Manipulating Charter Capital: Latest Penalty Rates and Enforcement Timeframe

What is Charter Capital?

According to Article 4, Clause 34 of the Law on Enterprises 2020, charter capital is defined as follows:

"In this Law, the following terms are understood as follows: ...

1. Charter capital is the total value of assets contributed or committed to be contributed by members of a limited liability company, a company with two or more members, or the total par value of shares sold or registered to be purchased when establishing a joint-stock company."

In simple terms, charter capital represents the total value of assets contributed or committed by members or shareholders when establishing a company.

Penalties for Falsifying Charter Capital

Referring to Article 16 of the Law on Enterprises 2020, the prohibited acts include:

"...5. Falsifying charter capital, not contributing the registered charter capital, or intentionally undervaluing contributed assets."

The law prohibits the falsification of charter capital. Any violation of this provision incurs penalties as specified below.

In accordance with Article 47 of Decree 122/2021/ND-CP, violations related to the declaration of charter capital are subject to fines as follows:

1. A fine ranges from 20,000,000 VND to 100,000,000 VND, depending on the value of the falsified charter capital.

2. Remedial measures include requiring the adjustment of charter capital to match the actual contributed capital.

Timeframe for Penalties

As per Clause 5 of Decree 122/2021/ND-CP, the timeframe for penalties for violations related to charter capital is as follows:

"The penalty timeframe for administrative violations in the field of investment, bidding, and enterprise registration is 01 year; for urban planning, it is 02 years."

Therefore, the penalty timeframe for falsifying charter capital is 01 year. This timeframe is calculated from the detection of the violation for ongoing violations, or from the cessation of the violation for completed violations.

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