What is the minimum charter capital of a joint stock company?

Charter capital of a joint stock company is the total capital contributed to the company by shareholders or members according to the provisions of Vietnamese law. In some specific cases, the charter capital level must meet the legal capital requirements for each industry and business field. To learn more about the specific regulations and implementation procedures, please continue reading the article.

What is the charter capital of a joint stock company?

According to the provisions of Clause 34, Article 4 of the Law on Enterprises 2020, charter capital is the total value of assets contributed or committed to by company members and owners when establishing a limited liability company, partnership company; is the total par value of shares sold or registered to buy when establishing a joint stock company.

On that basis, it can be understood that when establishing a joint stock company, the founding shareholders need to agree and decide on the appropriate charter capital level of the joint stock company. Charter capital plays an important role in determining voting rights and dividend rates for shareholders. Shareholders holding a larger number of shares will have voting rights and greater influence over the company’s decisions. The dividend rate is also based on the capital contribution ratio of each shareholder in the total charter capital.

Distinguish between charter capital and legal capital

Charter capital and legal capital are two different concepts in the field of business. In there:

• Charter capital is the amount of capital contributed or committed to be contributed by members and shareholders within a certain period of time. This capital level is stated in the company charter and may change during operations. The company is free to decide on the charter capital appropriate to its scale and business objectives, as long as it is not lower than the legal capital (if any).
• Legal capital is the minimum amount of capital required by law to establish a business. Only some specific industries such as banking, insurance, and securities require legal capital. This capital level is to ensure that businesses have enough financial capacity to operate in high-risk areas.

When determining charter capital, businesses need to consider many factors such as business lines, scale of operations, and development strategy. For conditional business lines, charter capital must meet the minimum legal capital level. Normal professions are not limited in terms of minimum capital.

Legal regulations on the minimum level of charter capital of a joint stock company

The Law on Enterprises 2020 does not specifically stipulate the minimum charter capital for joint stock companies. Enterprises are free to decide the level of charter capital in accordance with business needs. However, some specific industries still require minimum capital according to specific regulations.

For ordinary joint stock companies, shareholders agree on the charter capital level upon establishment. This level of capital must be enough for the company to carry out business activities as planned.

However, some conditional business sectors such as banking, securities, and insurance still require a minimum legal capital. For example, a securities company must have a minimum charter capital of 100 billion VND, a joint stock commercial bank must have a minimum charter capital of 3,000 billion VND. Then, businesses need to comply with these regulations when established.

In case there is a change in charter capital, the joint stock company must comply with the regulations on registration of changes. Increases and decreases in charter capital must be approved by the General Meeting of Shareholders and registration procedures with the business registration agency must be carried out. The company must ensure that the actual contributed charter capital is not lower than the legal capital (if any).

Issues to note when determining the charter capital of a joint stock company

Conditional business lines

When determining the charter capital of a joint stock company operating in conditional business lines, businesses need to pay special attention. Some fields such as finance, banking, and insurance require minimum legal capital. Charter capital must meet this requirement to be licensed to operate.

Enterprises need to carefully study specialized legal documents to determine the appropriate capital level. Failure to meet capital requirements may result in the risk of being denied an operating license.

Business goals and scale

Business goals and scale are important factors when determining the charter capital of a joint stock company. Charter capital needs to be large enough to meet initial investment and operating needs. Large-scale enterprises and long-term investment projects need higher charter capital.

When making a business plan, the company needs to estimate investment costs for facilities, equipment, and personnel. The working capital required for production and business activities must also be calculated. From there, determine the appropriate charter capital level of the joint stock company to ensure the ability to implement the plan.

Financial ability

The financial capacity of founding shareholders is a decisive factor when determining the charter capital of a joint stock company. Charter capital must match the financial resources that shareholders can mobilize. Setting a capital level that is too high compared to the actual capital contribution capacity can cause difficulties during the establishment and operation process.

Shareholders need to accurately evaluate the capital sources they can contribute. In addition to cash, contributed capital can be assets and intellectual property rights that are valued. The total value of these capital contributions will determine the initial charter capital of the joint stock company.

In case the capital need is greater than the capital contribution capacity of the founding shareholders, the company can consider raising capital from outside investors. This needs to be carefully calculated to ensure balance of interests between capital contributors.

Consulting on establishing joint stock companies according to regulations

Establishing a joint stock company is the beginning of a business process and requires compliance with many complex legal regulations. To ensure the establishment process goes smoothly and legally, investors should consider seeking support from experienced experts in the field. With a team of lawyers who deeply understand corporate law and related regulations, Long Phan will provide comprehensive consulting services on establishing joint stock companies, including the following work contents:

• Consulting on determining charter capital of a joint stock company;
• Draft complete and accurate documents to establish a joint stock company;
• Assist customers in preparing the Company Charter, Minutes of Founding Shareholders’ Meeting and other necessary documents;
• On behalf of customers, carry out business registration procedures at competent state agencies;
• Consulting on shareholder structure, rights and obligations of shareholders in joint stock companies;
• Support building an effective corporate governance model, in accordance with legal regulations.

With extensive experience in the field of business consulting, Long Phan is committed to providing optimal solutions for customers. We always update the latest legal regulations to ensure accurate and timely advice. Customer satisfaction is the top priority in all Long Phan services.

The charter capital of a joint stock company plays a very important role in the company’s operations. Enterprises need to consider carefully when determining charter capital, based on business goals and financial capacity. To establish a joint stock company according to regulations and avoid legal risks, customers should consult experts. Long Phan is ready to provide detailed advice on charter capital, shareholders, and related legal procedures. Contact Hotline 0906.735.386 immediately for support.