Application and procedures for decrease in charter capital of a joint-stock company in Vietnam

A joint-stock company may decrease its charter when providing payment. Below are the documents and procedures for reducing the charter capital of a joint-stock company in Vietnam

Application and procedures for decrease in charter capital of a joint-stock company in Vietnam (Source: Internet)

1. Cases of decrease in the charter capital of a joint-stock company in Vietnam

As per Clause 5, Article 112 of the Law on Enterprise 2020, the case of decrease in the charter capital of a joint-stock company is as follows:

- According to the decision of the General Meeting of Shareholders, the decrease is decided by the GMS, in which case the company will return part of the contributed capital to the shareholders in proportion to their holdings if the company has operated for at least 02 consecutive years from the enterprise registration date and is able to fully pay its debts and other liabilities after the return of capital

- Charter capital is not fully and punctually contributed by the shareholders as prescribed in Article 113 of Law on Enterprise 2020.

- The company repurchases the sold shares in accordance with Articles 132 and 133 of Law on Enterprise 2020, specifically:

Share repurchase at shareholders’ request

- The shareholders that have voted against the resolution on reorganization of the company or change of shareholders’ rights and obligations in the company's charter are entitled to request the company to repurchase their shares

The request shall be made in writing and specify the shareholder’s name and address, quantity of shares of each type, offered prices, reasons for requesting the repurchase.

The request shall be sent to the company within 10 days from the day on which the previously mentioned resolution is ratified by the GMS specified in Clause 1, Article 132 of the Law on Enterprise 2020.

The company shall repurchase shares at the request of its shareholders in accordance with Clause 1 of Article 132 of the Law on Enterprises 2020 at market prices or at the prices calculated in accordance with the rules in the company's charter within 90 days from the receipt of the request. 

In case an agreement on the prices cannot be reached, the parties may hire a valuation organization to determine the price.

The company shall introduce at least 03 valuation organizations for the shareholders to make the final decision.

Share repurchase under the company’s decision

The company is entitled to repurchase up to 30% the total ordinary shares, all or part of the participating preference shares that have been sold in accordance with the following regulations:

- The Board of Directors is entitled to decide repurchase of up to 10% of the total shares of each type which are sold within 12 months. Other cases of share repurchase shall be decided by the GMS;

- The company may repurchase shares of each shareholder in proportion to their holding in the company as follows:

+ The repurchase price for ordinary shares must not exceed their market price at the time, except the cases specified in Clause 3, Article 133 of the Law on Enterprise 2020.

+ The repurchase price for other types of shares must not be lower than their market prices unless otherwise prescribed by the company's charter or agreed upon by the company and relevant shareholders;

- The company may repurchase shares of each shareholder in proportion to their holding in the company as follows:

+ The notification on the company’s decision to repurchase shares shall be sent by express mail to all shareholders within 30 days from its ratification date.

The notification shall contain the company’s name and headquarters address, total number and types of shares repurchased, repurchase prices or pricing rules; procedures and deadline for paying, procedures and deadline for shareholders to sell their shares to the company;

+ The shareholders that agree to sell back their shares to the company shall send a written agreement to the company by express mail within 30 days from the notification date. The agreement shall contain:

Full name, mailing address, nationality, legal document number if the shareholder is an individual;

Name, EID number or legal document number, headquarters address if the shareholder is an organization;

The quantity of shares being held, quantity of shares to be sold;

Payment methods:

Signature of the shareholder or the shareholder’s legal representative

Note: The company only buys back the shares within this time limit.

2. Applications for the decrease in joint-stock company's charter capital in Vietnam

Clauses 1 and 4 of Article 51 of Decree No. 01/2021/ND-CP stipulates the application for the change in charter capital of a joint-stock company, including:

- A notification of changes to enterprise registration information which is signed by the enterprise’s legal representative;

- The resolution or decision of the General Meeting of Shareholders for joint-stock companies on the change of charter capital;

- A written approval given by the investment registration authority for capital contribution or purchase of shares/stakes by foreign investors/foreign-invested business entities in case procedures for registration of capital contribution or purchase of shares/stakes must be followed in accordance with the Law on Investment.

* In case of decrease in charter capital, the enterprise must make a commitment to settle all debts and other asset liabilities after capital decrease..

 the application for decreased in charter capital must include the latest financial statements closest to the time of the decision to decrease charter capital.

3. Procedures for the decrease in the charter capital of a joint-stock company in Vietnam

Pursuant to Clauses 1 and 5 of Article 51 of Decree No. 01/2021/ND-CP:

Step 1: Submit application

In case of change in the charter capital of a limited liability company, joint-stock company or partnership, the company shall send an application for changes to enterprise registration information to the Business Registration Office of province where it is headquartered.

Step 2: Process the application and return the results

After receiving the application, the Business Registration Office shall give a confirmation slip to the enterprise, examine the validity of documents, and issue the enterprise registration certificate to the enterprise.

Ngoc Nhi

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