Charter capital of the limited liability company is a significantly concerned issue for many investors when establishing new enterprises and during business operations of the limited liability company.

What is the current state of charter capital of the limited liability company? What are legal regulations on charter capital of the limited liability company? What are problems that need to be explained related to charter capital of the limited liability company?

I/ Current state of charter capital of the limited liability company

The concerned state of charter capital of the limited liability company currently is as follows:

- Many newly established enterprises have declared their charter capital at a high level, but actually they don’t implement contributions or don’t contribute such charter capital in full and in time as defined by Law on Enterprise causing potential risks, and they are subject to being fined when inspectors discover their violations.

- Many enterprises wish to increase their charter capital during operations to create additional capital sources to rotate such capital using in production and business activities, but they don’t implement procedures for increasing charter capital as defined by Law on Enterprise.

- Many enterprises have decreased their charter capital after business operations, but they don’t implement procedures for decreasing charter capital as defined by Law on Enterprise.

II/ Legal regulations on charter capital of the limited liability company

1. What is charter capital of the limited liability company?

Charter capital of the limited liability company is the total asset value that enterprise’s owners and members have contributed or committed to contribute and is recorded in the enterprise’s Charter when the limited liability company is established. (Clause 34, Article 4; Clause 1, Article 47; Clause 1, Article 75 of Law on Enterprise 2020)

2. Methods for contributing charter capital to the limited liability company

There are methods for contributing charter capital to the limited liability company, as follows:

- Contribution in Vietnamese dong;

- Contribution in convertible currency;

- Contribution in gold;

- Contribution in land use rights;

- Contribution in intellectual property rights;

- Contribution in technology;

- Contribution in technical know-how;

- Contribution in other assets that can be by Vietnamese dong. 

(According to Clause 1, Article 34 of Law on Enterprise 2020)

3. What time is the completion of the contribution of charter capital to the limited liability company?

Time for completing the contribution of charter capital to the limited liability company is within 90 days from the date of being issued the Enterprise Registration Certificate, not including the time for transporting and importing contributed assets and implementing administrative procedures to transfer ownership of such assets. (Clause 2, Article 47 and Clause 2, Article 75 of the Law on Enterprise 2020)

III/ Questions on charter capital of the limited liability company

1. Can investors contribute charter capital to the limited liability company by their cars?

Investors can contribute charter capital to the limited liability company by their cars because such cars are assets that can be valued by Vietnamese dong to implement capital contribution according to Clause 1, Article 34 of the Law on Enterprise 2020.

2. Is it necessary to prove charter capital when establishing the multiple-member limited liability company?

In fact, it isn’t necessary to prove charter capital when establishing the multiple-member limited liability company, except in cases where investors operate business lines requiring legal capital/ deposit, then they are subject to proving such charter capital (with confirmation from the bank about charter capital deposited in a blocked account opened at that bank).

For instances about cases required to prove charter capital:

- Multi-level marketing enterprises are responsible for opening a deposit account and depositing an amount equivalent to 5% of charter capital but not less than 10 billion VND (ten billion Vietnamese dong) at a commercial bank or a branch of a foreign bank in Vietnam. (Clause 2, Article 50 of Decree No. 40/2018/ND-CP)

- Air transport enterprises operating up to 10 aircraft require a minimum capital level of 300 billion VND according to Point a, Clause 1, Article 8 of Decree No. 92/2016/ND-CP amended and supplemented by Clause 5, Article 1 of Decree No. 89/2019/ND-CP.

In common, enterprises shall register charter capital by themselves and are responsible for the accuracy of declared contents, especially, the Law strongly prohibits behaviors falsely declaring their charter capital. 

3. Can investors be fined if investors fail to fully contribute charter capital according to a specific time as prescribed by Law?

If charter capital is not fully contributed within the prescribed time, investors will be subject to administrative sanctions because of not implementing procedures for capital adjustment or member change as prescribed at the business registration agency according to Clause 3 and Point b, Clause 5, Article 46 of Decree No. 122/2021/ND-CP as follows:

- Fines from 30,000,000 VND to 50,000,000 VND shall be imposed for behavior of not implementing procedures for adjusting capital or changing members, founding shareholders as prescribed by the business registration agency when the contribution period has expired and the adjustment period has expired because members or founding shareholders have not fully contributed capital but no members or founding shareholders have implemented their capital contribution commitments;

- Remedial measures: It is forced to implement procedures for adjusting capital or changing company members.
 

4. Can the multiple-member limited liability company decrease its charter capital if its members do not completely contribute committed charter capital? 

If members of the multiple-member limited liability company fail to fully contribute capital as committed, the enterprise can decrease its charter capital within 30 days from the last day of completely contributing capital as prescribed. (According to Clause 4, Article 47; Point c, Clause 3, Article 68 of the Law on Enterprise 2020)

IV/ Legal advice services on charter capital of the limited liability company

Ngoc Phu Law Company Limited (NPLaw) is a professional and reputable law firm providing legal advice services and implementing legal procedures for charter capital of the limited liability company with the following specific process and work:

- Receiving Client’s information on advising and implementing legal procedures related to charter capital of the limited liability company;

- Advising and guiding Client to prepare necessary documents completing relevant legal procedures;

- Drafting dossier and representing Client to discuss and work with the competent State authorities;

- Receiving, informing and handing over results to Client.

The above article analyzes some necessary information on charter capital of the limited liability company. If readers have any further questions needing professional support of lawyers or specialists, please contact NPLaw to receive the best legal advice protecting your legitimate rights and interests.