends rights, and other rights corresponding to the number of shares they have paid for; they cannot transfer the right to purchase unpaid shares to others;

- Unpaid shares are considered unsold shares and may be sold by the Board of Directors;

The enterprise registration certificate of a joint-stock company includes information about the charter capital. If shareholders do not contribute the full mount of capital, the company must reduce its charter capital and amend the enterprise registration certificate within 30 days from the end of the deadline for full payment of registered shares.

3. Is it necessary to prove the source of capital when establishing a joint-stock company?

When establishing a joint-stock company, the enterprise self-registers, declares, and is responsible for the accuracy of this information. Currently, there is no regulation on verifying the charter capital of a joint-stock company, but shareholders are responsible for the amount of capital they have contributed to the company. One of the prohibited acts under Clause 5 Article 16 of the Enterprise Law 2020 is faslely declaring charter capital, failing to contribute the registered charter capital; intentionally misvaluing contributed assets.

Therefore, it is mandatory for a company to prove the source of capital when establishing a joint-stock company, but having evidence to support the company’s charter capital can help build trust with customers and business parters.

4. What is the responsibility for debts in case the company’s losses exceed the charter capital in a joint-stock company?

According to point c, clause 1 Article 111 of Enterprise Law 2020, shareholders are only liable for the company’s debts and other property obligations within the amount of capital they have contributed to the company.

Thus, shareholders in a joint-stock company are only responsible for the company’s debts and losses within the amount of capital they have contributed. Any lossess exceeding the charter capital are not the responsibility of the shareholders.

5. Is the charter capital divided into equal parts in joint-stock company reffered to as shares?

According to point a clause 1 Article 111 of Enterprise Law 2020, the charter capital is divided into equal parts called shares.

Therefore, the charter capital divided into equal parts in a joint-stock company is reffered to as shares.

IV. Legal consulting services on charter capital for joint-stock companies

The above is an article by NPLaw analyzing some regulations on the charter capital of joint-stock companies. With a team of experienced lawyers and legal experts, NPLaw provides prestigious, professional legal services, ensuring the lawful rights and interests of our clients.