Trang chủNewsQuestion and AnswerDetails about the reduction of charter capital in case the company repurchases issued shares?

Date: 05/10/2020

 

Question:

 

 

Please provide more details about the reduction of charter capital in case the company repurchases issued shares?

 

Answer:

 

The reduction of charter capital in case the company repurchases issued shares được is divided into two following cases:

a) The reduction of charter capital in case the company repurchases of shares at the request of shareholders

Article 129 of the Law on Enterprises stipulates:

“1. 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. The request shall be made in writing, specifying the shareholder’s name, address, amount of each type of shares, wanted prices, and reasons for requesting the repurchase. The request shall be sent to the company within 10 days from the day on which the General Meeting of Shareholders ratifies the Resolution on the issues mentioned in this Clause.

2. The company shall repurchase shares at the request of shareholders as prescribed in Clause 1 of this Article at market prices or prices determined in accordance with the company’s charter within 90 days from the day on which the request is received. If an agreement on the price is not reached, both parties may request a professional valuation organization to carry out the valuation. The company shall recommend at least 03 professional valuation organizations for shareholders to choose. The decision given by such organization shall be final”.

Thus, the reduction of the charter capital in the case of the company repurchases of shares at the request of shareholders only applies to shareholders voting against the resolution on the reorganization of companies or change of rights, obligations of shareholders stipulated in the company charter. At the same time, the above shareholder must request in writing, clearly stating the name and address of the shareholder, the number of shares of each type, the intended selling price, the reason for requesting the company to buy back and  he request must be sent to the company within 10 days from the date the General Meetings of Shareholders adopts the resolution.

b) The reduction of charter capital in case repurchase of shares under the company’s decision

According to the Law on Enterprises, of charter capital in case repurchase of shares under the company’s decision shall be conducted once satisfies the following conditions:

- 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

- The company may repurchase the shares held by each shareholder in proportion to his/her holding in the company. In this case, a notification of the decision to repurchase shares must be sent by registered mail to all shareholders within 30 days from the day on which such decision is ratified. Any shareholder that agrees to resell his/her shares shall send the offering by registered mail to the company within 30 days from the notification date.

- The company may pay for the repurchased shares to the shareholders as prescribed in the Enterprise Law after fully paying for the repurchased shares, the company is still able to pay its debts and other liabilities.

- The company shall follow procedures for making a decrease to charter capital, which is equal to the total face value of shares repurchased by the company within 10 from the completion of payment for repurchased shares, unless otherwise prescribed by regulations of law on securities.

 

 

 


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