Capital is an important factor determining the operation of a business. Charter capital and owners’ equity are frequently mentioned concepts. However, these two terms are completely different in their legal nature. Misunderstanding them may lead to confusion in capital contribution, profit distribution, determination of asset liability, and even legal risks. In this article, let’s explore and distinguish them together with WEFLY!

Charter capital

According to Clause 34, Article 4 of the 2020 Law on Enterprises (as amended and supplemented by the 2025 Law on Enterprises), charter capital is the total value of assets contributed or committed to be contributed by company members or the company owner upon the establishment of a limited liability company or a partnership; for a joint-stock company, it is the total par value of shares that have been sold or registered for subscription at the time of establishment.

Characteristics of charter capital:

• Is a specific figure initial registration at the time of business establishment.
• Reflects the level of liability commitment of the owner/member/shareholder.
• It may be increased or decreased during the course of operation, but procedures for changing the business registration must be carried out.
• It serves as the basis for determining ownership ratio, voting rights, and profit distribution.

2️⃣ Owners’ equity

Owners’ equity is specifically regulated under the Principles of Accounting for Owners’ Equity in Part B – Accounting Principles of Circular No. 99/2025/TT-BTC (replacing Circular No. 200/2014/TT-BTC). Accordingly:Owners’ equity is the net asset portion of an enterprise remaining after deducting liabilities, which belongs to shareholders or capital-contributing members (owners). Owners’ equity must be recorded and monitored in detail according to each source of formation, such as owners’ contributed capital, profits from business operations, and revaluation differences of assets.

In other words, 🇬🇧 Tiếng Anh: Owners’ equity = Total assets − Total liabilities

📌From the above analysis, it can be seen that charter capital and owners’ equity differ in the following aspects:

• Regarding the time of determination: Charter capital is determined when the enterprise registers its establishment and only changes upon completion of adjustment procedures, whereas owners’ equity is determined at each point in time based on the actual financial situation.
• Regarding stability: Charter capital is relatively stable, whereas owners’ equity continuously fluctuates according to the enterprise’s profit or loss results.
• Regarding composition: Charter capital only includes the contributed or committed capital, whereas owners’ equity includes contributed capital, retained earnings, various funds, and other differences.
• Regarding significance: Charter capital reflects the capital contribution commitment and liability level of members/shareholders, whereas owners’ equity reflects the actual remaining asset value of the enterprise after deducting liabilities.

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