Regulations governing changes to a company’s charter capital are fundamental aspects of corporate governance. Consequently, they dictate how a company can modify its capital structure, a process that may have far-reaching implications for its financial stability and operations. Therefore, understanding these regulations is paramount for businesses seeking to adapt to changing circumstances or pursue growth opportunities. In this discussion, we will delve into the key aspects of regulations regarding changes to the company’s charter capital, shedding light on the procedures and considerations involved.
Question:
My company is a Joint Stock Company established in January 2019 with a charter capital of 4 billion VND. Currently, due to poor business conditions, we want to change our business direction and reduce the charter capital to 1 billion VND. I would like to ask if my company can reduce the charter capital, and if so, what procedures do I need to follow? I hope you can help me clarify these questions.
Answer:
– According to Clause 5 of Article 112 of Law on Enterprises 2020: “5. A joint stock company may decrease its charter capital in the following cases:
a) The decrease is decided by the GMS, in which case the company will return part of the contributed capital to the shareholders in proportion to their holdings if the company has operated for at least 02 consecutive years from the enterprise registration date and is able to fully pay its debts and other liabilities after the return of capital;
b) The company repurchases the sold shares in accordance with Article 132 and Article 133 of this Law;
c) Charter capital is not fully and punctually contributed by the shareholders as prescribed in Article 113 of this Law.”
– Companies should carry out the dossiers, procedures, and steps for changing the charter capital following the regulations outlined in Article 51 of Decree No. 01/2021/NĐ-CP regarding enterprise registration.
Conclusion
In conclusion, regulations regarding changes to a company’s charter capital play a pivotal role in shaping the financial landscape of businesses. These regulations aim to maintain transparency, protect stakeholders’ interests, and ensure that companies make informed decisions when modifying their capital structure. Comprehending and adhering to these regulations are vital for maintaining financial integrity and compliance with the law. Whether increasing or decreasing capital, companies must navigate these regulatory frameworks with diligence and expertise to achieve their strategic goals and safeguard their financial stability.
HMLF is always available to offer assistance in understanding the procedures with authorities.
Harley Miller Law Firm “HMLF”
Head office: 14th floor, HM Town building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
Phone number: +84 937215585
Website: hmlf.vn Email: miller@hmlf.vn
