Treasury shares (cổ phiếu quỹ) are shares that a joint stock company (JSC) has issued to and thereafter bought back from its shareholders. The legal treatment of treasury shares under Vietnamese corporate law is not clear. In particular, it is not clear if treasury shares form part of the charter capital or not. On the one hand, treasury shares can be considered as part of the charter capital because:

• Although treasury shares are bought back by a JSC, they could still be considered as having been issued and qualify as issued shares (cổ phần phát hành).
• Under Circular 19/2003, a JSC is only required to reduce its charter capital and cancel its treasury shares three years after such treasury shares are bought back. This provision suggests that until the treasury shares are cancelled, they form part of the charter capital.
• Similarly, there is no clear requirement under the business registration regulations to require a JSC to register to reduce its charter capital when it buys back its own shares.
• In practice, when a public listed JSC buys back its own shares, the Vietnam Depository Centre (VSD) still records the public listed JSC as “owner” of such treasury shares. In addition, a public listed JSC may sell its treasury shares on the stock exchange as a secondary trading or may use its treasury shares as in-kind capital contribution in other companies.

However, on the other hand (of which I am in favour), treasury shares should not be considered as part of the charter capital of a JSC because:

• The Enterprise Law provides that treasury shares are “withdrawn shares” (cổ phần thu về) and form part of the number of shares authorised for sale. It is difficult to consider “withdrawn shares” are “issued shares”.
• Circular 19/2003 is an implementing circular of the old Enterprise Law. Therefore, its provisions may not be consistent with the Enterprise Law.
• Treasury shares are not entitled to dividend or voting rights as other outstanding shares in the charter capital. In practice, while the VSD considers a public listed JSC as owner of its treasury shares, these shares are not allocated with rights to vote, to receive dividend or bonus shares. If treasury shares form part of the charter capital, why they are not given dividend and voting rights in the same manner as other outstanding shares in the charter capital?