Foreign enterprisers who want to start a business must consider various aspects before proceeding with the company formation procedure in Vietnam. Among these are the documents they must prepare, the approval they must obtain and the share capital requirements they must comply with. These are all regulated by the Commercial Code in Vietnam.
Our local consultants can explain the requirements related to starting a business in Vietnam and can offer information on the share capital which must be submitted upon incorporation.
Share capital requirements for a foreign company in Vietnam
The establishment of a new company in Vietnam, whether as a wholly owned firm or as a joint venture with foreign or Vietnamese partners, is an option for the foreign investor. Especially, for those who want to create a direct presence in Vietnam without buying an existing business.
To form a Vietnam company, the foreign investor will need to choose between two types of capital:
- the company’s charter capital;
- the legal capital (the minimum share capital for opening a particular type of company).
Both of these capital sources must be mentioned in the application materials submitted to the licensing authorities for approval. They will also be mentioned in the Vietnamese company and investment registration certificates.
Our agents can assist you if you are a foreigner who is interested to open a business in Vietnam. You can also get comprehensive guidance about the share capital requirements in Vietnam from our agents.
Difference between the legal capital and the charter capital in Vietnam
These are the two types of share capital prescribed by the law when registering a company in Vietnam.
Clause 29, Article 4 of the Enterprise Law 2014 defines charter share capital. Depending on the Vietnam company’s line of operation, the law may stipulate a minimum charter capital requirement or a foreign ownership cap.
Therefore, it is crucial to evaluate the market entrance requirements for the proposed business operations of a company. Or you can get in touch with our company incorporation agents. They can provide you with a detailed Vietnam business market evaluation, and you can take a decision accordingly.
Furthermore, the capital that the member or owner has agreed to contribute within a prescribed time frame is referred to as charter capital (usually 90 days from the issuance date of the enterprise registration certificate). The company may be forced to reduce its charter capital to reflect the actual capital contribution of the foreign investor, in addition to administrative sanctions, if the foreign investor fails to fully contribute the charter capital by the deadline.
On the other hand, the legal capital is the minimum share capital that must be subscribed to upon the registration of a company based on the requirements of the law. It is also defined in the Enterprise Law 2014. Legal capital is determined by particular business lines rather than the type of enterprise.
The contributed capital must be, at the least, equivalent to the legal capital if a corporation plans to start a business that needs it. The maximum legal capital fix for each company sector. In Vietnam, sub-law papers issued by the executive agency, notably Decree No. 86/2019/ND-CP controlling the capital level, are the primary means of determining the precise legal capital. Different businesses have various rules regarding legal share capital. So, if you are seeking information to understand these rules, you can get in touch with our experts. They can describe to you the difference between charter and legal share capital in Vietnam.
Besides this, if you are planning to open a branch office, the services of our company formation agents in Vietnam are at your disposal. They can help you set up a company in Vietnam.
The paid-up capital in Vietnam
As mentioned above, there are certain industries in which the investor must deposit the share capital upon the incorporation of the business with the Trade Register. This is the paid-up capital and it is required in the following cases:
- when opening a company in the real estate sector;
- when opening a business in the insurance industry;
- when registering a joint stock company that will be listed on the Vietnam Stock Exchange.
Investors setting up a joint stock company must deposit at least 20% of the share capital when the company is registered.
Our Vietnam company formation experts can offer information on the minimum share capital required in the industries above.
The Enterprise Law provides for the alteration of the share capital of a Vietnamese company by increasing or decreasing it. These changes must be announced to the Vietnam Trade Register.
Foreign enterprisers who want to open companies in Vietnam can ask our local consultants about the mandatory formalities. They can also contact us for assistance in registering the company with the right authorities in Vietnam.
Minimum share capital requirement in Vietnam
Please find below the minimum share capital (legal capital) that is required in order to set up different types of companies in Vietnam:
- Limited liability company (LLC): there is no minimum share capital requirement for an LLC in Vietnam;
- Joint stock company (JSC): the quantity of approved minimum capital is not limited by law, but practice demonstrates that if it is less than certain numbers, work licenses will not be issued. Each member must have at least $22,000 in authorized capital;
- Private enterprise: a private enterprise’s owner is required to accurately record the minimum capital. The owner of a private enterprise has the authority to alter the minimum amount of capital he/she invests in the enterprise’s operations.
For the majority of new enterprises entering the market, there is currently no specified minimum share capital requirement. This option alone opens up a wide range of opportunities for new business owners in Vietnam.
According to the Enterprise Law, charter capital must be paid in full 90 days after getting the certificate of business registration. Keep in mind, based on your anticipated business activity, your minimum allocated capital must be reasonable and feasible.
Except for a small number of heavily regulated firms (eg, banking, insurance, securities, education, and real estate development), there are typically no minimum capital requirements.
Furthermore, besides renting out a physical office, if you want to get a virtual office, get in touch with our agents. They can suggest different virtual office packages and you can choose one which seems suitable for your business needs.
Minimum capital for different Vietnamese industries
If you are a foreigner, who is interested to know about the share capital in Vietnam regarding different industries, please find below general statistics, for instance;
- Foreign investors frequently invest in language schools. Without taking into account the cost of renting the business premises, the required minimum capital for enterprises in the education sector is VND 20 million (about USD 850) per student;
- For instance, companies in the real estate industry must have a minimum capital of VND 20 billion (about USD 250,000) in the capital;
- 2 billion VND (about USD 80,460) in legal capital is needed for labor subleasing.
Contact our company incorporation specialists in Vietnam for detailed assistance. They can guide you about the share capital in Vietnam.
In addition to this, if you need trademark registration services for your products and services in Vietnam, our agents can assist you.