Capital structure of an existing JSC
The capital structure of a JSC under the Enterprise Law 2005 is anything but clear. In particular, the Enterprise Law 2005 and Decree 102/2010 do not clearly define how charter capital, paid-up shares, authorised shares and treasury shares relate to each other. It looks like that the drafting team of Enterprise Law 2014 has taken notes of our comments and substantially improve the clarity on the capital structure of a JSC.
In particular, the Enterprise Law 2014 introduces a new set of more consistent definitions for each portion of the capital of an existing JSC as follows:
- “shares which are authorised for sale” (cổ phần được quyền chào bán) (Authorised Shares) are defined as all of the shares that the General Meeting of Shareholders (Shareholders Meeting) decides to offer for sale for capital mobilisation;
- paid-up shares (cổ phần đã bán) are defined to mean the Authorised Shares which have been fully paid up by shareholders;
- unpaid shares (cổ phần chưa bán) are defined to mean the Authorised Shares which have not been paid up;
- charter capital of an existing JSC are the aggregate par value of all paid-up shares of the JSC; and
- shares which are bought back by the JSC (treasury shares) are expressly regarded as unpaid shares and the JSC must apply to reduce the charter capital to the extent of the aggregate par value of the treasury shares unless otherwise provided under securities regulations.
In light of the definitions under the Enterprise Law 2014, it now seems that:
- Authorised Shares of a JSC comprises of all unpaid shares and paid-up shares of a JSC;
- charter capital of a JSC comprises of all paid-up shares of a JSC; and
- treasury shares do not form part of the charter capital of a JSC.
Under the Enterprise Law 2005, it is not clear whether:
- Authorised Shares of a JSC includes paid-up shares or not;
- the charter capital of a JSC could include unpaid but committed shares or not; and
- the charter capital of a JSC could include treasury shares.
That said, the provisions regarding capital structure of a JSC under the Enterprise Law 2014 still have certain unclear issues. For example, under the definition of Authorised Shares, Authorised Shares are shares that the Shareholders Meeting decides to offer for sale. However, under the Enterprise Law 2014, the Shareholders Meeting only has the authority to decide on the number of Authorised Shares. The authority to decide to offer shares for sale within the number of Authorised Shares belongs to the Board of Directors (Hội đồng quản trị) (the Board).
Capital structure of newly incorporate JSC
Under the Enterprise Law 2014, the capital structure of a new JSC during the period of 90 days after its incorporation (New JSC) is substantially different from the structure during the period thereafter. In particular, for a New JSC
- paid-up shares are shares that shareholders of New JSC have subscribed to purchase. Unless otherwise provided by the charter, a shareholder in a New JSC will have voting rights equal to the number of shares subscribed by that shareholder;
- unpaid shares the shares that no shareholders of New JSC have subscribed to purchase; and
- charter capital means the aggregate par value of all subscribed shares.