CORPORATE ARTICLES

Capital Adjustment In Vietnamese Joint Stock Companies

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Adjustment of par value of shares; acquisition, recovery, and conversion of bonds; stock issuance; etc. are the circumstances in which joint stock companies are permitted to increase or decrease charter capital.

Joint stock companies may increase their charter capital in the following cases:

  • Issuance of new shares to raise additional capital as prescribed by law;
  • Conversion of issued bonds into shares. This case only applies when the company has already ensured the conditions by which the bonds are converted into shares and the options to issue converted bonds;
  • The company pays dividends by shares;
  • Issuance of new shares to implement a partial or full merger of another business with the joint stock company;
  • Transfer the capital surplus to add to the charter capital in accordance with law.
  • Joint stock companies need to notice that it is forbidden to use the price differences arising from the reevaluation of assets when there is no policy to increase the charter capital.

However, joint stock companies may reduce their charter capital under the following methods:

  • The company estimates the amount of capital to be reduced, then the company will proceed to purchase and dispose the amount of treasury shares with a par value corresponding to the amount of capital expected to be reduced based on the method approved by the General Meeting of Shareholders, or dispose the treasury shares required to be disposed.
  • The company revokes and disposes a number of shares of the shareholders with the par value corresponding to the reduced charter capital. Under this method, the company must pay each shareholder an amount of money equivalent to the number of revoked shares of each shareholder multiplied by par value of shares. The number of shares to be revoked from each shareholder is determined by having the number of shares owned by the shareholder multiplied by the amount of charter capital expected to be decreased.
  • The company can adjust par value of shares without changing the number of shares by revoking share certificates and issuing new share certificates with a par value adjusted lower. To apply this method, the company must pay its shareholders an amount of money, which equals the number of shares of each shareholder times the difference between the old and new par values.

In case the company loses for 3 consecutive years, has accumulated losses of the capital by 50% or more of the shareholders’ capital, and has yet to lose the ability to pay its due debts, the company can apply the methods of revocation and disposal to a number of shares or adjusts the par value of shares without having to pay money back to the shareholders.

PLF Law Firm 

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