The capital of a joint stock company according to Viet Nam Law on Enterprises

The capital of a joint-stock company is a vital issue to that company. Viet Nam Law on Enterprises has regulations on the capital of a joint-stock company. Let’s find out with Lawyer X through the following situation: “Dear lawyer! I want to ask is there any special thing in capital of a joint stock company? Is it compulsory to Pay for subscribed shares upon enterprise registration? Thanks for answering me!”

Legal grounds

Viet Nam Law on Enterprises

Joint-stock companies

– A joint stock company is an enterprise in which:

+ The charter capital is divided into units of equal value called shares;

+ Shareholders can be organizations and individuals; the minimum number of shareholders is 03; there is no limit on the maximum number of shareholders;

+ A shareholder’s liability for the company’s debts and liabilities is equal to the amount of capital contributed to the company by the shareholder;

+ Shareholders may transfer their shares to other persons except for the cases specified in Clause 3 Article 120 and Clause 1 Article 127 of Law on Enterprises.

– A joint stock company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

– A joint stock company may issue shares, bonds and other kinds of securities.

Capital of a joint-stock company

– A joint stock company’s charter capital is the total face value of the shares sold. The initially registered charter capital of a joint stock company is the total face value of subscribed shares and shall be written in the company’s charter.

– Sold shares are authorized shares that have been fully paid for the shareholders. Upon registration of a joint stock company, sold shares are the total number of subscribed shares.

– Authorized shares are the total number of shares that are offered by the General Meeting of Shareholders (GMS) to raise capital. The number of authorized shares of a joint stock company upon its registration is the total number of shares that will be offered by the company to raise capital, including subscribed shares and unsubscribed shares.

– Unsold shares are authorized shares that have not been paid for. Upon registration of a joint stock company, unsold shares are the total number of unsubscribed shares.

– A joint stock company may decrease its charter capital in the following cases:

+ 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;

+ The company repurchases the sold shares in accordance with Article 132 and Article 133 of Law on Enterprises;

+ Charter capital is not fully and punctually contributed by the shareholders as prescribed in Article 113 of Law on Enterprises.

Paying for subscribed shares upon enterprise registration

– Shareholders shall fully pay for the subscribed shares within 90 days from issuance date of the Certificate of Enterprise Registration unless shorter time limit is specified by the company’s charter or the shares registration contract. In case of capital contribution by assets, the time needed to transport or import the contributed assets and for completing ownership transfer procedures shall be added to this time limit. The Board of Directors shall supervise the shareholders fully and punctually paying for the subscribed shares.

– During the period from the issuance date of the Certificate of Enterprise Registration to the deadline for paying for the subscribed shares mentioned in Clause 1 of Article 113, the number votes of shareholders shall be proportional to their subscribed shares unless otherwise prescribed by the company’s charter.

– In case a shareholder fails to pay or to fully pay for the subscribed shares by the deadline specified in Clause of this Article:

+ The shareholder that fails to pay for the subscribed shares is no longer a shareholder of the company and must not transfer the right to purchase the shares to another person;

+ The shareholder that only pays for part of the subscribed shares will be entitled to a number of votes, dividends and benefits that are proportional to the paid shares and must not transfer the right to purchase the unpaid shares to another person;

+ The shares that are not paid for shall be considered unsold shares and may be sold by the Board of Directors;

+ Within 30 days from the deadline for paying for the subscribed shares mentioned in Clause 1 of Article 113, the company shall register the change in charter capital, which shall be equal to the total face values of paid shares unless the unpaid shares are sold out during this period; and register the change of founding shareholders.

– The shareholders that do not pay or fully pay for their subscribed shares shall be held liable for the company’s financial obligations that incur before the day on which the company register the change in charter capital as prescribed in Point d Clause 3 of Article 113 in proportion to the amount of their subscribed shares. Members of the Board of Directors and the legal representative shall be jointly responsible for the damage caused by the failure to comply with or fully comply with regulations of Clause 1 and Point d Clause 3 of Article 113 of Law on Enterprises

– Except for the cases in Clause 2 of Article 113 of Law on Enterprises, a capital contributor will become the company’s shareholder from the day on which the shareholder’s shares are fully paid for and the shareholder’s information specified in Points b, c, d and dd Clause 2 Article 122 of Law on Enterprises is recorded in the shareholder register.

Types of shares

– A joint stock company shall have ordinary shares, which are held by ordinary shareholders.

– In addition to ordinary shares, a joint stock company may have preference shares, which are held by preference shareholders. Preference shares include:

+ Participating preference shares;

+ Redeemable preference shares;

+ Super-voting shares;

+ Other types of preference shares prescribed by the company’s charter and securities laws.

– The persons that may purchase participating preference shares, redeemable preference shares and other preference shares shall be specified in the company’s charter or decided by the GMS.

– Every share of the same type will confer upon the holder equal rights, obligations and interest.

– Ordinary shares cannot not be converted into preference shares. preference shares may be converted into ordinary shares under a resolution of the GMS.

– Ordinary shares used as underlying assets to issue non-voting depository receipts are called underlying ordinary shares. Non-voting depository receipts have interest and obligations proportional to the underlying ordinary shares, except voting rights.

– The Government shall provide for non-voting depository receipts.

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