Holding a general meeting of shareholders to increase charter capital is a pivotal milestone that allows enterprises to expand their operations, invest in new projects, or comply with legal requirements. Are you concerned about the organization process, legal procedures, or protection of shareholder rights? NPLaw provides a comprehensive solution with accurate information, practical advice, and in-depth legal consultancy. We help you conduct the meeting efficiently, in full compliance with the law, and achieve your financial objectives. This article offers detailed guidance on how to successfully hold a general meeting of shareholders to increase charter capital with NPLaw!

I. Overview of the general meeting of shareholders on increasing charter capital 

A general meeting of shareholders to increase charter capital is a golden strategy enabling enterprises to scale up, seize investment opportunities, and assert their market position. This is a significant event where shareholders come together to deliberate and make strategic decisions about corporate capital.

According to Article 123 of the Law on Enterprise 2020, a joint-stock company may increase its charter capital by offering shares. However, to ensure the process runs smoothly, transparently and legally, effectively organizing a general meeting of shareholders is of utmost importance. Failure to do so will result in unintended legal consequences.

In fact, a company in Hanoi was forced to pay a fine of 125 million VND for failing to timely disclose the resolution on increasing its charter capital (Point c, Clause 3, Article 8 of Decree No. 156/2020/ND-CP).

II. Legal regulations on general meetings of shareholders for charter capital increases

1. What are the conditions for holding a general meeting of shareholders to increase charter capital?

To organize a general meeting of shareholders to increase charter capital, the company must meet the conditions stipulated in Articles 143 and 145 of the Law on Enterprise 2020, including:

  • Shareholders attending the meeting must represent more than 50% of the total voting shares (a different threshold may be provided in the company’s charter);
  • The meeting agenda (including the charter capital increase) must be sent to all shareholders with voting rights no later than 21 days before the meeting (unless otherwise stipulated in the charter);
  • All related documents (proposals, capital increase plan, etc.) must be fully prepared and made available to shareholders before the meeting;
  • If the first meeting lacks a quorum, the second meeting must have at least 33% of total voting shares represented. If the second meeting still fails to meet the quorum, the third meeting may proceed regardless of attendance.

Hence, to ensure a smooth meeting, it is essential to prepare detailed and clear materials outlining the purpose of the capital increase to encourage shareholder’s participation and to ensure the legally sufficient number of attendees or authorized entities. 

2. Who has the authority to convene a general meeting of shareholders for a charter capital increase?

According to Article 140 of the Law on Enterprise 2020, the Board of Directors has the authority to convene the general meeting of shareholders. The Board may call an extraordinary meeting when deemed necessary for the benefit of the company, for instance, when a charter capital increase is required to implement a new project.

3. Is it mandatory to prepare meeting minutes for a general meeting of shareholders on charter capital increase?

The meeting minutes are a crucial document that records the entire proceedings and outcomes of the meeting. Preparing the minutes is mandatory under Article 150 of the Law on Enterprise 2020. The minutes must be in Vietnamese, and may be prepared in another language in addition, and must include the main contents as required by law.

Note: The chairperson, secretary, or any person signing the minutes shall be jointly responsible for the accuracy and truthfulness of its contents.

III. Questions about general meetings of shareholders for charter capital increases

1. What is the procedure for holding a general meeting of shareholders to increase charter capital?

To ensure the meeting is smooth and effective, the procedure prescribed in Article 146 of the Law on Enterprise 2020 must be followed:

  • Registering shareholders attending the meeting;
  • Electing the chairperson, secretary, and vote counting committee;
  • Approving the meeting agenda, allocating time for each item;
  • Discussing and voting on each matter in the agenda;
  • Announcing voting results and preparing the meeting minutes.

2. What are the common issues discussed at a general meeting on increasing charter capital?

According to Article 138 of the Law on Enterprise 2020 regarding the rights and obligations of the general meeting of shareholders, main issues commonly discussed include:

  • The necessity and urgency of increasing charter capital;
  • Proposed methods for capital increase (e.g., issuance of new shares, private offering to existing shareholders);
  • Offering price of shares (if applicable);
  • Capital usage plan after the increase;
  • Effects of capital increase on shareholder ownership ratios.

3. What procedures must be followed after the general meeting?

After the general meeting of shareholders approves the charter capital increase, the company must register the change with the Business Registration Office.

The required dossier includes: A notification of enterprise registration change, resolution/decision/minutes of the meeting on capital increase, and other documents as prescribed (Article 51, Decree No. 01/2021/ND-CP).

If the capital increase is conducted through share offerings, the dossier must include the resolution of the general meeting and contents of the Board of Directors approving the offering and capital increase.

4. When is a general meeting of shareholders required for increasing charter capital?

According to Clause 1, Article 112 of the Law on Enterprise 2020, the charter capital of a joint-stock company upon registration is the total par value of shares subscribed and recorded in the company’s charter.

A general meeting must be convened in the following cases:

  • The company intends to expand its business or invest in new projects;
  • The current charter capital no longer satisfies legal requirements (e.g., a minimum capital of 20 billion VND for real estate businesses under Article 10 of the Law on Real Estate Business 2014);
  • At the request of the Board of Directors.

5. When does the resolution on charter capital increase take effect, and what are the voting requirements?

The resolution takes effect on the date it is approved by the general meeting of shareholders, pursuant to Article 148 of the Law on Enterprise 2020.

To be passed, the resolution must receive affirmative votes from shareholders representing at least 65% of the total voting shares of those attending. This applies to decisions regarding:

  • Type of share and total number of each class;
  • Changes to business lines or sectors;
  • Changes in the company’s governance structure;
  • Investment projects or asset sales valued at 35% or more of the company’s total assets, based on the latest financial statements (unless otherwise provided in the charter);
  • Reorganization, dissolution, or other matters as specified by the charter.

In case of a resolution passed via written consultation, according to Clause 4, Article 148, it is approved if more than 50% of the total voting shares of eligible shareholders approve. Specific ratios may be stated in the company’s charter.

IV. NPLaw’s legal consultancy services on general meetings for charter capital increases

NPLaw provides comprehensive legal consulting services for holding general meetings of shareholders to increase charter capital, including:

  • Preparing complete and legally valid documents;
  • Advising on procedures and meeting organization;
  • Drafting necessary legal documents (invitation notices, meeting minutes, shareholder resolutions, etc.);
  • Representing the enterprise in negotiations with shareholders (if needed);
  • Resolving disputes related to capital increases.

Would you like your shareholder meeting to be successful and legally compliant? Contact NPLaw for expert support!