Consideration of choosing the proper charter capital for enterprise establishment
Charter capital is the total value of assets contributed or committed to contribute by members when establishing a limited liability company or partnership; is the total par value of shares sold or registered for purchase upon the establishment of a joint-stock company (Clause 29, Article 4 of the Law on Enterprises 68/2014 / QH13).
1.Minimum / maximum charter capital for establishing an enterprise
Currently, the law does not regulate minimum or maximum charter capital for establishing an enterprise. Therefore, the registration of charter capital depends on factors such as financial capacity, business size and development orientation of the business. If you are doing business whose the minimum capital required by law for that line of business, you must register the charter capital equal to or greater than the legal capital level in legal documents promulgated by the State.
2. The charter capital level is the basis for paying license fees:
License fees payable
a) The charter capital is over 10 billion VND: 3,000,000 VND / year;
b) Charter capital of 10 billion VND or less: 2,000,000 VND / year;
c) Branches, representative offices, business locations, non-business units, other economic organizations: 1,000,000 VND/ year.
3. Should the charter capital be high or low?
If you sign up for high charter capital
Advantages: it will be easier to create trust with partners and customers,
Disadvantages:Increasing material liability, increasing risk tolerance of capital contributors. In case capital contributors don’t contribute enough the registered charter capital without proceeding procedures for registration of adjustment, the capital contributors shall be responsible for the amount of committed capital to the financial obligations of the issuing company during the period before the date the company registers to adjust its charter capital. At the same time, if it is over the term of adjusting charter capital but you don’t adjust charter capital, you can be fined of up to 20 milion VNĐ (Clause 3 Article 28 of Decree 50/2016 / ND-CP).
If you apply for a low charter capital:
– Advantages: reduceing license tax, reducing financial risks
– Disadvantage: When the cost required for the company’s operation is high or the company does not have enough capital to invest in new projects but the enterprise must mobilize capital from outside. The registration of a low charter capital can affect the corporate reputation and the bank’s acceptance of loans, getting a loan will be a huge difficult. This may directly affect the business, the trust of partners, customers, business plans of the company later. I must say that the charter capital ensures the business’s ability to operate as well as the solvency if there are disputes arising in the transaction process.
Please do not hesitate to contact us for more information to be supported and consulted:
LUAT SU RIENG (LSR) LAW FIRM
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