Distinguish charter capital, investment capital and capital contribution for the implementation of investment project

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. Therefore, with 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: Two members M and N intend to establish a multi-member limited liability company. Member M contributes VND 1,000,000,000 and member N contributes VND 2,000,000,000. Two members register for a total capital contribution of VND 3,000,000,000 to the Company. Thus, the figure of 3,000,000,000 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.

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: Company A has a charter capital of VND 50 billion and has a project with a total investment capital of VND 20 billion.
In which, Company A contributes VND 10 billion to implement the project, borrows VND 4 billion from the bank and other investors contributes VND 6 billion.

Thus, the investment capital of this project is VND 20 billion, of which the capital contributed by company A to implement the project is VND 10 billion.