Distinguishing Between a Company’s Charter Capital and Legal Capital

Charter capital and legal capital are two important concepts in the business sphere, yet they have fundamental differences. Lawyer Nguyen Hai Long helps you differentiate between them through the comparative points below!

1. Definition:

• Charter Capital: This is the total value of assets that company members or the company owner have contributed or committed to contribute upon the establishment of a limited liability company or a partnership; it’s the total par value of shares sold or registered for purchase upon the establishment of a joint-stock company (Clause 34, Article 4 of the Law on Enterprises 2020).
• Legal Capital: This is the minimum capital level an enterprise must possess to be established and operate in certain conditional business lines as stipulated by law.

2. Basis for Determination:

• Charter Capital: Determined by the members or shareholders themselves, who register and commit to contributing it when establishing the enterprise.
• Legal Capital: Determined by the competent state authority for each specific conditional business line.

3. Capital Level:

• Charter Capital: The law does not stipulate a minimum or maximum charter capital level when establishing a business. The members or shareholders themselves decide the charter capital level.
• Legal Capital: A fixed figure prescribed for each conditional business line.

4. Capital Contribution Deadline:

• Charter Capital: Members and shareholders must fully contribute the charter capital within 90 days from the date of receiving the Enterprise Registration Certificate.
• Legal Capital: The enterprise must have sufficient legal capital right from the start of its business operations in the conditional business line.

5. Capital Changes:

• Charter Capital: Can be increased or decreased during the company’s operation.
• Legal Capital: Usually does not change unless there are new legal regulations.

6. Legal Significance:

• Charter Capital: Serves as the basis for determining the property liability of the legal entity of the enterprise.
• Legal Capital: This is a condition for the enterprise to be permitted to operate in certain conditional business lines.

General Conclusion:

Charter capital and legal capital are two distinct concepts, although both relate to a company’s capital.

Contact Lawyer Nguyen Hai Long immediately if you need a more detailed consultation!

Hotline: +84 972 599 334 Email: lawyerhailong@ltk-lawfirm.com