Some ways and conditions to decrease the companys charter capital

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Some ways and conditions to decrease the companys charter capital

Adjustment to the charter capital is a part of the changes to enterprise registration information. Depending on certain demands of each enterprise will have differences from adjusting to charter capital – maybe increase or decrease. In general, increasing the charter capital seems to be easier than decreasing because decreasing the charter capital is just allowed in some certain cases. Pursuant to Enterprise Law in 2014, the company can decrease the charter capital as follow:
  • Part of stakes/shares is returned to members/shareholders according to their stake/share held if the company has run for more than 02 consecutive years from the date of business registration, provided the debts and other liabilities can be paid after the return is made. Accordingly, the return of stakes/shares must meet the condition on the percentage of capital contribution of members/shareholders of the company before and after the decrease of the charter capital is unchanged. Moreover, the company has been operating for at least 2 years from the date of issuing enterprise registration certificate and guaranteed the payment of debts so that the company is entitled to reduce its charter capital in this case.
  • The company repurchases a member’s stake/ a shareholder’s shares. Decreasing the charter capital as prescribed in Article 52 of Enterprise law in 2014 applied for multi-member limited liability companies) and article 129, 130 of Enterprise law in 2014 applied for joint stock company. Specifically, for multi-member limited liability companies, every member is entitled to request the company to repurchase his/her stake if such member votes against the resolution of the Board of members on amendments to the company’s charter that are related to rights and obligations of members and/or the Board of members, company restructuring, other cases prescribed by the company’s charter. Besides, for joint stock company, any shareholder who votes against the Resolution on the company’s restructuring or changes to the shareholders’ rights and obligations prescribed in the company’s charter shall be entitled to request the company to repurchase his/her shares or the company may repurchase up to 30% of total ordinary shares that are sold, part of or all of shares with preferred dividends that are sold as regulations.
  • Charter capital is not contributed fully and punctually by members/shareholders. Accordingly, if any member/shareholder does not contribute fully, punctually as agreed within 90 days from the day on which the enterprise registration certificate is issued, the company must take responsibilities for changing the company’s charter capital.
Furthermore, in the past, decreasing the charter capital must have both commitments to settle all debts and other liabilities after capital decrease and the latest financial statement of the company. Recently, pursuant to clause 14, article 1 of Decree 108/2018 / ND-CP, the company does not need to provide the latest financial statement (meaning the company just commits to settle all debts and other liabilities after capital decrease).
With all the information above, we hope that our closed readers have a general overview about decreasing the enterprise’s charter capital and know how many ways and conditions to do that.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.