What is a company charter? Key points foreign investors need to know

When establishing a business in Vietnam, especially for foreign investors, the “Company Charter” is one of the most important legal documents. It is not only required for the business registration process, but also serves as the legal basis governing the rights, obligations, and internal corporate governance. Understanding the charter is essential to operating a business in compliance with the law and minimizing risks among investors.

1. What is a company charter?

A Company Charter is an internal document that sets out the organization, operation, rights and obligations of members/shareholders, as well as the governance structure of the enterprise in accordance with Vietnam’s Law on Enterprises.

In other words, the charter is the “constitution” of the company, binding all owners and managers to comply.

2. Which types of companies are required to have a charter?

A charter is required for all forms of enterprises, including:

• Single-member limited liability company
• Multi-member limited liability company
• Joint-stock company
• Companies with foreign investment (FDI)
• Joint ventures between Vietnamese and foreign individuals/organizations

For FDI enterprises, the charter is often more complex as it must align both Vietnamese law and agreements between investors.

3. What key contents are included in a company charter?

A standard charter typically includes:

• Company name, address, business lines
• Charter capital, capital contribution ratio, contribution schedule
• Rights and obligations of members/shareholders
• Appointment procedures and authority of the legal representative
• Governance structure: Board of Directors, Director/CEO, Supervisory Board
• Regulations on transferring capital or shares
• Principles for profit distribution and loss handling
• Procedures for internal dispute resolution
• Conditions for dissolution or termination of operations

These provisions directly impact control rights and investor interests.

4. Why is the charter especially important for foreign investors?

Foreign investors often face risks when:

• They do not understand Vietnamese law and sign standard charters favoring local partners
• Control rights are unclear, leading to loss of voting power
• There is no exit mechanism, making capital withdrawal difficult during disputes
• There is no veto right for major shareholders

Therefore, the charter must be carefully designed to protect the investor’s interests and control rights.

5. Key clauses foreign investors should pay attention to

6. Can a company charter be amended?

Yes. A charter can be amended if approved by the General Meeting of Shareholders/Members based on the voting ratio defined in the current charter. For FDI enterprises, amendments may also require adjustments to the investment registration certificate.

A Company Charter is not only a mandatory legal document but also a key governance tool that helps foreign investors protect their interests, maintain control, and reduce dispute risks. To ensure effectiveness, investors should prepare a detailed, bilingual charter and seek advice from experts knowledgeable in Vietnamese law.