Below is a detailed guide and practical experience on choosing the registered capital level, contribution methods, contribution deadlines, and relevant legal regulations regarding the registered capital of a business.
1. Understanding the registered capital of a business.
🔍 What is registered capital?
Authorized capital It is the total value of assets contributed or pledged by company members or owners when establishing a limited liability company or partnership; it is the total par value of shares sold or registered for purchase when establishing a joint-stock company.
🔍 The liability of the "business owner" is limited to the registered capital.
- For a single-member limited liability company: The company owner is responsible for the company's debts and other financial obligations. within the scope of the registered capital of the company.
- For limited liability companies with two or more members: Members are liable for the debts and other financial obligations of the business to the extent of their liability. capital contributed to the business (Generally speaking, registered capital).
- For joint-stock companies: Shareholders are only liable for the debts and other financial obligations of the business to the extent of the capital they have contributed to the business.
Thus, it can be seen that: "Business owners" are liable up to the amount of the company's registered capital. Therefore, unless there is a specific need, registering a higher amount of registered capital than necessary unnecessarily increases liability.
2. How to calculate the registered capital amount
💡 Suggestions on how to calculate the registered capital amount
To calculate the appropriate registered capital for your business, you can use the following method:
Registered charter capital = Fixed capital requirements + Working capital requirements + Capital reserve
For example:
You establish a business in the trading sector, importing food products for consumption in Vietnam.
- Your initial investment: 200 million
- Monthly working capital is approximately = Inventory value + Accounts receivable (Amount owed by customers) – Accounts payable (Amounts not yet paid to suppliers) = approximately 1 billion VND
- Other monthly working capital requirements (office expenses, electricity, water, entertainment, salaries, social insurance, etc.) are 200 million.
- You want to set aside approximately 30% in reserve funds.
The registered capital you should aim for is: (200 million + 1 billion + 200 million) x 130% = 1,82 billion VND.
⚠️ Consequences of insufficient registered capital (insufficient working capital)
Registering an unreasonable amount of charter capital, below the required level, leads to the need for personal borrowing (by the business owner) to cover the deficit.
Currently, with regulations on related-party transactions, transactions between business owners and their businesses, or excessively high bank borrowings, can lead to the business being classified as a related-party transaction (transfer pricing). In such cases, This gives rise to three difficult problems for businesses:
- Transfer pricing reports must be submitted to the tax authorities.
- Interest expenses are subject to limitations on how they can be included as deductible expenses when calculating corporate income tax.
- The possibility of being investigated for related-party transactions.
3. Regulations on contributing charter capital
⏰ Deadline for contributing charter capital
The deadline for contributing charter capital is the deadline by which the full charter capital must be contributed.
- The company owner must provide the company with sufficient capital and the correct type of assets as committed when registering the business within 90 days from the date of issuance of the Business Registration Certificate.
- Members must contribute the full amount and the correct type of assets as committed when registering the business within 90 days from the date of issuance of the Business Registration Certificate.
- Shareholders must pay the full amount of the shares they have subscribed for within 90 days from the date of issuance of the Business Registration Certificate.
Therefore, the deadline for contributing the full amount of charter capital is within 90 days from the date the Business Registration Certificate was issued.
❓ Can the charter capital be contributed in cash or via bank transfer?
Circular 09 / 2015 / TT-BTC The guidance in Article 6 of Decree 222/2013/ND-CP on cash payments issued by the Ministry of Finance stipulates:
Article 3. Forms of payment in transactions involving capital contributions and the purchase, sale, and transfer of capital contributions in other enterprises.
1. Businesses that do not use cash (paper money and coins issued by the State Bank) for payment when conducting transactions. Contributing capital and buying, selling, and transferring ownership stakes in other businesses..
2. When conducting transactions involving capital contributions and the purchase, sale, or transfer of capital contributions in other businesses, enterprises shall use the following forms:
a) Pay in Czech;
b) Payment by payment authorization - money transfer;
c) Other appropriate non-cash payment methods as prescribed by current regulations.
3. When businesses conduct transactions involving capital contributions and the purchase, sale, or transfer of capital contributions in other businesses using assets (not cash), they must comply with the provisions of the law on enterprises.
Based on the above regulations, businesses are not allowed to use cash when contributing capital, buying, selling, or transferring ownership stakes in a business. This regulation does not apply to individuals when contributing capital to a business.
Therefore, businesses can apply the Regulations on contributing charter capital as follows:
- Businesses use their own capital to invest in other businesses: No cash accepted.
- Individuals contributing capital to a business: Payment can be made in cash or through a bank.
4. Advice on applying the Regulations on contributing charter capital
Although it is possible to contribute capital to a business in cash, this method gives rise to the following problems:
- We have to check a large sum of money.
- There is a risk of counterfeit money.
- Receipts must be kept carefully; their loss could significantly impact the business when proving sufficient capital contribution to tax authorities, the government, and shareholders.
- The signatures on the receipt must be verified accurately, and there must be five signatures.
- If a company has only one member, its reliability is not high.
- Keeping large sums of money outside of a cash deposit is risky.
- If an audit is required, proving the amount of capital contributed is very complex and difficult.
- Low reliability
Given the risks mentioned above, the decision to accept cash capital contributions requires careful consideration. What consequences could arise for the business if the cash capital contribution is not properly fulfilled and is therefore not accepted as having been fully contributed?
- Interest expenses cannot be deducted when calculating corporate income tax if the registered capital has not been fully contributed.
- Violation of corporate law regarding capital contributions.
- Unable to demonstrate financial capacity to partners and shareholders.
5. Instructions for resolving cases of insufficient capital contribution:
🏢 For a single-member limited liability company:
If the registered capital is not fully contributed within the prescribed time limit, then within 30 days from the last day for contributing the full registered capital, the owner must register a change in the company's registered capital to match the value of the capital already contributed;
During the period before the final date for registering changes to the company's charter capital, the owner is liable for the company's financial obligations arising from the committed capital contribution.
The company owner is liable with all their assets for the company's financial obligations and for damages arising from failure to contribute, insufficient contribution, or late contribution of charter capital as required.
🏢 For Limited Liability Companies with two or more members:
If, after the stipulated deadline, there are still members who have not contributed capital or have not contributed the full amount of capital they committed to, the following procedures will apply:
- Members who have not contributed capital as committed are automatically no longer members of the company.
- Members who have not contributed their full committed capital share have rights corresponding to the amount of capital they have contributed;
- The uncontributed capital of the members is offered for sale according to resolutions and decisions of the Board of Members.
If a member has not contributed capital or has not contributed the full amount of capital committed, within 30 days from the last day for contributing the full capital as stipulated, the Company must register a change in charter capital and the capital contribution ratio of the members to reflect the actual capital contributed.
Prior to the date the company registers a change in charter capital and the capital contribution ratio of its members, members who have not contributed capital or have not contributed the full amount of capital they committed shall be liable, in proportion to their committed capital contribution, for the company's financial obligations arising from the change.
🏢 For Joint Stock Companies:
If, after the specified deadline, a shareholder has not paid or has only partially paid for the shares they registered to purchase, the following regulations shall apply:
- Shareholders who have not paid for the shares they registered to purchase automatically cease to be shareholders of the company and are not allowed to transfer their right to purchase those shares to others.
- Shareholders who only pay for a portion of the registered shares have voting rights, receive dividends and other rights corresponding to the number of shares paid for; they are not allowed to transfer the right to purchase the unpaid shares to others.
- Unpaid shares are considered unsold shares, and the Board of Directors has the right to sell them.
- Within 30 days from the end of the deadline for full payment of the registered shares, the company must register an adjustment to its charter capital equal to the par value of the fully paid shares, unless the unpaid shares have been sold within this period; and register a change in founding shareholders.
Before the date the company registers the adjustment of its charter capital as stipulated, shareholders who have not paid or have not fully paid for the shares they registered to purchase shall be liable for the company's financial obligations arising from the total par value of the registered shares.
Members of the Board of Directors and legal representatives shall be jointly liable for damages arising from failure to comply with or improper compliance with regulations.
6. What happens if the capital contribution is not made within the stipulated timeframe? Will there be a penalty for failing to contribute the full amount?
If the committed capital is not contributed or is not fully contributed after the stipulated deadline, an adjustment to the charter capital must be registered, with the registered capital equal to the actual contributed capital, within 30 days from the last day for contributing the full amount of capital.
If no adjustments are made, the provisions of Clauses 3 and 5 of Article 46 of Decree 122/2021/ND-CP on penalties for violations related to the establishment of enterprises will apply as follows:
Article 46. Violations concerning the establishment of enterprises
3. Fines from 30.000.000 VND to 50.000.000 VND for any of the following acts:
a) Failure to carry out the procedures for adjusting capital or changing founding members or shareholders as prescribed by the business registration authority when the capital contribution deadline and the capital adjustment period have expired due to founding members or shareholders not contributing sufficient capital, but no founding members or shareholders fulfill their capital contribution commitments;
Therefore, if the company fails to contribute or contributes the full amount of committed capital after the stipulated deadline, it will be penalized according to the regulations mentioned above.