Minimum charter capital: Strategic guidance for FDI enterprises & Japanese investors

Capital is one of the essential conditions for establishing an enterprise. One of the key concerns of foreign investors is whether Vietnam imposes a minimum charter capital requirement when setting up a company.

In this article, KMC provides a comprehensive and detailed explanation of company incorporation capital, offering a clear analysis of charter capital and legal capital (statutory capital), as well as the latest regulations on registered capital requirements applicable to FDI enterprises in Vietnam.

What is the minimum charter capital requirement?

According to the Law on Enterprises 2020, the law does not prescribe a minimum charter capital level nor does it impose a maximum capital limit for enterprise establishment, except for certain specific business lines that are subject to statutory capital requirements.

Pursuant to Clause 34, Article 4 of the Law on Enterprises 2020:

Charter capital is the total value of assets contributed or committed to be contributed by members of a limited liability company or a partnership upon the establishment of the company; or the total par value of shares sold or registered for subscription upon the establishment of a joint-stock company.

Clause 5, Article 16 of this Law strictly prohibits the act of declaring fictitious charter capital or failing to fully contribute the registered charter capital.

In addition, it also stipulates that contributed capital includes Vietnamese Dong, freely convertible foreign currencies, gold, land use rights, intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese Dong under Article 34.

However, enterprises should note that charter capital represents a capital commitment of the company to customers and business partners. Therefore, setting the charter capital at an excessively low level may reduce the credibility and trust of the enterprise with partners and customers, especially in bidding activities.

Accordingly, the company should consider its financial capacity, business objectives, operating costs, and contractual projects with partners in order to determine an appropriate level of charter capital.

Important exceptions: Business lines requiring statutory capital/minimum charter capital

In addition to charter capital, enterprises must also pay attention to statutory capital!

Statutory capital is the minimum capital level prescribed by law that an enterprise must have in order to be permitted to establish and operate certain conditional business lines. This capital level is determined by the competent state authority and serves as a basis to ensure financial capacity. An enterprise must meet this capital requirement in order to be granted an operating license.

Statutory capital is commonly applied to specific business sectors such as securities, insurance, monetary/financial services, and real estate business. The purpose of regulating statutory capital is to reduce risks during business operations. In such cases, the contributed capital or business capital of the enterprise must be equal to or greater than the minimum statutory capital required for that industry.

The statutory capital levels for some common business lines are shown in the table below:

Note: The above figures are for reference purposes only. The specific capital requirements may change over time and must be verified against the relevant specialized legal documents.

Severe legal risks in case of non-compliance with business capital requirements

Failure to fully contribute the registered charter capital or failing to meet the statutory capital requirement may lead to severe legal consequences:

• Capital contribution timeline: Under the Law on Enterprises 2020, members/shareholders must fully contribute the committed charter capital within 90 days from the date of issuance of the Enterprise Registration Certificate.
• Administrative sanctions: Failure to contribute or fully contribute charter capital within the prescribed timeline may result in monetary penalties of up to tens of millions of VND in accordance with the Decree on administrative sanctions in the field of planning and investment.
• Highest risk: The enterprise may have its Enterprise Registration Certificate revoked if non-compliance is not remedied. For FDI enterprises, this may result in project failure, leading to significant financial losses and reputational damage.

Therefore, proper financial planning and strict legal compliance from the outset are critical success factors.

Expert advice from KMC: How to determine an appropriate charter capital for FDI/Japanese enterprises

Based on our experience supporting hundreds of FDI enterprises, particularly Japanese-invested companies, we provide the following practical recommendations to help businesses determine an appropriate charter capital level:

1. Assess actual operational capital needs

Forecast expenses for office rental, human resources, raw materials, machinery, and other operating costs for at least the first 6–12 months of operation. The charter capital should be sufficient to cover a significant portion of these requirements.

2. Consider parent company / Japanese partner requirements:

Many Japanese corporations apply internal policies on minimum capital levels for overseas subsidiaries to ensure consistent corporate image and minimize risk exposure.

3. Plan for future expansion:

If the company intends to apply for sub-licenses (e.g., import–export licenses, manufacturing permits) or expand production facilities within 2–3 years, registering an adequately high charter capital from the beginning can help reduce time and costs associated with future capital increases.

4. Avoid two extremes:

Registering too low charter capital may raise concerns about financial capacity and create difficulties in bidding or partnership arrangements. Conversely, registering capital that is too high compared to actual contributed ability may create financial pressure and legal risks as mentioned above.

Procedure for adjustment of charter capital

To register or adjust charter capital, the enterprise shall follow the instructions below:

• Initial registration: Clearly state in the enterprise incorporation dossier (Company Charter, Enterprise Registration Application).
• Adjustment of charter capital (increase/decrease): A Resolution/Decision of the Members’ Council is required, together with amendments to the Company Charter, and the procedure for registration of changes to enterprise registration content with the Business Registration Authority must be carried out. This process requires absolute accuracy in both legal and accounting aspects.

Frequently asked questions (FAQ)

In addition to the issue of minimum charter capital, there are many other questions related to business capital that FDI enterprises are concerned about. Below, KMC will address the 3 most important questions:

Is charter capital the amount that must be proven in a bank account?

No. At the time of incorporation, you are not required to prove this amount in a bank account. However, you are legally responsible for the entire amount of charter capital committed with your total assets. Capital contribution may be made in cash or other assets and must be valued and completed within 90 days.

Can charter capital be registered in USD?

For FDI enterprises, charter capital is often registered in USD or another foreign currency as agreed upon in the capital contribution arrangement; however, it must be converted into VND at the exchange rate at the time of capital contribution for recording in legal documents in Vietnam.

Where is charter capital information publicly disclosed?

Information on charter capital is publicly disclosed on the National Business Registration Portal (dangkykinhdoanh.gov.vn), and can be easily searched by any partner.

Above, KMC has provided a detailed and comprehensive explanation regarding minimum charter capital for enterprise establishment. In summary, determining charter capital is a strategic decision that affects the enterprise’s reputation, business operations, and long-term development.

However, to ensure full legal compliance from the outset and optimize business strategy and efficiency, please contact KMC experts for in-depth and comprehensive advisory support.

For quick consultation with our experts, please contact our hotline: 081 489 4789.