Capital contribution time limit when increasing charter capital

During operations, companies have the right to decide to increase charter capital in accordance with the needs of the company and investors. Regarding increasing charter capital, the issue of the capital contribution deadline when increasing charter capital in accordance with the law is something that many people are concerned about. The following article by Viet An Law Firm will provide you with the most detailed information about the capital contribution time limit when increasing charter capital in Vietnam.

Legal basis

• Law on Enterprise 2020;
• Decree 01/2021/ND-CP on business registration.

General regulations on company charter capital

What is charter capital?

Charter capital is the total value of assets contributed or committed to be contributed by company members and owners when establishing a limited liability company or partnership; is the total par value of shares sold or registered to buy when establishing a joint stock company.

What is capital contribution?

Capital contribution is the contribution of assets to form the company’s charter capital, including capital contribution to establish a company or additional charter capital contribution of an already established company.

What is a charter capital increase?

Increasing charter capital is an activity aimed at restructuring charter capital. Increasing charter capital is an activity that businesses carry out when they want to expand the scale of business operations or increase loan limits in banks.

Methods of increasing charter capital

Each type of company will have different ways to increase charter capital, specifically as follows:

Increase charter capital of single-member limited liability company (LLC).

Single-member LLCs increase the charter capital in the following ways:

• Company owners contribute additional capital;
• Mobilize additional capital from others. In this case, the owner decides the form and amount of charter capital increase.

Increase charter capital of multiple-member LLC

Multiple-member LLCs increase charter capital in the following ways:

• Increasing members’ capital contribution: existing members of the company will contribute additional capital corresponding to their capital contribution in the company’s charter capital. Members can transfer their capital contribution rights to others according to the provisions of the law;
• Receiving additional capital from new members: in this case, the number of company members increases and the capital contribution ratio of existing members may change.

Increase charter capital of joint stock company

Joint stock companies increase charter capital by:

• Offering shares ;
• Release Stock;
• Payment of dividends by shares.

The sale of shares can be done in the following forms:

• Offering shares to existing shareholders;
• Offering private shares;
• Offering shares to the public.

Bond issuance can be done in the following forms:

• Issuing certificates;
• Issuing book entries;
• Release of electronic data.

Increase charter capital of partnership company

To increase charter capital, it can be done in one of the following two forms:

• Members of the company contribute additional capital.
• The company will accept additional partnership members or capital contributing members.

Capital contribution time limit when increasing charter capital

Capital contribution time limit when increasing charter capital for joint stock companies, single-member and multiple-member LLCs

Based on the following legal provisions:

• Enterprises are responsible for registering changes to the content of the Business Registration Certificate within 10 days from the date of change (Article 30 of the Enterprise Law 2020);
• In case the management organization is in the form of a limited liability company with two or more members, the company must notify the change in business registration content within 10 days from the date of completion of the change in charter capital (Article 87 of the Enterprise Law 2020);
• The company registers changes in charter capital within 10 days from the date of completion of the share sale (Article 123 of the Enterprise Law 2020).

The date of change is understood as the date capital is added to the company’s capital account. Such a deadline Capital contribution when increasing charter capital for joint stock companies, single-member limited liability companies, and multiple-member limited liability companies or more is 10 days. After 10 days from the date of completion of capital increase procedures, the company shall register to increase charter capital.

Capital contribution time limit when increasing charter capital for a Partnership Company

According to the provisions of Clause 2, Article 186 of the Law on Enterprises 2020, partners or capital-contributing members must pay the full amount of capital committed to contributing to the company within 15 days from the date of approval, unless the Association the partner decide on another deadline.

Some frequently asked questions related to increasing charter capital

Is the capital contribution period when increasing charter capital different from the capital contribution period when establishing a business?

The time limit for capital contribution when establishing an enterprise is 90 days from the date of obtaining the business registration certificate (Clause 2, Article 47 of the Enterprise Law 2020).

Thus, the capital contribution period when the company increases capital will be shorter than the capital contribution period when established. The reason is that when establishing a business, charter capital is needed for the business to exist. Meanwhile, capital contribution when increasing charter capital is only a form to help businesses develop and expand their scale.

How are the procedures for increasing the company’s charter capital carried out?

Step 1: Submit documents to increase the company’s charter capital at the Department of Planning and Investment at the Provincial/City level

The legal representative or authorized person submits the application to increase the company’s charter capital at the Business Registration Office of the Department of Planning and Investment of the Province/City where the enterprise is headquartered. The registration office officer checks the validity of the application and gives a receipt. Dossiers include:

• Application for change of business registration;
• Decision to increase the capital of the Board of Members (for multiple-member limited liability companies), of the General Meeting of Shareholders (for joint stock companies);
• Minutes of meetings of the Board of Members (for multiple-member limited liability companies), of the General Meeting of Shareholders (for joint stock companies);
• Certificate of capital contribution of new members (in case of accepting new members);
• New member’s notarized personal attestation;
• Power of Attorney for organizations and individuals to carry out procedures.

Step 2: Receive the results of the charter capital increase application

After 03 working days from the date of receiving the dossier, the business registration office will return the result as a new enterprise registration certificate with a new charter capital (if the dossier is valid). Or return notice of amendments to the dossier (if the dossier needs further amendments).

Step 3: Publication of the change information on the national business portal.

Note on procedures

For a single-member limited liability company, increasing charter capital by mobilizing additional capital contributions from others will break the “single-member” regime of the company, the company must organize management according to one of two types. image:

• Multiple-member LLC: The company must notify the business registration content within 10 days from the date of completion of the change in charter capital;
• Joint stock company: according to regulations on business type conversion.

For joint stock companies, the General Meeting of Shareholders approves the issuance of shares for sale to increase charter capital, and at the same time assigns the Board of Directors to carry out procedures for registering to increase charter capital after each share offering completely.

Does the tax rate after increasing corporate capital change?

Increasing a business’s capital increases the business license tax rate. The applicable license tax rate in 2023 is based on the charter capital of the enterprise as follows:

• For enterprises registering charter capital or investment capital of over 10 billion VND: 3,000,000 VND/year;
• For enterprises registering charter capital or investment capital of 10 billion VND or less: 2,000,000 VND/year;
• For branches, business locations, public service units, and other economic organizations: 1,000,000 VND/year.

Customers who need advice and learn more about corporate law, please contact Viet An Law Firm for our best support!