According to the provisions of the Enterprise Law 2020, a joint-stock company may reduce its charter capital in the following three cases:
- a) According to the decision of the General Meeting of Shareholders, the company will return a part of the contributed capital to the shareholders in proportion to their share ownership in the company if the company has operated continuously for 02 years or more. from the date of registration of enterprise establishment and to ensure full payment of debts and other property obligations after they have been returned to shareholders;
- b) The company repurchases the sold shares according to the provisions of Articles 132 and 133 of this Law;
- c) The charter capital is not paid in full and on time by shareholders as prescribed in Article 113 of this Law.”
- Reduced charter capital in case the company returns part of the contributed capital to shareholders.
According to the provisions of Point a, Clause 1, Article 68 of the Law on Enterprises 2020, according to the decision of the General Meeting of Shareholders, the company can change its charter capital in case the company returns a part of the contributed capital to the shareholders according to the provisions of the Law on Enterprises. their share ownership rate in the company if the company has operated continuously for 02 years or more from the date of business registration and ensures full payment of debts and other property obligations after completion. paid to members.
Pursuant to the above provisions, the reduction of charter capital in this case shall be effected if the following conditions are satisfied:
– The company may only return part of the contributed capital to shareholders in proportion to their share ownership in the company.
– The company has operated continuously for 02 years or more from the date of registration for establishment of the enterprise.
– After returning to shareholders, the company must ensure to pay all debts and other property obligations.
- Reduced charter capital in case the company buys back issued shares
The reduction of charter capital when the company repurchases issued shares is divided into two cases as follows:
2.1. Redemption of shares at the request of shareholders.
Article 132. The Law on Enterprises stipulates
“first. Shareholders who have voted not to pass a resolution on the reorganization of the company or changes in the rights and obligations of shareholders specified in the company’s charter have the right to request the company to buy back their shares. The request must be in writing, clearly stating the name and address of the shareholder, the number of shares of each class, the intended selling price, and the reason for requesting the company to buy back. The request must be sent to the company within 10 days from the date the General Meeting of Shareholders passes a resolution on the issues specified in this Clause.
- The company must repurchase shares at the request of shareholders specified in Clause 1 of this Article at the market price or the price calculated according to the principles specified in the company’s charter within 90 days from the date of receipt. request. If the price cannot be reached, the parties may request a valuation organization to determine the price. The company introduces at least 03 valuation organizations for shareholders to choose and that selection is the final decision.
Thus, the reduction of charter capital in case the company buys back the issued shares at the request of the shareholders, only applies to the shareholders voting against the resolution on the reorganization of the company or the change of the rights of shareholders. and obligations of shareholders specified in the company’s charter. At the same time, the above-mentioned shareholder must make a written request, clearly stating the name and address of the shareholder, the number of shares of each type, the intended selling price, the reason for requesting the company to buy back and requesting the company to repurchase them. The request must be sent to the company within 10 days from the date the General Meeting of Shareholders passes the resolution.
2.2 Buyback of shares at the discretion of the company
Article 133. The Law on Enterprises stipulates
“The Company has the right to redeem no more than 30% of the total number of sold ordinary shares, part or all of the sold dividend preference shares in accordance with the following provisions:
- The Board of Directors has the right to decide to buy back no more than 10% of the total number of shares of each type sold within 12 months. In other cases, the repurchase of shares shall be decided by the General Meeting of Shareholders.
- The Board of Directors decides the share repurchase price. For ordinary shares, the redemption price must not be higher than the market price at the time of redemption, except for the case specified in Clause 3 of this Article. For shares of other types, unless otherwise provided for in the company’s charter or the company and related shareholders do not otherwise agree, the redemption price must not be lower than the market price;
- The company may redeem shares of each shareholder in proportion to their share ownership ratio in the company according to the following order and procedures:
- a) The decision to repurchase shares of the company must be notified by a method that is guaranteed to reach all shareholders within 30 days from the date of approval of such decision. The notice must include the name, address of the head office of the company, the total number of shares and types of shares to be repurchased, the redemption price or principles of redemption valuation, the procedure and payment term, the procedure and time limit for the redemption of shares. deadline for shareholders to sell their shares to the company;
- b) Shareholders agreeing to resell shares must send written consent to sell their shares by a method that is guaranteed to reach the company within 30 days from the date of notification. The written consent to sell shares must contain the individual’s full name, contact address and legal document number, for individual shareholders; name, enterprise code or number of legal papers of the organization, head office address, for shareholders being organizations; number of shares owned and number of shares agreed to sell; payment methods; signature of the shareholder or the shareholder’s legal representative. The Company only repurchases shares within the above time limit.”
- Reduced charter capital in case shareholders do not pay in full and on time as prescribed
- According to the provisions of Clause 1, Article 113 of the Enterprise Law 2020, Shareholders must pay in full for the number of shares registered for purchase within 90 days from the date of issuance of the Enterprise Registration Certificate, except for the case The company’s charter or the share subscription contract stipulates another shorter term.
- If after the time limit specified in Clause 1 of this Article, a shareholder has not yet paid or is only able to pay a part of the shares registered to buy, the following provisions shall apply:
– Shareholders who have not paid for the number of shares registered to buy are automatically no longer shareholders of the company and may not transfer the right to buy such shares to other people;
– Shareholders only pay part of the shares registered to buy with voting rights, receive dividends and other rights in proportion to the paid shares; may not transfer the right to purchase unpaid shares to another person;
– Unpaid shares are considered unsold shares and the Board of Directors is entitled to sell;
– Within 30 days from the end of the time limit for paying in full for the number of shares registered to buy as prescribed in Clause 1 of this Article, the company must register for an adjustment of charter capital equal to the par value of the registered shares. be paid in full, unless the unpaid shares have been sold out within this time limit; register to change founding shareholders.
Shareholders who have not paid or have not fully paid for the number of shares registered to buy shall be responsible for the total par value of shares registered for purchase for the financial obligations of the company arising within the period before the date of purchase. the company registers for adjustment of charter capital as prescribed at Point d, Clause 3 of this Article.
In case the time limit for registration for adjustment of charter capital is exceeded because a member has not yet contributed or has not fully contributed charter capital as committed, the company shall register for an adjustment to decrease in charter capital equal to the value of the actual contributed capital. In this case, violations of the regulations on the time limit for registration of changes in business registration information will be sanctioned according to the provisions of Article 25 of Decree No. 50/2016/ND-CP dated June 1, 2016. The Government’s regulations on sanctioning of administrative violations in the field of planning and investment.
Dossiers for registration of change of charter capital are specified in Article 51 of Decree No. 01/2021 guiding enterprise registration.
