How to handle situations where partners do not agree with capital reduction

During the process of capital restructuring or adjustment of business operations, many enterprises encounter situations where partners or capital-contributing members do not agree with the reduction of charter capital, resulting in deadlocks in corporate governance decisions.

I. Current situation of partners not agreeing with capital reduction

At present, in the context where many enterprises are required to adjust their operational scale, restructure finances, or address prolonged losses, the need to reduce charter capital has become increasingly common. However, such a process often faces significant obstacles due to the lack of consensus from partners or capital-contributing members.

The primary reasons stem from concerns over reduced control rights, impacts on voting ratios, diminished corporate reputation in the market, or suspicions regarding the actual purpose of the capital reduction.

In addition, current legal regulations require a high approval ratio within the enterprise, meaning that opposition from only a small group of partners may be sufficient to delay the decision.

This reality has resulted in numerous disputes relating to corporate governance and members’ interests, thereby slowing down the capital restructuring process that enterprises urgently need in order to adapt to current business conditions.

II. What does it mean when partners do not agree with capital reduction?

1. Concept of partners not agreeing with capital reduction

Partners not agreeing with capital reduction refers to a situation where one or more capital-contributing members oppose the enterprise’s decision to reduce charter capital.

Such opposition may arise from various grounds, including concerns over losing control rights, reduced ownership ratios, impacts on voting rights, or suspicions that the purpose of the capital reduction lacks transparency. Such a type of internal conflict creates risks of disputes relating to corporate governance and operations, especially where capital reduction is considered a necessary solution for financial restructuring.

2. Circumstances leading to partners not agreeing with capital reduction

There are many practical reasons why partners oppose capital reduction, commonly including:

• Concerns over reduced control rights: Capital reduction may alter the structure of voting rights, especially where ownership ratios are reduced.
• Disagreement regarding restructuring objectives: Some members believe that capital reduction is neither the optimal nor necessary solution.
• Lack of financial transparency: Where the enterprise fails to fully disclose its financial situation, partners may become suspicious about the reasons for the reduction.
• Conflicts of interest among member groups: Differences in business orientation and investment strategy lead to disagreements over important decisions, including capital reduction.

3. Methods for resolving situations where partners do not agree with capital reduction

When partners do not agree with capital reduction, enterprises may adopt various approaches, including:

• Enhancing discussions and financial transparency to persuade partners of the necessity of reducing capital.
• Negotiating to achieve consensus, including consideration of more flexible capital reduction methods (reduction on a proportional basis, reduction through partial capital refund, etc.).
• Applying legal regulations on voting ratios, where the enterprise has already satisfied the approval ratio required under the charter or the Law on Enterprise 2020, as amended in 2025.
• Considering alternative restructuring solutions, such as converting the enterprise type or adjusting investment strategies, in order to meet financial needs without necessarily reducing capital.

III. Legal regulations relating to partners not agreeing with capital reduction

1. Relevant regulations in resolving situations where partners do not agree with capital reduction

Relevant regulations to be noted when resolving situations involving partners not agreeing with capital reduction include:

The Law on Enterprise 2020, as amended in 2025, such as:

• Joint-stock companies may reduce charter capital in the cases specified in Clause 5 Article 112, as amended by Points a and b Clause 17 Article 1 of the amended Law on Enterprise 2025: Under a decision of the General Meeting of Shareholders, the company refunds part of the contributed capital to shareholders in proportion to their shareholding ratio; the company repurchases issued shares at the request of shareholders or by decision of the company; or where charter capital is not fully and timely paid by shareholders.
• Multi-member limited liability companies: Article 68 provides that a multi-member LLC may reduce charter capital in the following cases: Charter capital is not fully and timely contributed by members; refunding part of contributed capital to members in proportion to their capital contribution ratios; or the company repurchases members’ capital contributions.
• Single-member limited liability companies: Under Clause 3 Article 87, a single-member LLC may reduce charter capital in the following cases, such as refunding part of contributed capital to the company owner; or where charter capital is not fully and timely contributed by the owner.
• Partnerships: Under Article 185, a partnership may reduce charter capital through the expulsion of contributing members and termination of partnership member status.
• Decree No. 168/2025/ND-CP: Article 44 regulates procedures for registration of changes to charter capital.

The Commercial Law 2005: Article 317 provides for methods of resolving commercial disputes, including:

• Negotiation between the parties;
• Mediation conducted by an agency, organization, or individual agreed upon by the parties;
• Resolution by Arbitration or the Court.

The current legal framework establishes mechanisms to protect members’ interests while also imposing strict requirements for enterprises to lawfully implement capital reductions.

2. Competent authorities to resolve cases where partners do not agree with capital reduction

Where disagreements arise, the competent authority depends on the applicable legal mechanism:

• Within the enterprise: the Members’ Council (for multi-member LLCs under Point b Clause 2 Article 55 of the Law on Enterprise 2020), the company owner (for single-member LLCs under Clause 1 Article 87 of the Law on Enterprise 2020), or the General Meeting of Shareholders (for joint-stock companies under Point a Clause 5 Article 112 of the Law on Enterprise 2020, as amended by Point a Clause 17 Article 1 of the amended Law on Enterprise 2025) is the body having final authority to decide on capital reduction according to the prescribed voting ratio.
• Court or Commercial Arbitration: Under Clause 3 Article 317 of the Commercial Law 2005, the Court or Commercial Arbitration has authority where partners oppose the capital reduction resolution and claim that such resolution violates the law or the company charter, or where disputes arise from rights to request repurchase of contributed capital or shares. However, disputes may only be resolved by Arbitration where the parties have an arbitration agreement pursuant to Clause 1 Article 5 of the Law on Commercial Arbitration 2010.

3. How can partners’ opposition to capital reduction affect enterprise decisions?

Partners’ opposition to capital reduction may result in several significant consequences:

• Failure to achieve the approval ratio required for resolutions: If the voting ratio is insufficient, the enterprise cannot proceed with the capital reduction even where it is a necessary financial solution.
• Delays in processing registration documents: Internal disputes may postpone the submission of enterprise registration amendment dossiers, thereby affecting restructuring plans.
• Increased legal risks: Opposing partners may request repurchase of contributed capital or shares, initiate lawsuits seeking cancellation of resolutions, or raise other disputes concerning interests, causing operational instability.
• Negative impacts on the enterprise’s image and reputation: Prolonged internal conflicts may adversely affect relationships with partners, banks, and external investors.

IV. Questions regarding partners not agreeing with capital reduction

1. Which contractual provisions may be affected if partners do not agree with the capital reduction?

Within an enterprise, contracts and capital contribution agreements may be affected if partners do not agree with the capital reduction, particularly:

• Provisions relating to ownership ratios and voting rights, because capital reduction may alter the balance of power among partners.
• Provisions relating to profit distribution and financial obligations, since changes in charter capital directly affect economic interests.
• Provisions on investment commitments or maintaining minimum capital levels, especially in agreements among members or with strategic investors.
• Exit provisions, which may be triggered if a partner disagrees and requests repurchase of its capital contribution.

2. If a partner does not agree with the capital reduction, what steps may the enterprise take to resolve the issue?

If a partner does not agree with the capital reduction, the enterprise may generally apply the following measures:

• Ensuring transparency of information and explaining the reasons for the capital reduction, helping partners understand the necessity of the decision.
• Negotiating and adjusting the capital reduction plan, such as reducing capital proportionally or partially refunding contributed capital.
• Collecting opinions and conducting voting in accordance with the company charter; if the statutory voting threshold is achieved, the resolution remains valid even if certain partners object.
• Recognizing the dissenting partner’s right to request repurchase of its capital contribution in accordance with the Law on Enterprise.
• Using mediation, arbitration, or court proceedings where disputes become more complex.

3. What consequences may arise from a capital reduction decision if partners do not agree?

A capital reduction decision may lead to the following consequences where partners object:

• Failure to pass the resolution, causing delays in restructuring plans.
• Internal disputes relating to ownership rights, economic interests, and the right to request repurchase of capital contributions.
• Negative impacts on reputation and business operations, particularly where conflicts are prolonged.
• The risk of the resolution being challenged and cancelled if dissenting partners prove that the resolution violates the company charter or applicable laws.

4. What should an enterprise consider when partners do not agree with the capital reduction in order to avoid legal disputes?

When partners do not agree with the capital reduction, the enterprise should consider the following factors in order to avoid legal disputes:

• Strict compliance with procedures and voting ratios prescribed by law and the company charter.
• Ensuring transparency and disclosure of financial records to avoid suspicions regarding the purpose of the capital reduction.
• Considering the lawful interests of each partner, especially the right to request repurchase of capital contributions.
• Properly retaining meeting minutes and documents proving the validity of the resolution as legal evidence in the event of disputes.
• Consulting legal counsel before issuing the capital reduction resolution.

5. What may partners do if they do not agree with the capital reduction decision and believe they have suffered damage?

If partners do not agree with the capital reduction decision and believe they have suffered damage, they may exercise the following rights:

• Requesting the enterprise to repurchase their capital contribution/shares in accordance with the law if they voted against the resolution.
• Requesting disclosure of information and inspection of financial records to clarify the legitimacy of the capital reduction.
• Submitting internal complaints to the Members’ Council or the General Meeting of Shareholders.
• Initiating court proceedings or request arbitration to cancel the resolution if they can prove that the resolution violates the company charter, applicable laws, or infringes upon their lawful rights and interests.

V. Are you looking for a reputable lawyer to resolve issues relating to partners not agreeing with capital reduction?

Disputes relating to partners not agreeing with capital reduction are often complex, prolonged, and may directly affect the financial structure and future of an enterprise. To protect your rights and minimize risks, you should seek assistance from an experienced lawyer specializing in corporate law, investment, and internal dispute resolution.

The above information is provided for reference purposes only. Should you require detailed advice regarding a specific case, please contact NPLaw Firm for immediate assistance.