CONDITIONS AND PROCEDURES FOR REDUCING CHARTER CAPITAL IN JOINT-STOCK COMPANY

There are many reasons why a joint-stock company wants to reduce its charter capital, but not all cases are allowed to reduce its registered charter capital. To help customers understand more about the conditions and procedures for reducing charter capital in a joint-stock company, we would like to provide some related information in the article below.

1. Cases of reduction of charter capital in joint-stock companies

According to the provisions of Article 112.5 of the Law on Enterprises 2020, a joint-stock company may reduce its charter capital in the following cases:

1.1. According to a decision of the General Meeting of Shareholders

Pursuant to a decision of the General Meeting of Shareholders, the company shall return part of the capital contribution to the shareholders in proportion to their ratio of ownership of shares in the company if the company has conducted business activities for two or more consecutive years from the date of registration for establishment of the enterprise, and must ensure payment of all debts and other property obligations upon return to the shareholders;

1.2. The company redeems shares which have been sold

The company redeems shares which have been sold in following cases:

• A shareholder casting a vote which does not agree with a resolution on re-organization of the company or against a change to the rights and obligations of shareholders stipulated in the charter of the company may demand the company redeem its shares;

• Redemption of shares pursuant to decision of company

 The Board of Management has the right to decide on redemption of no more than ten (10) per cent of the total number of shares of each class already sold within a period of twelve (12) months. In other cases, redemption of shares shall be decided by the General Meeting of Shareholders;

 The Board of Management shall decide on the price for redemption of shares. The price for redemption of ordinary shares shall not be higher than the market price at the time of redemption, subject to the exception in case the company may redeem shares of each shareholder in proportion to their ratio of ownership of shares in the company. In respect of shares of other classes, unless otherwise stipulated in the charter of the company or agreed between the company and the relevant shareholders, the price for redemption shall not be lower than the market price.

1.3. The shareholders fail to pay for the charter capital in full and on time

Shareholders must pay in full for the number of shares which have been registered for subscription within ninety (90) days from the date of issuance of the enterprise registration certificate (ERC), except where the charter of the company or share subscription agreement stipulates a shorter time limit. If a shareholder contributes capital in the form of assets, then the time taken for transportation, import and conduct of administrative procedures in order to transfer ownership of the assets is not included in the above deadline for contributing such capital.

Within thirty (30) days from the date of expiry of the period in which the shares registered for subscription must be paid for in full as stipulated in clause 1 above, the company must register adjustment of the charter capital on the basis of the par value of shares which have been paid for in full.

2. Procedures for reducing charter capital in joint-stock company

According to Article 51 of Decree 01/2021/ND-CP of the Government, to reduce charter capital in joint-stock companies, enterprises need to follow the following steps:

Step 1: Submit an application to the Business Registration Office

Application includes:

• Notice of change of business registration content;

• Decision the meeting minute of the General Meeting of Shareholders on reducing charter capital;

• Commitment on ensuring full payment of debt and other property obligation after reducing charter capital;

• List of shareholders of the joint-stock company;

• Power of Attorney to carry out the procedure on reducing charter capital (in case of authorization for another person to do it).

Step 2: The Business Registration Office receives and checks the application

The Business Registration Office award the receipt, check the validity of the application and issue the Enterprise Registration Certificate (ERC) to the enterprise.

Processing time: 03 working days from the day receive a valid application.

ADK Vietnam Lawyers