What Is the Company Charter? What Are the Contents?

Introduction

Every legally established company operates on a foundation of rules that define how it is structured, managed, and governed. In Vietnam, this foundation is known as the company charter, a critical legal document required under the Law on Enterprises 2020. While many new entrepreneurs focus heavily on registration procedures and operational setup, the importance of the company charter is often underestimated.

In reality, the charter is far more than a formality. It acts as the internal constitution of the company, governing relationships between shareholders, members, and management while ensuring compliance with Vietnamese law. It is also one of the first documents reviewed during due diligence processes, investment negotiations, and dispute resolution.

This article provides a comprehensive and legally grounded explanation of what a company charter is, what it must contain, and why it plays a central role in corporate governance in Vietnam.

What Is a Corporate Charter?

A corporate charter, known in Vietnamese as “Điều lệ công ty,” is a written agreement among the founders or owners of a company that defines its organizational structure, operational rules, and governance mechanisms. It is a mandatory document submitted during the enterprise registration process and must comply with the provisions of the Law on Enterprises 2020.

The charter applies to all types of enterprises in Vietnam, including limited liability companies, joint stock companies, and partnerships. Although its structure may vary depending on the type of company, its purpose remains consistent: to establish a clear legal framework for how the business operates.

From a legal perspective, the company charter is binding on the company and its members or shareholders. It serves as a reference point for resolving internal disputes and ensuring that all parties act within agreed parameters.

Core Contents of a Corporate Charter

Vietnamese law sets out specific requirements regarding the contents of a company charter. While companies have some flexibility in drafting their charters, certain core elements must always be included.

The charter must specify the company’s name, registered address, and business lines. These details establish the identity and scope of the company’s operations.

It must also define the charter capital and the contributions of each member or shareholder. This includes the value, form, and timeline of capital contributions, which are essential for determining ownership and liability.

Another critical component is the organizational structure of the company. This includes the roles and responsibilities of governing bodies such as the Members’ Council, Board of Directors, and legal representatives, depending on the company type.

The charter must also outline the rights and obligations of members or shareholders. This includes voting rights, profit distribution, and mechanisms for transferring ownership interests.

In addition, the charter should include procedures for decision-making, dispute resolution, and amendment of the charter itself. These provisions ensure that the company can adapt to changing circumstances while maintaining legal compliance.

How Are Company Bylaws Regulated by Law?

In Vietnam, the company charter functions similarly to what is commonly referred to as bylaws in other jurisdictions. However, its legal status is more formalized and strictly regulated.

The Law on Enterprises 2020 provides a framework for what must be included in the charter and sets boundaries for its content. Companies are free to customize their charters within these boundaries, allowing them to tailor governance structures to their specific needs.

Any provisions in the charter that conflict with mandatory legal requirements are considered invalid. This ensures that the charter cannot override statutory obligations or infringe upon the rights of third parties.

Regulatory authorities may also review the charter during the registration process to ensure compliance. In practice, legal professionals often assist in drafting charters to align with both legal requirements and business objectives.

Role and Legal Significance of the Corporate Charter

Creation of a Separate Legal Entity

One of the most fundamental roles of the company charter is to support the creation of a separate legal entity. Once registered, the company exists independently from its owners, with its own rights and obligations.

The charter defines the structure and identity of this entity, ensuring that it operates within a legally recognized framework.

Foundation for Limited Liability

For limited liability companies and joint stock companies, the charter establishes the basis for limited liability. It clearly defines the extent of each member’s or shareholder’s financial responsibility, which is typically limited to their capital contributions.

This protection is a key reason why many entrepreneurs choose corporate structures over sole proprietorships.

Framework for Corporate Governance

The charter serves as the primary document governing how the company is managed. It outlines decision-making processes, authority levels, and the roles of different management bodies.

This framework helps prevent conflicts and ensures that the company operates efficiently and transparently.

Basis for Due Diligence and Transparency

During investment, mergers, or acquisitions, the company charter is one of the first documents reviewed by potential investors. It provides insight into ownership structure, governance mechanisms, and potential risks.

A well-drafted charter enhances transparency and builds confidence among stakeholders.

Defining Shareholder Rights

The charter plays a crucial role in defining the rights of shareholders or members. This includes voting rights, dividend entitlements, and rights to access information.

Clear definitions help prevent disputes and ensure fair treatment of all parties.

Principles When Building the Company Charter

Must Not Detect Illegal Acts or Infringe Upon the Interests of Third Parties

The charter must comply with all applicable laws and must not include provisions that facilitate illegal activities or harm the rights of third parties. Any such provisions are considered void.

Voluntary and Agreed Within the Legal Framework

The charter is based on the mutual agreement of the founders or shareholders. While it must comply with legal requirements, it also reflects the intentions and agreements of the parties involved.

Must Ensure Full Main Contents in Accordance with Law Provisions

All mandatory contents specified by the Law on Enterprises 2020 must be included. Failure to do so may result in rejection of the registration application or legal complications later.

Must Have Approvals from Founding Shareholders

The charter must be approved and signed by all founding members or shareholders. This ensures that all parties agree to its terms and are bound by its provisions.

What Content Must Be Included in the Amended and Supplemented Charter During the Course of Operation?

As a company evolves, it may need to amend or supplement its charter. Changes may arise from capital increases, restructuring, changes in management, or new business strategies.

Any amendments must clearly state the revised provisions and be approved in accordance with the procedures outlined in the existing charter and the Law on Enterprises 2020.

The amended charter must continue to include all mandatory elements, such as company information, capital structure, governance framework, and rights of members or shareholders.

In addition, changes must be notified to the relevant business registration authority where required, ensuring that official records remain accurate and up to date.

Distinguishing Between the Corporate Charter and the Bylaws

While the terms “corporate charter” and “bylaws” are sometimes used interchangeably in international contexts, they have distinct meanings depending on the jurisdiction.

In Vietnam, the company charter encompasses both the foundational and operational rules of the company. It is a comprehensive document that combines elements typically found in both articles of incorporation and bylaws in other legal systems.

In contrast, in some countries, bylaws are separate internal documents that provide more detailed operational guidelines, while the charter focuses on basic corporate information.

Understanding this distinction is important for foreign investors who may be more familiar with other legal systems.

FAQs

When Must the Company Charter Be Created?

The company charter must be created at the time of establishing the company. It is a mandatory document submitted as part of the enterprise registration dossier.

Without a valid charter, the company cannot be legally registered.

Who Must Sign the Company Charter?

The charter must be signed by all founding members or shareholders. For partnerships, all general partners must sign the document.

This requirement ensures that all parties agree to the terms and are legally bound by them.

Can Foreign Investors Participate in Drafting the Charter?

Yes, foreign investors can fully participate in drafting the company charter. In fact, for foreign-invested enterprises, the charter is often a critical document for defining governance structures and protecting investor interests.

However, the charter must comply with Vietnamese law regardless of the nationality of the investors.

What Happens If the Company Operates Against Its Charter?

If a company operates in violation of its charter, it may face internal disputes, legal challenges, and potential administrative penalties. In some cases, actions taken in violation of the charter may be deemed invalid.

Ensuring compliance with the charter is therefore essential for maintaining legal integrity and operational stability.

Conclusion

The company charter is one of the most important legal documents in the life of a business in Vietnam. It defines the structure, governance, and operational rules that guide the company from its formation through its growth and evolution.

By understanding its contents, legal significance, and drafting principles, entrepreneurs and investors can build a strong foundation for their businesses. A well-prepared charter not only ensures compliance but also supports transparency, stability, and long-term success in Vietnam’s competitive business environment.