Distinguish between the charter capital and the investment capital of the project

When setting up a company in Vietnam, investors are interested in the amount of money needed to invest, and the minimum amount of capital. Investors also have many questions about what charter capital is, what investment capital is, and whether charter capital is investment capital or not. In the following article, Viet An Law Company will distinguish between the charter capital and the investment capital of the project in Vietnam.

Legal basis

• Law on Enterprise 2020.
• Law on Investment 2020.

The similarity between charter capital and investment capital

According to the provisions of the Enterprise Law 2020:

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

According to the provisions of the Investment Law 2020:

“Invested capital is money and other assets to carry out business investment activities.”

“Investment capital of the project (including investors’ contributed capital and mobilized capital.”

Therefore, the similarity here between Charter Capital and Investment Capital is the assets or cash that investors use to operate a business.

Distinguish charter capital and investment capital in Vietnam

Charter capital

The concept of Charter Capital commonly used in Vietnamese capital companies is recorded in the Business Registration Certificate.

Charter capital is the capital contributed or committed to contribute upon establishment by members and shareholders of the company. During operation, the Company may register to increase or decrease charter capital and must carry out procedures to change the Business Registration Certificate.

Charter capital has a capital contribution term of 90 days from the date of issuance of the first enterprise registration certificate and is recorded in the company’s charter.

Investment capital

For foreign capital companies, Investment Capital is more widely used. While the Charter Capital is also recorded in the Enterprise Registration Certificate, this enterprise is the organization implementing the investment project with information on the Investment Registration Certificate.

Investment capital is equal to the investor’s capital contribution to implement the project plus mobilized capital.

The investor’s capital contribution time limit is recorded in the Investment Registration Certificate. Regarding the newly established projects, this time limit is usually equal to the charter capital contribution time limit: 90 days from the date of issuance of the Enterprise Registration Certificate of the project implementing organization.

A business enterprise can have many projects, each of which is recorded in a separate project investment capital.

Therefore, the difference between Charter Capital and Investor’s contributed capital in investment capital is as follows:

There are cases where the charter capital is equal to the investor’s contributed capital. Normally when an investor establishes a new project and establishes a project implementation organization (establishment of an enterprise), the investor’s contributed capital will be equal to the charter capital. The investor’s capital contribution must be at least equal to the charter capital so that the investor has fully contributed assets within 90 days from the date of issuance of the Business Registration Certificate of the project implementation organization. However, the default cannot be understood in this case that the charter capital will be equal to the investor’s contributed capital.

During project implementation, investors can increase their capital contribution to the project without increasing charter capital.

Above is the consulting content of Viet An Law about distinguish between the charter capital and the investment capital of the project in Vietnam. If you have any related questions, please contact Viet An Luat for the most effective support.