Increasing And Decreasing Charter Capital In Accordance With The Law On Enterprise 2020

Charter capital is defined as the total value of assets that have been contributed or have been committed to contribute by the members/owner/shareholders of the company; or the total par value of shares sold or registered to be purchased. Accordingly, the members/owner/shareholders have the right to freely decide on the increase or decrease of charter capital in the following cases:  

Increasing And Decreasing Charter Capital In Accordance With The Law On Enterprise 2020
Increasing And Decreasing Charter Capital In Accordance With The Law On Enterprise 2020

1. Increasing in charter capital

According to Clauses 1 and Clause 2 Article 68; Clauses 1 and Clause 2 Article 87; Clauses 1 and Clause 2 Article 123; and Clause 6 Article 135 of the Law on Enterprise 2020, Multiple-member limited liability companies, Single-member limited liability companies and Joint stock companies may increase charter capital in the following cases: 

 

Case No.  Multiple-Member Limited Liability Company  Single Member Limited Liability Company  Joint Stock Company 
Increasing in capital contributed through the increase in the members’ capital contribution; the increase will be distributed among the members in proportion to their holdings in the company. 

 

Increasing in charter capital as the company’s owner contributes capital   Offering shares as follows: 

– Offering shares to existing shareholders; 

– Private placement of shares; 

– Public offering of shares. 

Receipt of capital contribution from new members 

 

 

The owner of the company raises capital from other individuals or other organizations. In this case, such company shall be converted into a Multiple-member limited liability company or Joint stock company.  

 

Dividends payment in the company’s shares 

 

2. Decreasing in charter capital

According to Clauses 3 Article 68, Clauses 3 Article 87 and Clauses 5 Article 112 of the Law on Enterprise 2020, Multiple-member limited liability companies, Single-member limited liability companies and Joint stock companies may decrease charter capital in the following cases: 

Case No.  Multiple-Member Limited Liability Company  Single Member Limited Liability Company  Joint Stock Company 
Company operated for at least 02 consecutive years from the enterprise registration date returns part of the contributed capital to the Members in proportion to their holdings in the company and such company must ensure full payment of debts and other liabilities after the return of capital 

 

Company operated for at least 02 consecutive years from the enterprise registration date returns part of the contributed capital to the company’s Owner and such company must ensure full payment of debts and other liabilities after the return of capital 

 

Company operated for at least 02 consecutive years from the enterprise registration date returns part of the contributed capital to the Shareholders in proportion to their holdings in the company and such company must ensure full payment of debts and other liabilities after the return of capital 

 

Charter capital is not fully and punctually contributed by the members within 90 days from the issuance date of the Enterprise Registration Certificate. 

 

Charter capital is not fully and punctually contributed by the owner within 90 days from the issuance date of the Enterprise Registration Certificate. 

 

Charter capital is not fully and punctually contributed by the shareholders within 90 days from the issuance date of the Enterprise Registration Certificate. 

 

The company repurchases the Members’ stakes upon member’s request 

 

  The company repurchases the Shareholders’ stakes upon Shareholders’s request 

 

 

3. Legal consequences in case of increase or decrease in charter capital

According to Clauses 4 Article 28 of the Law on Enterprise 2020, the charter capital is recorded in the content of Enterprise Registration Certificate, accordingly, in case of changes in charter capital, an application for revision shall be submitted by the company within 10 days from day on which the change occurs as prescribed in Clause 2 Article 30 of the Law on Enterprise 2020. 

In the event of company’s violations against regulations on deadline for registering changes in enterprise registration certificates mentioned above, pursuant to Article 44 of Decree No. 122/2021/ND-CP, such company shall be fined for administrative violation as follows: 

Violations against regulations on deadline for registering changes in the Enterprise Registration Certificate  Penalties to be imposed  Remedial Measures 

 

01 – 10 days behind the scheduled deadline 

 

Warnings  The violator is compelled to register for changes in the Enterprise Registration Certificate  
11 – 30 days behind the scheduled deadline  

 

A fine ranging from VND 3,000,000 to VND 5,000,000 

 

31 – 90 days behind the scheduled deadline 

 

A fine ranging from VND 5,000,000 to VND 10,000,000 

 

91 days or longer behind the scheduled deadline 

 

A fine ranging from VND 10,000,000 to VND 20,000,000 

 

Failure to register changes in the content of Enterprise Registration Certificate 

 

A fine ranging from VND 20,000,000 to VND 30,000,000 

 


Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.

Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Business and Investment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.

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