Capital is no longer a strange concept for businesses and investors. However, in order to distinguish between 03 types of capital: charter capital, investment capital and contributed capital for implementation of investment project, people still get confused.
For the purpose of helping you distinguish charter capital, investment capital and contributed capital for the implementation of investment project, PL & Partners would like to share some basic information as follows:
1. CHARTER CAPITAL.
The concept of charter capital has been specified in the Law on Enterprise 2020, accordingly,
| “Charter capital means the total value of assets that have been contributed or promised by the members/partners/owners when a limited liability company or a partnership is established; or the total par value of the sold or subscribed shares when a joint stock company is established“ |
Example:
There are there people A, B, and C wanting to establish a multi-member limited liability company called XYZ, to which:
- Member A contributes VND 1 billion.
- Member B contributes VND 1 billion.
- Member C contributes VND 2 billion.
Thus, they contribute VND 4 billion in total. This figure is called the charter capital of the Company.
2. INVESTMENT CAPITAL.
Clause 23, Article 3 of the Law on Investment 2020 stipulates the concept of investment capital as follows:
| “23. Investment capital is money and other assets as prescribed by civil law and international treaties to which the Socialist Republic of Vietnam is a signatory for the purpose of carrying out business investment activities.” |
Thus, investment capital is known as the total of all capital contributed to an investment project, which may include charter capital (partially or wholly), capital mobilized as: contributed capital of other investors, loans from banks, etc. to implement one or more investment projects, depending on the financial capacity of the company.
The concept of investment capital is often used in foreign-invested enterprises and is shown in the Investment Registration Certificate.
Example:
XYZ Company implements an investment project, to which:
- XYZ Company contributes all of its charter capital which is VND 4 billion.
- External investors contribute VND 1 billion.
- Borrow VND 1.5 billion from the bank.
Thus, the total amount contributed to the above investment project is VND 6.5 billion. This figure is called the :investment capital” of the project.
3. CONTRIBUTED CAPITAL FOR INVESTMENT PROJECT IMPLEMENTATION.
Contributed capital for investment project implementation is the amount of capital that an investor contributes to implementing a certain investment project.
Example:
XYZ Company has a charter capital of VND 4 billion.
This company has spent VND 2 billion implementing an investment project. It also raises from external sources VND 3 billion and borrows VND 1,5 billion from the bank.
Therefore, the “investment capital” of this project is VND 6.5 billion.
In which, the “contributed capital for investment project implementation” of the company is VND 2 billion.
If you need further legal support, please contact us immediately:
PL AND PARTNERS LAW FIRM
Headquarters: 46th Floor, Bitexco Financial Tower, No. 2 Hai Trieu, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam
Office: Lot 1.16 Viva Riverside, 1472 Vo Van Kiet, Ward 3, District 6, HCMC
Hotline: 093.1111.060
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We are always ready to assist you.
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The article is based on the current legal regulations at the time of writing, and it may no longer be valid or relevant at the time you are reading it due to changes of the law. The article, therefore, is seen as reference only. |
