Reduce company charter capital in Vietnam

During operations, for various reasons, the company needs to reduce the registered and contributed charter capital of the company. Accordingly, reducing charter capital is an administrative procedure that a company must carry out when the company reduces the amount of charter capital registered with the business registration agency, contributed, or has not contributed capital to the company. This procedure applies to all types of partnerships, limited liability companies, and joint stock companies.

Legal basis

• Law on Enterprise 2020;
• Decree 01/2021/ND-CP on business registration;
• Circular 01/2021/TT-BKHDT on business registration forms.

Cases of reduce company charter capital in Vietnam

There are two main cases where a company needs to register to reduce its charter capital as follows:

Reduced capital due to failure to contribute fully and on time

Company members and shareholders do not contribute in full and on time as recorded in the company charter. Specifically, if charter capital is not paid in full and on time by members and shareholders when registering for enterprise establishment, this company must register to reduce charter capital within 30 days from the last day of capital contribution.

Demand to reduce capital according to the actual operations of the company

Return part of the capital contribution to the company owner if the company has operated continuously for 02 years or more from the date of business registration and ensures full payment of debts and other property obligations after returning the capital contribution to the company owner.

Reducing the charter capital of a single-member limited liability company

• Return part of the capital contribution to the company owner if the company has operated continuously for 02 years or more from the date of business registration and ensures full payment of debts and property obligations. other after returning the capital contribution to the company owner;
• The charter capital is not paid in full and on time by the company owner as stated in the company charter when registering to establish a business; The company owner must register to reduce charter capital by the value of the contributed capital within 30 days from the last day the charter capital must be fully contributed.

Reducing the charter capital of a multiple-member limited liability company

Based on the current Enterprise Law, a multiple-member limited liability company can reduce the amount of charter capital in the following cases:

Charter capital is not paid in full and on time by members

• According to the provisions of Article 47 of the Enterprise Law 2020, within 90 days from the date of receiving the business registration certificate, members must contribute capital to the company in full and with the correct type of assets as committed when registering to establish a business.
• In case members have not contributed capital or have not contributed the full amount of capital as committed, the company must register to change charter capital, with the propart of members’ capital contribution equal to the amount of capital contributed within 30 days from the expired date as prescribed in Clause 2, Article 47 of the Law on Enterprises 2020.
• Note: Company members can still contribute capital to the company with assets other than the type of assets previously committed if approved by the majority of the remaining members.

Return a part of capital contribution to members according to their capital contribution ratio in the company’s charter capital

For a multiple-member limited liability company to reduce its charter capital in the direction of returning a part of capital contribution to members according to their capital contribution ratio in the company’s charter capital, the following conditions must be satisfy:

• This limited liability company has operated continuously for more than 2 years;
• Ensure full payment of debts and other property obligations after repaying members.

The company repurchase capital contributions from members

Members have the right to request the company to repurchase their capital contribution with the following necessary and sufficient conditions:

• That member voted against the resolution of the Members’ Council, and this disapproval vote will have to be on the following issues:
  • Amending and supplementing contents in the Company’s Charter related to the rights and obligations of members and the Board of Members;
  • Reorganize the company;
  • Other cases as prescribed in the company’s Charter.
• The request to repurchase the capital contribution must be in writing and sent to the company within 15 days from the date of passing the resolution specified in this Clause.

Reduce the charter capital of a Joint Stock Company

Return a part of capital contribution to shareholders according to their capital contribution ratio in the company’s charter capital

• According to the decision of the General Meeting of Shareholders, the company returns a part of capital contribution to shareholders in proportion to their share ownership in the company if the company has been in continuous business operation for 2 years or more since the date of business establishment registration and ensuring full payment of debts and other property obligations after repayment to shareholders;
• The company repurchases the shares sold on the condition that after repurchasing the shares The company still ensures full payment of debts and other property obligations.

The company repurchases shares at the request of shareholders

• The company repurchases shares at the request of shareholders. Shareholders who voted not to pass a resolution on reorganizing the company or changing the rights and obligations of shareholders stipulated in the company charter have the right to request the company to repurchase their shares. Shareholders must submit a request within 10 days from the date the resolution/decision is passed. The company must repurchase shares within 90 days from the date of request, at the market price or the price specifically stipulated in the company charter.

The company repurchases shares at the company’s discretion

The company has the right to repurchase no more than 30% total number of common shares sold, part or all of the dividend preference shares sold. The company can repurchase shares from each shareholder in proportion to their share ownership in the company according to the prescribed order and procedures, according to which shareholders agree to sell, the company will purchase.

Charter capital was not paid in full and on time by shareholders when registering to establish a business

Charter capital is not fully and properly paid by the shareholders’ deadline when registering to establish a business. The company must register to reduce charter capital within 30 days from the end of the deadline to fully pay for the number of shares registered to purchase.

Deadline for registering to reduce charter capital

The company must register a reduction in charter capital corresponding to the total par value of the shares repurchased by the company within 10 days from the date of completion of payment for the repurchase of shares.

Reduce the charter capital of the Partnership Company

A partnership company can reduce its charter capital by expelling capital contributors from the company and terminating their status as partnership members as follows:

Not contributing in full and on time as committed

In case a capital contributing member fails to contribute the committed capital amount in full and on time, the not yet fully contributed capital is considered that member’s debt to the company; Related capital contributing members may be expelled from the company according to the decision of the Board of Members.

The partnership member’s status is terminated

• Voluntarily withdraw capital from the company.
• Be expelled from the company when falling into the cases specified in Clause 3, Article 185 of the Law on Enterprises 2020.
• Serving a prison sentence or being banned by the Court from practicing certain professions or doing certain jobs according to the provisions of law.
• Death, disappearance, limited or loss of civil act capacity, difficulty in cognition and behavior control.
• Other cases prescribed by the company charter.

Reduce charter capital of private enterprises

During operation, the owner of a private enterprise has the right to decide on reducing his or her investment capital in the enterprise’s business activities.

However, no matter how much investment capital is registered, unlike other types of businesses, the owner of a limited liability company or joint stock company only has limited liability to the extent of capital contributed to the company’s charter capital. As for private enterprise owners, they must bear unlimited liability for the business activities of the private enterprise.

Application for registration of charter capital reduction

For single-member limited liability company

• Notice of change in business registration content;
• Decision of the company owner;
• Power of attorney, if using charter capital reduction service of Viet An Law Firm.

For multiple-member limited liability companies

• Notice of change in business registration content;
• Minutes of the Board of Members meeting on reducing charter capital;
• Decision of the Board of Members on reducing charter capital;
• Latest financial statements, if capital is reduced in case of returning capital contributions to members according to the ratio to prove that the company has enough ability to pay debts and tax obligations;
• Power of attorney, if using charter capital reduction service of Viet An Law Firm.

For joint stock companies

• Notice of change in business registration content;
• Minutes of the General Meeting of Shareholders on reducing charter capital;
• Resolution/Decision of the General Meeting of Shareholders on reducing charter capital;
• Power of attorney, if using charter capital reduction service of Viet An Law Firm.

Conditions for applying to reduce company charter capital in Vietnam

• Do not handwrite application forms; Do not use staples to staple documents (use staples); Records and copies of personal identification papers, practice certificates, and accompanying documents must use A4 size paper;
• Enterprises are responsible for registering changes within 10 working days from the date of issuance of the Decision (or Resolution) to change or reduce the company’s charter capital.
• Enterprises must register a contact phone number and arrange business lines according to the Vietnam standard industrial classification in case the Business Registration Certificate does not have the above information when registering to reduce the charter capital of the company;
• Enterprises must update information on business registration and tax registration in case of discrepancies when submitting documents to reduce charter capital;
• In case of reducing charter capital for enterprises conducting business lines that require legal capital, the enterprise may only register to reduce charter capital if the registered capital level after reduction is not lower than the applicable legal capital level. applicable to that industry.
• The company’s financial statements for the period closest to the time of the decision to reduce charter capital (in case of charter capital reduction). For companies with foreign ownership of more than 50%, the financial statements must be confirmed by an independent auditor;
• Original Certificate of Enterprise Registration Certificate and Tax Registration Certificate or Business Registration and Tax Registration Certificate;
• Table of contents (recorded in the above order);
• File cover (made of thin paper or hard nylon without text used for other purposes).

The place to submit an application

After completing the application, the enterprise can choose one of the following three methods to submit to the Business Registration Office – Department of Planning and Investment where the enterprise is headquartered;

• Submit directly to the Business Registration Office – Department of Planning and Investment;
• Submitted via postal service, must have a letter of authorization for the postal service;
• Submit via electronic information network: dangkyquamang.dkkd.gov.vn by business registration account or by public digital signature.

The time limit for processing applications for registration of reduction of company charter capital

Within 4-6 working days from the date of receiving complete and valid documents, the Business Registration Office – Department of Planning and Investment will issue a certificate of registration to establish a multiple-member limited liability company.

Granting an Enterprise Registration Certificate after completing reduce company charter capital

• The enterprise has registered contact phone number information;
• Business lines registered according to the Vietnam standard industrial classification;
• There is complete information about business registration and tax registration on the National Business Information System;
• Have a valid record of changing and reducing company capital according to the provisions of law;
• Pay the full fee for changing business registration/enterprise registration according to the provisions of law.

Declaration form 08, License tax declaration

In case the reduction of the enterprise’s capital reduces the amount of business license tax payable, the enterprise needs to carry out the following procedures:

• Declare and submit form 08-MST;
• Submit additional license tax declaration;

Some questions related to charter capital reduction

Can a company that has not yet completed its tax obligations register to reduce capital?

The company must ensure that when registering to reduce charter capital in case of returning capital contributions proportionally to members, it must be able to pay debts. The business registration agency may require a commitment to fulfill tax obligations on debts to ensure that businesses comply with regulations.

What are the conditions for a company to reduce its charter capital?

• The company can only return a part of capital contribution to shareholders in proportion to their share ownership in the company;
• The company has been in continuous business operation for more than 02 years, since the date of business registration;
• After repaying shareholders, the company must ensure full payment of debts and other property obligations;

What are the responsibilities of members due to failure to contribute capital leading to a reduction in charter capital?

For a multiple-member limited liability company, members who have not yet contributed capital or have not contributed the full amount of committed capital must be responsible in proportion to the committed capital contribution ratio for financial obligations of the company arising in the period before the date the company registers to change the charter capital and the capital contribution ratio of members.

For joint stock companies, shareholders who have not paid or have not paid in full for the number of shares registered to purchase must be responsible for the total par value of the shares registered to purchase for the company’s financial obligations arising within the period before the date the company registers to adjust its charter capital.

Service of registering changes in the charter capital of Viet An Law Firm

• Viet An Law advises on conditions for capital reduction for LLCs and Joint Stock Companies;
• Viet An Law advises on the appropriate capital reduction ratio according to the provisions of the law;
• Viet An Law advises businesses on conditions, order, and procedures for reducing charter capital;
• Viet An Law advises businesses to prepare appropriate financial reports according to business operations and legal regulations to qualify for reducing charter capital of limited liability companies and joint stock companies;
• Viet An Law prepares documents to change and reduce charter capital for businesses;
• Viet An Luat represents, on behalf of the customer, submits documents to change and reduce the company’s charter capital at the competent state agency.
• Consulting for businesses to carry out procedures after reducing capital in LLCs and joint stock companies;

We are always proud to be chosen by many domestic and foreign customers. With many years of experience in corporate legal consulting, Viet An Law Company always wants to provide the best legal services to customers and based on research and profound experience, Viet An Law Firm will advise and find out the current legal problems of businesses to provide the most optimal solution for clients when reducing charter capital. Please contact us for the best support.