Registering change in the company’s charter capital in Vietnam

During operation, enterprises have the right to change their charter capital to make it more suitable and convenient. There are two main forms of changing charter capital: increasing charter capital and decreasing charter capital. When changing charter capital, enterprises must register changes to the contents of the enterprise registration certificate. Pursuant to Clause 2, Article 30 of the Enterprise Law 2020, within 10 days from the date of the decision to change charter capital, the legal representative of the enterprise must register the change with the business registration office. In addition, it is necessary to comply with the provisions of the law when performing the change registration procedure. In the following article, Viet An Law will provide information on the procedure for registering change in the company’s charter capital in Vietnam according to current regulations.

In case of increasing charter capital

Time to increase charter capital

Enterprises must complete the increase in charter capital before carrying out the procedure for registering the capital increase to ensure the amount of increased capital to avoid the case where after registering the increase, the actual contribution is not enough.

Form of charter capital increase

• For a single-member LLC: The company owner invests more or the company owner raises additional capital from others ( Clause 1, Article 87 of the Enterprise Law ).
• For multiple-member LLC: Increase capital contributions of members or receive capital contributions of new members ( Clause 1, Article 68 of the Enterprise Law ).
• For joint stock companies ( Circular 19/2003/TT-BTC ):
  • Issue new shares to raise additional capital in accordance with the provisions of law, including cases of restructuring corporate debt in the form of converting debt into equity capital according to an agreement between the enterprise and creditors;
  • Converting issued bonds into shares: Charter capital increase can only be carried out when all conditions for converting bonds into shares according to the provisions of law and the plan for issuing convertible bonds are met;
  • Implement stock dividend payment;
  • Issue new shares to merge a part or the whole of another business into the company;
  • Carry over surplus capital to increase charter capital.

After completing the actual increase in charter capital, the enterprise shall carry out the procedure of registering the change in the enterprise’s charter capital according to the increased capital amount.

Procedures for increasing company’s charter capital

Step 1: Submit application for charter capital increase

The enterprise shall send a notice to the business registration office where the enterprise has registered. The content of the notice is specifically regulated in Clause 1, Article 51 of Decree 01/2021/ND-CP.

Attached to the above Notice must be:

• Single-member LLC: Decision of the owner of the single-member LLC on changing the charter capital.
• Limited Liability Company: Written decision and valid copy of meeting minutes of the Board of Members;
• Joint stock company: Written decision and valid copy of minutes of meeting of General Meeting of Shareholders;
• The decision and meeting minutes must clearly state the amended contents of the Company Charter.

Notes for the case of a joint stock company increasing capital by offering shares to the public:

In case the General Meeting of Shareholders approves the issuance of shares for sale to increase charter capital, and at the same time assigns the Board of Directors to carry out the procedures for registering the increase in charter capital after the end of each share offering. Attached to the above notice, the dossier for registration of change in charter capital must include the following documents as prescribed in Clause 3, Article 51 of Decree 01/2021/ND-CP:

• Resolution and copy of the minutes of the General Meeting of Shareholders on the offering of shares to increase charter capital, clearly stating the number of shares offered and assigning the Board of Directors to carry out the procedures for registering the increase in charter capital after the end of each share offering;
• Resolution, decision and copy of minutes of the meeting of the Board of Directors of the joint stock company on registration of increase in charter capital of the company after the end of each share sale.
• The decision and meeting minutes must clearly state the amended contents of the company charter.

Step 2: Receive the results of increasing the company’s charter capital

Upon receipt of the notice, the Business Registration Office shall issue a receipt and register the capital increase for the enterprise within 3 working days from the date of receipt of complete and valid documents.

In case of reducing company charter capital

Reducing charter capital of a single-member LLC

Pursuant to Clause 3, Article 87 of the Enterprise Law 2020, a single-member LLC is allowed to reduce its charter capital in the following two cases:

• Refund a portion of the capital contribution to the company owner if the company has been operating continuously for 02 years or more from the date of business registration and ensures full payment of debts and other financial obligations after returning the capital contribution to the company owner.
• Charter capital is not fully and timely paid by the company owner as prescribed in Article 75 of the Enterprise Law 2020.

Reducing charter capital of a multiple-member LLC

Pursuant to Clause 3, Article 68 of the Enterprise Law 2020, a multiple-member LLC is allowed to reduce its charter capital in one of the following forms:

• Refund a portion of the capital contribution to members in proportion to their capital contribution in the company’s charter capital if the company has been in continuous business operation for 02 years or more from the date of business registration and ensure full payment of debts and other financial obligations after refunding to members;
• The company repurchases the member’s capital contribution according to the provisions of Article 51 of the Enterprise Law 2020;
• Charter capital is not paid in full and on time by members as prescribed in Article 47 of the Enterprise Law 2020.

Reduce charter capital of joint stock company

Full and timely payment from shareholders for the shares registered to purchase upon business registration (Point d, Clause 3, Article 113, Enterprise Law 2020)

• Within a maximum period of 90 days from the date the company receives the Enterprise Registration Certificate, shareholders must fully pay for the number of shares registered to purchase.
• After the above deadline, the company must register to adjust the charter capital to the par value of the fully paid shares and change the founding shareholders within 30 days from the end of the deadline for fully paying for the registered shares as prescribed (ie after 90 days from the date the company receives the Enterprise Registration Certificate).

Capital reduction by decision of General Meeting of Shareholders

• Point a, Clause 5, Article 112 of the Enterprise Law stipulates: According to the decision of the General Meeting of Shareholders, the company shall return a part of the contributed capital to shareholders in proportion to their share ownership in the company, provided that: The company has been operating continuously for more than 02 years from the date of business registration and ensures full payment of debts and other financial obligations after returning to shareholders.
• In addition, pursuant to Point g, Clause 2, Article 138 of the Enterprise Law 2020, the General Meeting of Shareholders has the right to decide to buy back more than 10% of the total number of shares sold of each type.

Capital reduction due to company buying back issued shares

There are two cases where a company can buy back shares:

Case 1: Repurchase shares at the request of shareholders

Pursuant to Article 132 of the Enterprise Law 2020, the company repurchases shares according to the following provisions:

• Shareholders who have voted against the resolution on company reorganization or change of shareholders’ rights and obligations as stipulated in the company’s charter have the right to request the company to buy back their shares.
• The request must be in writing, stating clearly the name and address of the shareholder, the number of shares of each type, the intended selling price, and the reason for requesting the company to buy back.
• The request must be sent to the company within 10 days from the date the General Meeting of Shareholders passes a resolution on the matters specified in this clause.
• The company must repurchase shares at the request of shareholders as prescribed in Clause 1 of this Article at market price or price calculated according to the principles prescribed in the Company Charter within 90 days from the date of receipt of the request.
• In case of failure to agree on price, the parties may request a valuation organization to determine the price.
• The company introduces at least 03 valuation organizations for shareholders to choose from and that choice is the final decision.

Case 2: Repurchase shares according to the company’s decision

The company repurchases shares according to the company’s decision and in accordance with the provisions of Article 133 of the Enterprise Law 2020.

• Limitation: The company has the right to repurchase no more than 30% of the total number of common shares sold, part or all of the dividend preference shares sold.
• Decision-making authority: Board of Directors (with the total number of shares repurchased not exceeding 10% of the total number of shares of each type offered for sale within 12 months) or General Meeting of Shareholders (in other cases)
• Repurchase price: Decided by the Board of Directors. For common shares, the repurchase price must not be higher than the market price at the time of repurchase. For other types of shares, unless otherwise stipulated in the Company Charter or otherwise agreed between the Company and the relevant shareholders, the repurchase price must not be lower than the market price;

Procedure notes:

• The company may repurchase shares from each shareholder in proportion to their shareholding in the company. In this case, the company’s decision to repurchase shares must be notified by a guaranteed method to all shareholders within 30 days from the date of the decision. The notice must include the name, head office address of the company, the total number of shares and the type of shares to be repurchased, the repurchase price or the principle of determining the repurchase price, the payment procedure and deadline, and the procedure and deadline for shareholders to offer their shares to the company.
• Shareholders who agree to resell their shares must send their offer of shares by guaranteed method to the company within 30 days from the date of notification. The offer must include the full name, permanent address, Citizen Identification Card number, Identity Card, Passport or other legal personal identification of the individual shareholder; the name, enterprise code or establishment decision number, head office address of the institutional shareholder; the number of shares owned and the number of shares offered; payment method; signature of the shareholder or the shareholder’s legal representative. The company will only repurchase shares offered for sale within the above time limit.

Application for change of charter capital reduction of company

• Similar to the registration file for changes due to increased charter capital;
• However, the enterprise must commit to ensuring full payment of debts and other financial obligations after the capital reduction. Therefore, the Notice of registration of change in charter capital must be accompanied by the company’s Financial Statement for the period closest to the time of the decision to reduce the charter capital. The Financial Statement must ensure sufficient cash to repay the capital contribution for debts and other financial obligations related to the operation of the joint stock company.
• For companies with foreign ownership of more than 50%: financial statements must be certified by an independent auditor.
• Note for industries with legal capital requirements : when registering to reduce charter capital for enterprises operating in industries with conditions on legal capital, the enterprise can only register to reduce charter capital if the registered capital after reduction is not lower than the legal capital applicable to that industry. In case the enterprise registers to change capital to a level lower than the legal capital for that industry, the enterprise must simultaneously register to change (abandon) that business industry.

Notes after performing the procedure of registering changes to the charter capital of an enterprise

• After registering a change in charter capital, the enterprise must publish the change information on the national enterprise information portal within 30 days from the date of change.
• For a single-member LLC, in case of increasing charter capital by mobilizing additional capital contributions from others, the company must organize company management according to one of two types:
  • A limited liability company with two or more members and the company must change the business registration content within 10 days from the date of completion of the change of charter capital;
  • Joint stock company as prescribed in Article 202 of the Enterprise Law 2020.
• After registering a change in charter capital, company members, owners and shareholders of the company are responsible for their capital after registering a change in the enterprise.

Business license tax for businesses in 2024

Business license tax, also known as business license fee, is currently applied according to the provisions of Decree No. 139/2016/ND-CP and Circular 302/2016/TT-BTC. Accordingly, the business license tax rate is applied based on the form of production and business organization, and according to the charter capital of the enterprise stated on the Enterprise Registration Certificate, specifically:

• Enterprises with charter capital over 10 billion VND: payment level 3,000,000 VND/year;
• Enterprises with charter capital of 10 billion VND or less: payment level is 2,000,000 VND/year;
• Branches, representative offices, business locations, public service units, other economic organizations: VND 1,000,000/year.

In cases where an enterprise changes its charter capital, the basis for determining the amount of business license fee payable is the enterprise’s charter capital of the year preceding the year of calculating the business license fee.

Procedures for declaring business license fees in 2024:

Article 10.1(a) of Decree 126/2020/ND-CP on guidelines for the Law on Tax Administration (amended and supplemented by Decree 91/2022/ND-CP) stipulates:

“ In case there is a change in capital during the year, the person paying the business license fee must submit the business license fee declaration no later than January 30 of the year following the year of change. ”

Therefore, the case in 2024 if a business register change in the company’s charter capital, the business must submit the adjusted business license fee declaration no later than January 30, 2025.

If you need to register change in the company’s charter capital in Vietnam, please contact Viet An Law Firm for specific advice and support!