Conditions for payment and settlement of repurchased shares in Vietnam

Conditions for payment and settlement of repurchased shares in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Conditions for payment and settlement of repurchased shares in Vietnam

Specifically, Article 134 of the Law on Enterprises 2020 stipulates the conditions for payment and settlement of repurchased shares in Vietnam as follows:

- The company may only make the payment for the shares repurchased in accordance with Article 132 and Article 133 of the Law on Enterprises 2020 if it is still able to fully pay its debts and other liabilities after the shares are fully paid for.

- The shares repurchased in accordance with Article 132 and Article 133 of the Law on Enterprises 2020 shall be considered unsold shares according to Clause 4 Article 112 of the Law on Enterprises 2020.

The company shall register the charter capital decreases, which is equal to the total face value of repurchased shares, within 10 days from the date of completion of payment for the shares unless otherwise prescribed by securities laws.

- The share certificates of the repurchased shares shall be destroyed right after the shares are fully paid for. The President of the Board of Directors and the Director/General Director shall be jointly responsible for the damage caused by the failure to or delay in destroying the share certificates.

- After all of the repurchased shares are fully paid for, if the total assets in the company’s accounting books is reduced by more than 10%, the company shall send a notification to all of its creditors within 15 days from the payment date.

2. Cases of share repurchase at shareholders’ request in Vietnam

Pursuant to Article 132 of the Law on Enterprises 2020, the cases of share repurchase at shareholders’ request are as follows:

- 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.

- 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.

3. Cases of share repurchase under the company’s decision in Vietnam

According to Article 133 of the Law on Enterprises 2020, 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. To be specific:

- 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 Board of Directors is entitled to impose the repurchase price. The repurchase price for ordinary shares must not exceed their market price at the time, except the cases specified in Clause 3 of Article 133 of the Law on Enterprises 2020.

Repurchase prices of 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 the 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; method of payment, signature of the shareholder or the shareholder’s legal representative.

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

Ho Quoc Tuan

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE