Charter Capital, Legal Capital and Capital Contribution 2026

Charter Capital, Legal Capital and the Capital Contribution Duty in 2026

"Charter capital: VND 100 billion" on the licence — but the company's bank account holds a few hundred million. The gap between committed and paid-in capital is one of the most underestimated legal risks in Vietnam. In 2026, as tax authorities and banks scrutinise declared capital more closely, understanding three concepts — charter capital, legal capital and the contribution duty — is no longer a box-ticking exercise at incorporation.

Table of contents

• 1. Three often-confused concepts
• 2. Deadlines and forms of contribution
• 3. Late or short contributions: legal consequences
• 4. Drafting the charter: getting contribution terms right
• 5. Legal capital: who should care?
• 6. Practical recommendations
• 7. Frequently asked questions
• 8. When to work with a lawyer

1. Three often-confused concepts

Charter capital is the total capital members (LLC) or shareholders (JSC) commit to contribute, recorded in the company charter and on the Enterprise Registration Certificate. It is a public figure — counterparties, banks and tax authorities all look at it to assess the company's scale and financial capacity.

Legal capital is the minimum capital required by law for certain conditional business lines: banking, insurance, securities, real estate business (depending on the period)… Companies in these sectors must maintain charter capital at or above legal capital throughout operation — not just at incorporation.

The capital contribution duty is each member's/shareholder's legal obligation to pay in full the committed portion, in the right asset type, within the charter's deadline. It is a personal obligation of each contributor, not a vague duty of the company.

In short: charter capital is the public promise, legal capital is the statutory floor, and the contribution duty is the obligation to keep the promise.

2. Deadlines and forms of contribution

The contribution deadline is a statutory 90 days from the date of issuance of the Enterprise Registration Certificate — under the 2020 Enterprise Law: Article 47(2) (multi-member limited liability companies), Article 75 (single-member LLCs) and Article 113(1) (joint-stock companies). This 90-day period excludes time for transporting/importing contributed assets and completing administrative procedures to transfer asset ownership. A company charter may only set a specific contribution schedule within the 90-day limit (or shorter), never longer — so when acquiring equity or investing in an existing company, still read the charter to see the schedule applying to each member/shareholder, but the 90-day ceiling is set by law.

Contributable assets include cash, foreign currency, gold, land use rights, intellectual property, technology, technical know-how and other assets valuable in money. For non-cash assets, members/shareholders must agree on valuation — and this is where disputes most often start: inflated valuations to "pump" charter capital may be treated as false declaration.

For foreign investors, note that capital contributions from abroad must flow through proper channels (capital accounts, registered contribution schedules on the IRC where applicable) — a contribution the bank cannot evidence is a contribution that does not exist for compliance purposes. In practice, the State Bank's foreign-exchange reporting regime means each tranche of inbound capital should be traceable from the offshore remitter to the company's capital account; undocumented "shareholder loans" later recharacterised as capital are a recurring source of disputes with both banks and tax authorities.

Valuation of non-cash contributions deserves special care in cross-border deals. Technology, trademarks or machinery contributed by a foreign parent must be valued by agreement of all members — and Vietnamese law requires the valuation to be honest and defensible. An inflated valuation does more than risk sanctions: it distorts the foreign ownership ratio, the registered investment capital on the IRC, and the baseline for future profit repatriation calculations.

3. Late or short contributions: legal consequences

When a member/shareholder fails to contribute in full on time, the law and the charter respond as follows:

1. Unpaid capital does not count: the defaulter's voting and dividend rights attach only to actually contributed capital.
2. The company must adjust capital: the LLC must register a charter capital reduction down to paid-in capital (unless remaining members cover the shortfall). A JSC follows its corresponding offering/adjustment mechanics.
3. Liability to third parties: while capital remains unpaid, members/shareholders may still be liable for the company's financial obligations within the unpaid portion — "limited liability" is only complete once contribution is complete.
4. Administrative sanctions: declaring charter capital falsely (declaring high with no ability or intent to contribute) may draw sanctions for enterprise registration violations.

There is also a commercial consequence investors feel first: unpaid capital shows up in due diligence. Any serious buyer, lender or JV partner will reconcile committed versus paid-in capital, and a large gap either kills the deal or reprices it. In M&A practice, sellers are routinely asked to warrant that charter capital is fully paid — and a breach of that warranty, discovered post-closing, becomes a purchase-price adjustment or an indemnity claim. Cleaning up capital contribution records before going to market is one of the cheapest forms of deal preparation available.

4. Drafting the charter: getting contribution terms right

Most contribution disputes are born in a vaguely drafted charter. When setting up the company, address these points explicitly rather than relying on statutory defaults:

• Deadline: state a concrete date or a fixed period from ERC issuance, and align it with the shareholders' actual funding timeline. A deadline nobody can meet is worse than no deadline — it creates a technical breach on day one.
• Form of contribution: list permitted asset types and require written valuation minutes for non-cash assets, signed by all members at the time of contribution — not reconstructed years later during a dispute.
• Remedies: spell out what happens on default — forfeiture mechanics, the right of remaining members to subscribe the shortfall, and interest or damages. The Enterprise Law provides a framework, but a charter that is silent on remedies forces the parties into negotiation or court precisely when trust has broken down.
• Foreign-investor overlay: where the IRC also records investment capital and contribution schedules, keep the charter and the IRC consistent. Inconsistency between the two documents is a classic finding in investment inspections.

5. Legal capital: who should care?

Not every company needs legal capital — only sectors where sectoral law sets a minimum. Key points:

• Legal capital levels are set by sectoral instruments, not the Enterprise Law — e.g. credit institutions, insurers, securities companies, investment funds.
• The company must maintain charter capital at or above legal capital throughout operation. Reducing capital below the floor means losing eligibility for that sector.
• Legal capital levels are under review in 2026 drafts — businesses planning incorporation in conditional sectors should check the instrument in force at filing.

6. Practical recommendations

1. Write the contribution schedule clearly in the charter (within the statutory 90-day limit), aligned with the actual cash-flow plan — do not leave it by default and forget it.
2. Contribute via bank transfer for a paper trail; avoid large cash contributions that are hard to prove in disputes.
3. Value non-cash contributions honestly, with valuation records kept on file.
4. Track contribution progress as a recurring legal-housekeeping item, especially before signing credit agreements or raising funds — banks always ask about paid-in capital.
5. When acquiring equity, check whether the transferor fully contributed — the duty to pay the shortfall may "travel with" the transferee depending on the deal structure.

7. Frequently asked questions

Q: What is the difference between charter capital and legal capital?

A: Charter capital is the capital members/shareholders commit to contribute, recorded in the charter and on the ERC. Legal capital is the minimum capital required by law for certain conditional business lines (e.g. banking, insurance). Companies in conditional sectors must keep charter capital at or above legal capital.

Q: What is the deadline for full capital contribution?

A: 90 days from the date of issuance of the Enterprise Registration Certificate — a statutory deadline under the 2020 Enterprise Law (Article 47(2) for multi-member LLCs; Article 75 for single-member LLCs; Article 113(1) for joint-stock companies), excluding time for transporting/importing contributed assets and completing ownership-transfer procedures. A company charter may only set a specific contribution schedule within the 90-day limit, never longer.

Q: What happens if capital is contributed late or short?

A: The unpaid portion does not count: voting and profit rights attach only to actually contributed capital; the LLC must register a charter capital reduction to paid-in capital (unless remaining members cover the shortfall); and false capital declarations may draw administrative sanctions.

Q: Must paid-in capital be proven at incorporation?

A: At incorporation the enterprise declares charter capital by commitment; the registrar does not require proof of payment upfront. But paid-in capital must appear in accounting books and financial statements, and banks, counterparties and tax authorities may ask for proof in transactions.

Q: Does charter capital affect owner liability?

A: Indirectly, yes. In LLCs and JSCs, owners/members/shareholders enjoy limited liability within contributed capital. But operating with unpaid capital that leads to obligations beyond solvency can expose owners in many situations (tax, social insurance debts).

8. When to work with a lawyer

Work with a lawyer when: drafting the charter and contribution structure for a new company (especially with non-cash assets); handling contribution disputes among members/shareholders; reducing charter capital or dealing with unpaid portions; incorporating in a conditional sector (confirming current legal capital); or verifying paid-in capital in M&A. FLAT Law Firm advises on capital structuring and contribution disputes for domestic and foreign enterprises — hotline 0988424851.

References

• Enterprise Law 59/2020/QH14, amended by Law 76/2025/QH15 (effective 01/7/2025).
• Sectoral instruments on legal capital per field (check the instrument in force at application).
• Cross-checked via thuvienphapluat.vn and luatvietnam.vn at drafting (28/9/2026).

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