In corporate operations, the handling of treasury shares is an important matter that directly affects charter capital, shareholder structure, and enterprise value. However, in practice, many enterprises still do not fully understand the legal nature and relevant regulations, leading to unnecessary legal risks. The following article provides an overview of the legal provisions and addresses several common issues relating to treasury shares handling, helping enterprises apply the regulations correctly and effectively.

I. Current situation relating to treasury shares handling

In recent years, the handling of treasury shares in many enterprises has revealed a number of shortcomings. Some companies have repurchased and resold treasury shares without fully complying with the legal conditions and procedures, particularly regarding capital sources and information disclosure.

In addition, the determination of treasury share sale prices, treatment of differences, and accounting recognition remains inconsistent, which may easily result in inaccuracies in financial statements. Furthermore, many enterprises have not properly understood the legal nature of treasury shares, leading to confusion in the use, distribution, or cancellation of treasury shares.

Such situations require a clear understanding and proper application of regulations on treasury shares handling in order to minimize legal risks and ensure transparency in corporate operations.

II. Concept of treasury shares handling

1. What is treasury shares handling?

Treasury shares handling refers to the legal actions taken by a joint stock company in relation to shares repurchased by itself, including resale, cancellation for charter capital reduction, or use for other lawful purposes.

Pursuant to Clause 3, Article 3 of Decree No. 155/2020/ND-CP (supplemented by Point c, Clause 1, Article 1 of Decree No. 245/2025/ND-CP), treasury shares are issued shares that have been repurchased by the issuing company itself. At the same time, under Clause 2, Article 134 of the Law on Enterprise 2020 (amended and supplemented in 2025), shares repurchased by the company are considered unsold shares, and the company has the right to handle them in accordance with the law.

Accordingly, treasury shares handling is essentially the process by which an enterprise determines how to reuse these shares to serve its financial and governance objectives, but such handling must strictly comply with the laws on enterprises and securities.

2. What is the legal nature of treasury shares?

In terms of legal nature, treasury shares remain shares issued by the company but repurchased by the company itself; thus, they are no longer considered shares circulating in the market.

Treasury shares do not lead to shareholder rights, including voting rights, dividend rights, and rights to purchase newly issued shares. At the same time, they are not considered ordinary assets of the enterprise, but rather an equity reduction item in the financial statements.

Therefore, treasury shares have a “special” nature as they are both a financial instrument held by the company and subject to restrictions on rights, as well as strict legal regulation during treasury shares handling.

3. Are treasury shares considered assets of the company?

Treasury shares are not considered assets of the company. Pursuant to Clause 2, Article 134 of the Law on Enterprise 2020 (amended and supplemented in 2025), shares repurchased by the company are considered unsold shares. It shows that treasury shares are no longer objects creating proprietary rights like ordinary corporate assets.

Pursuant to Articles 115 and 135 of the Law on Enterprise 2020 (amended and supplemented in 2025), voting rights, dividend rights, and rights to purchase new shares belong only to shareholders. Meanwhile, treasury shares are not associated with shareholder status and thus do not lead to these rights.

Treasury shares do not generate independent economic benefits but only serve the purpose of capital adjustment. Therefore, treasury shares handling must comply with separate legal regulations.

III. Legal provisions relating to treasury shares handling

1. Conditions for a company to sell treasury shares

Pursuant to Clause 7, Article 36 of the Law on Securities 2019 (amended and supplemented in 2024), the resale of treasury shares must comply with strict conditions to ensure transparency and market stability.

Specifically, the law permits the sale of treasury shares immediately after repurchase in the following special cases:

  • A securities company repurchases its own shares to correct trading errors or handle odd-lot shares.
  • A public company repurchases odd-lot shares arising from a share issuance plan for dividend payment or issuance from equity capital sources.
  • A public company repurchases odd-lot shares at the request of shareholders.

Apart from the above cases, the sale of treasury shares must comply with regulations on holding periods, information disclosure, and trading conditions under securities laws.

Accordingly, when handling treasury shares through resale activities, enterprises must pay special attention to legal conditions in order to avoid potential violations and legal sanctions.

2. According to which principles is the selling price of treasury shares determined?

The selling price of treasury shares cannot be determined arbitrarily but must comply with the principles of publicity, transparency, and market mechanisms. Legal basis:

Pursuant to Clause 1, Article 36 of the Law on Securities 2019 (amended and supplemented in 2024), when conducting share repurchase, the company must prepare a plan, including the principles for price determination (price range). It serves as the basis for treasury shares handling, including resale.

Pursuant to Article 37 of the Law on Securities 2019 (guided by Article 10 of Circular No. 118/2020/TT-BTC), public companies are obliged to disclose information regarding transaction methods and pricing principles before conducting treasury share transactions. In addition, as treasury share sales are conducted on the securities market, the selling price must be consistent with market prices and trading margins as prescribed by the Stock Exchange.

Therefore, the selling price of treasury shares is determined based on approved principles, publicly disclosed information, and compliance with market mechanisms to ensure transparency in treasury shares handling.

3. Is a company allowed to cancel treasury shares to reduce charter capital, and what is the procedure?

A company is permitted to cancel treasury shares to reduce charter capital if the repurchase of shares is conducted for the purpose of capital reduction.

  • Pursuant to Clause 5, Article 36 of the Law on Securities 2019 (amended and supplemented in 2024), when a public company repurchases its own shares, it must implement procedures for reducing charter capital corresponding to the total par value of the repurchased shares within 10 days from the completion date of payment.
  • Pursuant to Clause 2, Article 134 of the Law on Enterprise 2020 (amended and supplemented in 2025), shares repurchased by the company are considered unsold shares, and the company has the right to handle them in accordance with the law.

Implementation procedures:

  • Adopt a resolution of the General Meeting of Shareholders on share repurchase for charter capital reduction, clearly stating the quantity, timeline, and pricing principles (Clause 1, Article 36 of the Law on Securities 2019, amended in 2024).
  • Conducting treasury share repurchase in accordance with procedures, conditions, and information disclosure requirements under Articles 36 and 37 of the Law on Securities 2019 (amended and supplemented in 2024).
  • After completing the repurchase payment, the company shall cancel the corresponding treasury shares and redetermine charter capital.
  • Register the change of charter capital with the business registration authority.
  • Disclose information in accordance with securities laws.

Accordingly, cancellation of treasury shares to reduce charter capital is lawful, but the company must fully comply with procedures, formalities, and information disclosure obligations during treasury shares handling.

4. Is there a limit on the proportion of treasury shares that a company may hold?

Current law does not provide a fixed maximum ratio for the number of treasury shares that a joint stock company may hold. However, treasury share holding is indirectly limited through conditions for share repurchase.

  • Pursuant to Article 36 of the Law on Securities 2019 (amended and supplemented in 2024), a public company may only repurchase shares if it satisfies conditions regarding lawful capital sources such as share premium, undistributed after-tax profits, and development investment funds.
  • At the same time, the company may not repurchase shares in cases such as overdue debts, ongoing share issuance for capital mobilization, or being subject to a public tender offer (Clause 3, Article 36).
  • In addition, after repurchasing shares, the company is obliged to reduce charter capital in certain cases (Clause 5, Article 36), which also limits long-term holding of treasury shares.

Accordingly, although there is no specific legal regulation on treasury share ratios, in practice, the law establishes barriers regarding capital sources, financial conditions, and legal obligations, thereby indirectly controlling the proportion of treasury shares that a company may hold during treasury shares handling.

IV. Questions relating to treasury shares handling

1. Are treasury shares entitled to dividends?

Treasury shares are not entitled to dividends. Pursuant to Clause 2, Article 135 of the Law on Enterprise 2020 (amended and supplemented in 2025), dividends are only paid to ordinary shares based on profits and distributed to shareholders. At the same time, under Article 115 of this Law, the right to receive dividends is one of the fundamental rights of shareholders. Meanwhile, treasury shares are shares held by the company itself and do not establish shareholder status; therefore, they do not have the right to receive dividends. Accordingly, during treasury shares handling, the company may not distribute dividends for these shares.

2. Can a company use treasury shares to reward employees?

Under the Law on Securities 2019 (amended and supplemented in 2024), a company (especially a public company) is permitted to use treasury shares to reward employees in certain cases.

  • Clause 2, Article 36 of the Law on Securities 2019 (amended and supplemented in 2024): It permits a company to repurchase shares from employees under an Employee Stock Ownership Plan (ESOP).
  • Clause 7, Article 36 of the Law on Securities 2019 (amended and supplemented in 2024): A public company may resell treasury shares, including distribution to employees under an approved plan.

Conditions for implementation:

  • There must be a treasury share utilization plan approved by the General Meeting of Shareholders.
  • Compliance with information disclosure requirements and related conditions.
  • Distribution must be transparent and made to the correct beneficiaries under the approved program.

A company may use treasury shares to reward employees, but it must be implemented under a lawful program and approved in accordance with legal regulations.

3. How should the difference be handled when treasury shares are sold at a price lower than the purchase price?

Under the Law on Enterprise 2020 (amended and supplemented in 2025) and the Law on Securities 2019 (amended and supplemented in 2024), the law does not provide a specific provision on handling differences arising from treasury share sales. However, based on the legal nature under Article 132 of the Law on Enterprise 2020 (amended and supplemented in 2025) and Clause 5, Article 36 of the Law on Securities 2019 (amended and supplemented in 2024), treasury shares are transactions relating to owners’ equity rather than ordinary business activities.

Accordingly, when treasury shares are sold at a price lower than the purchase price, the loss difference shall be recognized as a reduction in the company’s owners’ equity; it shall first be offset against share premium, and if insufficient, it shall continue to reduce undistributed after-tax profits in accordance with accounting regulations.

4. Can a company use treasury shares as collateral for financial obligations?

A company may not use treasury shares as collateral for financial obligations. Pursuant to Clause 2, Article 134 of the Law on Enterprise 2020 (amended and supplemented in 2025), shares repurchased by the company (treasury shares) are considered unsold shares. It means that treasury shares are no longer circulating and are not associated with proprietary rights of an independent entity.

Moreover, pursuant to Article 295 of the Civil Code 2015, assets used as security must belong to the ownership of the securing party and must be legally tradable. Meanwhile, treasury shares are restricted in transfer and may only be handled through legally prescribed methods (resale or cancellation).

As treasury shares do not satisfy the condition of being independently tradable assets, they cannot be used as collateral during treasury shares handling.

5. Can a joint stock company repurchase treasury shares while implementing procedures for securities issuance to raise additional capital?

A joint stock company may not repurchase treasury shares while implementing procedures for securities issuance to raise capital. Pursuant to Clause 3, Article 36 of the Law on Securities 2019 (amended and supplemented in 2024), a public company is prohibited from repurchasing its own shares while conducting a share offering or while being the subject of a public tender offer.

The above regulation is based on the fact that the two activities have opposite legal nature: Share issuance aims to increase capital and attract investors, while treasury share repurchase reduces the number of circulating shares and may even lead to charter capital reduction. If simultaneous implementation were allowed, enterprises could manipulate share prices, mislead investors, and reduce market transparency.

Therefore, during treasury shares handling, the company may only conduct share repurchase after completing the issuance in accordance with the law.

V. Why you should seek legal advice from NPLaw regarding treasury shares handling

Treasury shares handling is a complex matter involving enterprise law, securities law, and accounting, and it easily creates risks if not implemented properly. Therefore, choosing a reputable legal advisory firm such as NPLaw provides many benefits:

  • Legal advice in compliance with the Law on Enterprise 2020 (amended and supplemented in 2025) and the Law on Securities 2019 (amended and supplemented in 2024).
  • Assessment and control of legal risks in transactions involving repurchase, sale, or cancellation of treasury shares.
  • Support in preparing proper documentation and procedures, minimizing errors.
  • Assistance in resolving disputes arising with shareholders or regulatory authorities.

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