When starting a business, everyone always imagines a crucial matter: capital. Capital may be self-funded or borrowed, but anyone who has business must have it. Today, as society has grown, business may have been different, but capital has always been the theme for those who are doing business or will intend to do business. One of the kinds of capital is charter capital.
So, what is charter capital and why do we need to care about it when establishing a company or intending to do business?
In a common sense, charter capital is the business capital registered and recorded in the company’s charter.
According to the provisions of the current Enterprise Law, “Charter capital is the total value of assets contributed or committed to contribute by members when establishing limited liability companies or partnerships; is the total value of the par value of the shares already sold or registered to buy upon the establishment of the enterprise in the case of a joint stock company.”
Thus, charter capital here includes money and other valuable assets contributed by the company’s members for the purpose of business after the company is established. Apart from a number of specific industries which require a certain amount of capital to do business (such as real estate, labour outsourcing), most of the remaining businesses do not require minimum charter capital. Therefore, members or owners of companies can register their companies’ charter capital depending on their financial ability. 10 million Vietnam dong or more, it all depends on the nature and size of the company.
When enterprises grow and develop, can they increase the charter capital; or when enterprises have difficulties, can they reduce the charter capital? The answer is that enterprises can increase or reduce their charter capital because charter capital, though specified in the company charter, can be increased or decreased depending on the needs of enterprises.
The ways to raise or reduce capital are specified in the current Enterprise Law. It is important to note that when charter capital is reduced, as in the case capital is repaid to company members or company owner(s), the company must operate for 2 continuous years from the date of enterprise registration and ensure full payment of debts and other property obligations after the capital has been repaid.
In short, capital is always the “hot” topic for those who are doing and will do business. When doing a small business, people may not pay much attention to “charter capital”, but as the business grows and development orientation plans are set up, charter capital will be the key issue in the meeting of the Board of Directors or Board of Members.
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