Capital is one of the main elements for the establishment and maintenance of business operations of any enterprise, particularly joint stock companies. With a flexible capital structure and broad capital mobilization capability, joint stock companies play an important role in the economy. So, what are the current legal regulations on the capital of a joint stock company?

I. Overview of the capital of a joint stock company

The capital of a joint stock company is not merely a financial figure but also reflects the level of commitment and responsibility of shareholders toward the company.

In business practice, issues relating to capital, such as capital structure, shareholders’ rights and obligations, as well as increases or reductions of charter capital, are not only technical legal matters but also directly affect investors’ interests and the stability of the enterprise. Proper determination and management of capital in accordance with the law is a prerequisite for ensuring transparent and efficient business operations.

II. Legal regulations on the capital of a joint stock company

1. What is the capital of a joint stock company?

Clause 1, Article 112 of the Law on Enterprise 2020 provides as follows:

  • The charter capital of a joint stock company is the total par value of all types of shares that have been sold. The charter capital of a joint stock company at the time of enterprise registration is the total par value of all types of shares registered for purchase and recorded in the company’s charter.

Accordingly, the charter capital of a joint stock company is the total par value of all types of shares that have been sold.

2. Classification and calculation of the capital of a joint stock company

The capital of a joint stock company may be classified based on various criteria. Pursuant to Article 112 of the Law on Enterprise 2020, the types of shares in a joint stock company include:

  • Sold shares;
  • Shares authorized for offering;
  • Unsold shares.

The method for calculating the capital of a joint stock company, as prescribed in Clause 1, Article 112 of the Law on Enterprise 2020, is as follows:

  • The charter capital of a joint stock company at the time of enterprise registration is the total par value of all types of shares registered for purchase and recorded in the company’s charter.

3. What rights and obligations do the owners of capital in a joint stock company have?

Shareholders, as the owners of the capital of a joint stock company, have the following fundamental rights and obligations under the Law on Enterprise 2020:

- Common shareholders have the following rights (Article 115): 

  • To attend and speak at meetings of the General Meeting of Shareholders and to exercise voting rights directly, through an authorized representative, or through other forms as provided by the company’s charter and the law; each common share obtains one voting right;
  • To receive dividends at the level decided by the General Meeting of Shareholders;
  • To have priority in purchasing newly issued shares in proportion to their ownership of common shares in the company;
  • To freely transfer their shares to others, except for cases specified in Clause 3, Article 120 and Clause 1, Article 127 of this Law and other relevant legal provisions;
  • To review, access, and extract information on names and contact addresses in the list of shareholders entitled to vote, and to request correction of inaccurate personal information;
  • To review, access, extract, or copy the company’s charter, minutes of meetings of the General Meeting of Shareholders, and resolutions of the General Meeting of Shareholders;
  • Upon dissolution or bankruptcy of the company, to receive a portion of the remaining assets corresponding to their shareholding ratio.

Shareholders or groups of shareholders owning at least 5% of the total number of common shares, or a lower percentage as stipulated in the company’s charter, have the following rights:

  • To review, access, and extract minutes books and resolutions or decisions of the Board of Directors, semi-annual and annual financial statements, reports of the Supervisory Board, contracts and transactions subject to approval by the Board of Directors, and other documents, except for those relating to the company’s trade secrets or business secrets;
  • To request the convening of a General Meeting of Shareholders in the cases specified in Clause 3 of this Article;
  • To request the Supervisory Board to inspect specific issues related to the management and operation of the company when deemed necessary. Such requests must be made in writing and include: Full name, contact address, nationality, and legal identification number for individual shareholders; name, enterprise identification number or legal identification number, and headquarters address for organizational shareholders; number of shares and date of share registration of each shareholder, total number of shares of the shareholder group and their ownership ratio in the total shares of the company; matters to be inspected and the purpose of the inspection;
  • Other rights as provided by this Law and the company’s charter.

Shareholders or groups of shareholders owning at least 10% of the total number of common shares, or a lower percentage as stipulated in the company’s charter, have the right to nominate candidates to the Board of Directors and the Supervisory Board.

- Common shareholders have the following obligations (Article 119):

  • To pay in full and on time for the shares committed to purchase;
  • Not to withdraw contributed capital represented by common shares from the company in any form, except where such shares are redeemed by the company or another party. Where a shareholder withdraws part or all of the contributed share capital in violation of this provision, such shareholder and any related persons in the company shall be jointly liable for the company’s debts and other property obligations within the value of the withdrawn shares and any resulting damages;
  • To comply with the company’s charter and internal management regulations;
  • To comply with resolutions and decisions of the General Meeting of Shareholders and the Board of Directors;
  • To keep confidential information provided by the company in accordance with the company’s charter and the law; to use such information solely for exercising and protecting their lawful rights and interests; and not to disseminate, copy, or transmit such information to other organizations or individuals;
  • Other obligations as provided by this Law and the company’s charter.

III. Certain questions regarding the capital of a joint stock company

1. Can the charter capital of a joint stock company be increased or reduced?

Pursuant to Clause 5, Article 112 of the Law on Enterprise 2020, a joint stock company may reduce its charter capital in the following cases:

  • Based on a resolution of the General Meeting of Shareholders, the company refunds part of the contributed capital to shareholders in proportion to their shareholding ratios, provided that the company has operated continuously for at least two years from the date of enterprise registration and ensures full payment of all debts and other property obligations after such refund;
  • The company redeem sold shares in accordance with Articles 132 and 133 of this Law;
  • The charter capital is not fully and timely paid by shareholders as prescribed in Article 113 of this Law.

Clause 1, Article 123 of the Law on Enterprise 2020 stipulates: 

  • Offering of shares means an increase in the number of shares or types of shares authorized for offering by the company in order to increase its charter capital.

Accordingly, a joint stock company may increase or reduce its charter capital in accordance with the above regulations.

2. How are different types of capital in a joint stock company distinguished?

Pursuant to Clauses 2, 3, and 4, Article 112 of the Law on Enterprise 2020, the types of shares in a joint stock company include:

  • Sold shares: Shares authorized for offering that have been fully paid for by shareholders. Upon enterprise registration, sold shares are the total number of shares of all types registered for purchase.
  • Shares authorized for offering: The total number of shares of all types that the General Meeting of Shareholders decides to offer for capital mobilization. Upon enterprise registration, shares authorized for offering include both shares registered for purchase and shares not yet registered for purchase.
  • Unsold shares: Shares authorized for offering that have not yet been paid for. Upon enterprise registration, unsold shares are the total number of shares of all types not registered for purchase.

3. Can the capital of a joint stock company be transferred?

Pursuant to Clause 1, Article 127 of the Law on Enterprise 2020 regarding share transfer:

  • Shares may be freely transferred, except for cases specified in Clause 3, Article 120 of this Law and where the company’s charter provides restrictions on share transfer. Where the company’s charter provides restrictions on share transfer, such restrictions are only effective if clearly stated on the corresponding share certificates.

Accordingly, the capital of a joint stock company may be freely transferred, except for the cases specified in Clause 3, Article 120 of this Law and where the company’s charter provides restrictions on share transfer.

4. What is the procedure for changing the charter capital of a joint stock company?

  • Step 1: Adoption of a resolution by the General Meeting of Shareholders on the change of charter capital in accordance with regulations.
  • Step 2: Submission of the dossier and completion of procedures for registration of the change in charter capital with the competent business registration authority.
  • Step 3: Upon receipt of the dossier, the business registration authority issues a receipt, reviews the validity of the dossier, and grants the Enterprise Registration Certificate to the company.

IV. Legal advisory services on the capital of a joint stock company

The above is NPLaw’s article on the current regulations governing the capital of joint stock companies. With a team of experienced lawyers and legal professionals, NPLaw provides reputable and professional legal services, ensuring optimal protection of clients’ lawful rights and interests. Should you require legal assistance, please contact NPLaw for consultation and support.