During the establishment and implementation of business activities, enterprises are allowed to increase/decrease charter capital to suit their business objectives and scale. The change of charter capital of each type of enterprise is quite different. In this article, Warren B will share with customers about the case of an increase/decrease in charter capital of a limited company in Vietnam.
What is charter capital?
“Charter capital” means the total value of assets that have been contributed or promised by the members/partners/owners when the limited liability company or partnership is established; or the total of nominal values of the sold or subscribed shares when a joint-stock company is established.
Increasing, decreasing charter capital for multiple-member limited liability company in Vietnam
1. A company may increase its charter capital in the following cases:
a) Increase in the members’ capital contribution;
b) Receipt of capital contribution from new members.
2. In case of an increase in the members’ capital contribution, the increase will be distributed among the members in proportion to their holdings in the company. Members may transfer their right to contribute capital to other persons in accordance with Article 52 of Law no. 59/2020/QH14. In case a member does not contribute or fully contribute that member’s share of additional capital as distributed, the remainder shall be divided among other members in proportion to their holdings in the company unless otherwise agreed by the members.
3. A company may decrease its charter capital in the following cases:
a) The company returns part of the contributed capital to the members in proportion to their holdings in the company after the company has operated for at least 02 consecutive years from the enterprise registration date and the company is able to fully pay its debts and other liabilities after the return of capital;
b) The company repurchases the members’ stakes as prescribed in Article 51 of Law no. 59/2020/QH14;
c) Charter capital is not fully and punctually contributed by the members as prescribed in Article 47 of Law no. 59/2020/QH14.
4. In the case specified in Point c Clause 3 of this Article, within 10 days from the day on which the increase or decrease in charter capital is complete, the company shall send a written notification to the business registration authority. Such notification shall contain the following information:
a) The company’s name, EID number, headquarters address;
b) The charter capital, the increase or decrease;
c) Time and method of increase or decrease;
d) Full names and signatures of the company’s legal representatives.
5. The notification mentioned in Clause 4 of this Article shall be enclosed with the resolution or decision and the minutes of the meeting of the Board of Members and, in case of charter capital decrease specified in Point a and Point b Clause 3 of this Article, the latest financial statement.
6. The business registration authority shall update information about the increase or decrease in charter capital within 03 working days from the day on which the notification is received.
Increasing, decreasing charter capital for single-member limited liability companies in Vietnam
1. A single-member limited liability company may increase its charter capital when its owner contributes capital or raises capital from other persons. The owner shall decide on the specific increase and the method.
2. In case of raising capital from other persons, the company shall be converted into a multiple-member limited liability company or joint stock company. To be specific:
a) In case of conversion into a multiple-member limited liability company, a notification of change in enterprise registration information shall be submitted within 10 days from the day on which the change in charter capital is complete;
b) In case of conversion into a joint stock company, follow the instructions in Article 202 of Law no. 59/2020/QH14;
3. A single-member limited liability company may decrease its charter capital in the following cases:
a) Part of the contributed capital is returned to the company’s owner after the company has operated for at least 02 consecutive years from the enterprise registration date and the company is able to fully pay its debts and other liabilities after the return of capital;
b) Charter capital is not fully and punctually contributed by the owner as prescribed in Article 75 of Law no. 59/2020/QH14.
That is the information about the increasing/decreasing charter capital for limited liability companies in Vietnam Warren B sent to customers. If customers have any question, please contact Warren B for more consultancy. We hope that the information we provide is useful to customers to set up a company in Vietnam.
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