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7 ways to change charter capital
To align with strategic goals and operational demands, business owners commonly change charter capital. Business owners may need to change charter capital for various reasons, including changes in ownership, fundraising, legal compliance, or optimizing capital structure.
4 situations to change charter capital in Vietnam
Let’s take the change in charter capital involving legal compliance as an example. Since the new enterprise law no longer classifies the real estate sector as a conditional business line, business owners are no longer required to maintain a minimum charter capital of 20 billion dong. Consequently, to mitigate and eliminate any potential risks associated with charter capital, business owners may choose to reduce it to a lower amount.
By reducing the charter capital to a lower amount, business owners limit their liability in case of bankruptcy or insolvency. This adjustment also improves cash flow, allowing them to invest in other business sectors. In other words, changing charter capital offers advantages to business owners from both legal and financial perspectives.
Typically, there are 7 ways to change charter capital in Vietnam, namely
- Option 1: Current members contribute additional capital.
- Option 2: Acquire fresh capital from new members.
- Option 3: Return part of the capital to members proportionally.
- Option 4: Buyback the members capital contribution.
- Option 5: Members fail to contribute capital as required.
- Option 6: Transfer capital to one members.
- Option 7: Transfer to external parties.
7 options to change the charter capital.
It is important to note, however, that changes in charter capital are subject to specific conditions and follow different procedures. For instance, under option 3 (e.g., to change charter capital by returning part of the capital to members proportionally), the business must have been in operation for at least two years from the date of its registration and must ensure full repayment of debts and other financial obligations before returning capital to its members.
To assist clients, thele.blog publishes this insightful article “7 ways to change charter capital in Vietnam” detailing the procedures, required documents, and timeline for making such changes to charter capital.
Procedures to change charter capital
An overview of the step-by-step procedure to change charter capital
- Step 1: Document Preparation
In this step, business owners must provide or obtain, through the licensing authority when applicable, the following three key documents: (i) a resolution, (ii) a notice of change, and (iii) approval documents.
Notice of Change
A notice of change in enterprise registration details, signed by the company’s legal representative.
Resolution or Decision
This refers to the decision or resolution made by the company owner (for single-member LLCs), the Board of Members (for multi-member LLCs), or the General Meeting of Shareholders (for joint-stock companies) concerning the change in charter capital. It is the key document that the business owner must prepare, as it specifies the details of the change—what will be altered, why, and how the business intends to implement the change in charter capital.
Approval Documents
If applicable, a document from the Investment Registration Authority approving the capital contribution, share purchase, or capital contribution purchase by foreign investors or foreign-invested economic organizations.
You may find it helpful to read the article ‘84 Business Lines Restricted for foreign investors in Vietnam‘ to familiarize yourself with the business sectors that are open to investors in Vietnam, as well as those that are restricted or require approval from the licensing authority.
- Step 2: Submission of Application
Once the required documents are properly prepared or obtained, business owners can submit them to the licensing authority where the company is headquartered.
This can be done either in person or online via the National Business Registration Portal at https://dangkytinhdoanh.gov.vn.
- Step 3: Licensing Authority's Review
The licensing authority will review the application and, if valid, issue a new Enterprise Registration Certificate within three working days from the date of receipt.
If the licensing authority rejects the application or requests further justification, they will notify the applicant, who must then prepare and resubmit the required documents.
- Step 4: Post-Change Obligations
In any case, ensure this step is completed, as failure to comply with any of the following post-change obligations could result in a fine. Specifically
Public Announcement
After registering the change, the company must announce the updated information on the National Business Registration Portal within 30 days.
Tax Obligations
If the change in charter capital affects the business license tax rate, the company must submit a license tax declaration before December 31 of the same year.
Amendment to the Charter
The charter must also be updated to accurately reflect the revised charter capital. While these updates are circulated internally, submission to regulatory authorities is not required.
- Step 5: Conversion of Business Entity
If the change in charter capital results in a change to the type of business entity, the company must prepare the necessary documents to update its registration with the Business Registration Office at the Department of Planning and Investment (DPI) where its head office is located. Additionally, the company must announce the change on the national business registration portal.
This conversion is required when:
- a single-member limited liability company transitions to a multi-member limited liability company or a joint-stock company due to the addition of members
- a multi-member limited liability company or a joint-stock company becomes a single-member limited liability company because one member acquires all the charter capital of the others.
Special Notes
- The charter must also be updated to accurately reflect the revised charter capital. While these updates are circulated internally, submission to regulatory authorities is not required.
- Governmental fee: 5–8 USD per application.
- Timeline: Typically 3 working days from the licensing authority's receipt of the complete application
- The licensing authority may reject the application in certain situations, such as during an insolvency process, if the business is not active at its registered location, or by order of a competent authority prohibiting the change.
Required Documents to Change Charter Capital in Specific Situations
The following documents are prepared for real-world situations. However, please note that laws change rapidly, and each licensing authority may have a different perspective on each applicant. We recommend consulting our legal professionals for tailored guidance specific to your situation.
In case the multi-member limited liability company decreases its charter capital
A notice of change in enterprise registration details, signed by the company’s legal representative. Form II-1 (an original copy)
Resolution or Decision made by the company owner (for single-member LLCs), the Board of Members (for multi-member LLCs), or the General Meeting of Shareholders (for joint-stock companies). (an original copy)
Minutes of Meeting of the company owner (for single-member LLCs), the Board of Members (for multi-member LLCs), or the General Meeting of Shareholders (for joint-stock companies) (an original copy).
Approval Document from the Investment Registration Authority approving the capital contribution, share purchase, or capital contribution purchase by foreign investors or foreign-invested economic organizations. (an original copy)
In case a limited liability company, joint stock company, or partnership registers to change its charter capital
Notification of change in business registration contents signed by the legal representative of the enterprise Form II-1 (Originaln copy: 1)
Resolutions and decisions of the company owner for a single-member limited liability company; resolutions, decisions and minutes of the meeting of the Board of Members for a limited liability company with two or more members, a partnership, or of the General Meeting of Shareholders for a joint stock company on changing its charter capital. (Original copy: 1)
Document of the Investment Registration Authority approving the capital contribution, share purchase, or capital contribution purchase by a foreign investor or foreign-invested economic organization in cases where it is required to carry out procedures for registering capital contribution, share purchase, or capital contribution purchase in accordance with the provisions of the Investment Law
In case the company registers to change the capital contribution, the capital contribution ratio of members of a limited liability company with two or more members, of general partners of a general partnership
Notice of change in business registration content signed by the legal representative of the enterprise Form II-1 (Original copy: 1)
List of members of a limited liability company with two or more members; list of members of a partnership, which does not include the declaration of capital contributing members. The lists must include the signatures of members whose capital contribution has changed, and are not required to include the signatures of members whose capital contribution has not changed Form I-6, Form I-9 (Original copy: 1)
Transfer contract or documents proving the completion of the transfer in case of transfer of capital contribution; Donation contract in case of donation of capital contribution (Original copy: 1)
Document of the Investment Registration Authority approving the capital contribution, share purchase, capital contribution purchase of foreign investors, economic organizations with foreign investment capital in cases where it is required to carry out procedures for registration of capital contribution, share purchase, capital contribution purchase according to the provisions of the Investment Law (Original copy: 1)
Document of the Investment Registration Authority approving the capital contribution, share purchase, capital contribution purchase of foreign investors, economic organizations with foreign investment capital in cases where it is required to carry out procedures for registration of capital contribution, share purchase, capital contribution purchase according to the provisions of the Investment Law (Original copy: 1)
In case the General Meeting of Shareholders approves the offering of shares to increase charter capital, and at the same time assigns the Board of Directors to carry out the procedures for registering the increase in charter capital after the end of each share sale period
Notice specified in Point a, Clause 1, Article 51 of Decree No. 01/2021/ND-CP: Notice of change in business registration content signed by the legal representative of the enterprise Form II-1 (Original copy: 1)
Resolution and copy of the minutes of the General Meeting of Shareholders on the offering of shares to increase charter capital, stating clearly the number of shares offered and assigning the Board of Directors to carry out the procedures for registering the increase in charter capital after the end of each share sale (Original copy: 1)
Resolution, decision and copy of the minutes of the meeting of the Board of Directors of the joint stock company on registering the increase in the company’s charter capital after the end of each share sale (Original copy: 1)
In case of authorizing an individual to carry out business registration procedures, the business registration dossier must include
An authorization document is required for an individual to carry out procedures related to business registration. This authorization document does not need to be notarized or certified (Original copy: 1)
Copy of legal documents of the authorized individual (Copy: 1)
In case of authorizing an organization or unit providing postal services other than public postal services to carry out business registration procedures, the business registration dossier must include
Copy of service contract with the organization providing services to carry out procedures related to business registration (Copy: 1)
Letter of introduction from that organization to the individual directly carrying out procedures related to business registration (Original copy: 1)
Copy of legal documents of the individual being introduced (Copy: 1)
In case of authorizing a public postal service provider to carry out business registration procedures, when carrying out business registration procedures, the postal employee must submit
Copy of the application form according to the form issued by the public postal service provider with the signature of the postal staff and the person authorized to sign the document requesting business registration (Copy: 1)
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Thele.blog hopes that the article, ‘7 Ways to Change Charter Capital,’ proves helpful to its clients to some extent. If clients face any challenges or require legal assistance regarding changes to charter capital, they are welcome to contact us via email at hi@thele.blog, call us at +84-916-545-618, or submit their inquiry using the form below:
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