The latest update on the procedures for buying back a joint stock company in 2023

1. Procedures for buying back a joint stock company

The procedure for buying back a joint-stock company, also known as changing shareholders through the procedure for buying back shares of a company. There are 4 steps for carrying out the procedure for buying back a joint stock company:

Step 1: Check the company information

Individuals or organizations who wish to buy back a joint stock company need to check the information of the company, specifically:

• Information about the company's operational status;
• Status of employee use and employee insurance;
• Tax information: Check the use of invoices, input and output invoices, company revenue during the operation process, financial reports and other accounting documents;
• Tax obligations of the company: Check the completion of tax obligations, tax reports, tax debts (if any), and the tax settlement status of the company.

Step 2: Share transfer

The transfer of shares is carried out through two methods:

• Through a transfer contract between the transferor and the transferee.
• Through securities trading, the procedure and the ownership recognition are carried out in accordance with securities law regulations.

During the share transfer process, attention must be paid to the tax obligations of the organization or individual transferring shares:

• For individuals, they must fulfill their obligation to declare personal income tax with the following tax calculation method: Personal income tax to be paid = the price of each transfer of securities x 0.1% tax rate.
• For organizations, the revenue from share transfer activities will be included in corporate income tax, and the company must declare the revenue in the provisional declaration according to quarter and settle according to year.

Restrictions on share transfer:

• Limited transfer for a period of 03 years, from the date of the company's business registration certificate issuance, founding shareholders have the right to freely transfer their shares to other founding shareholders, and can only transfer their common shares to non-founding shareholders if approved by the General Meeting of Shareholders. In this case, shareholders planning to transfer their shares have no right to vote on the transfer of those shares.
• After 90 days from the date of business registration certificate issuance, shareholders have not paid or only partially paid for the shares they have registered to buy. In this case, shareholders will not be allowed to transfer the right to buy those unpaid shares to others.
• Shareholders who own preferential voting shares. In this case, shareholders are not allowed to transfer those shares to others.
• The right to transfer shares of shareholders is restricted in accordance with the regulations in the company's charter. In this case, the restriction on the transfer of shares only takes effect when it is clearly stated in the shares of the corresponding shares.

Procedures for buying back shares of a company

Step 3: Conduct the share transfer procedure and declare personal income tax

According to the current regulations in Decree 108/2018/ND-CP, the business registration authority does not manage the change of shareholders due to share transfer, so the enterprise does not have to notify the business registration authority. Therefore, the enterprise only carries out the share transfer within the internal company and fulfills the obligation to declare and pay personal income tax.

Provided information:

• List of shareholders of the company;
• Information of the organization or individual receiving the share transfer;
• Information on the shareholding structure of shareholders after receiving the share transfer.

Drafting documents:

The transfer dossier includes:

• Transfer contract;
• Liquidation minutes;
• Minutes of the shareholders' General Meeting;
• Decision of the shareholders' General Meeting;
• List of shareholders;
• Shareholder register;
• Company's articles of association.

The tax declaration dossier includes:

• Transfer contract;
• Liquidation minutes;
• Personal income tax declaration form;
• Authorization letter for the person submitting the tax declaration dossier (in case the owner authorizes the company to submit the dossier);
• Introduction letter.

Business registration amendment dossier:

In case of transferring shares while changing the legal representative of the company, the enterprise must notify this change to the business registration agency to reissue the business registration certificate. The amendment dossier includes:

• Decision of the Board of Directors or Shareholders' General Meeting;
• Minutes of the Board of Directors or Shareholders' General Meeting;
• Notice of change of legal representative;
• Notice of business registration change;
• Other relevant legal documents.

Submitting dossier and announcement fee:

• The business registration amendment dossier will be submitted to the Department of Planning and Investment where the enterprise is headquartered within 10 days from the date of business registration change;
• The enterprise pays the announcement fee according to legal regulations: VND 100,000/time;
• The tax declaration dossier will be submitted to the Tax Department where the enterprise is headquartered within 10 days from the date of signing the share transfer contract;
• The transferring individual pays personal income tax (if any).

Step 4: Complete the procedures

Results can be obtained within 05-08 working days for the business registration change procedure, and 10-15 working days for the personal income tax declaration procedure.

2. Two methods for a company to buy back shares from shareholders

2.1. Repurchasing shares upon the request of shareholders

Shareholders only have the right to request the company to buy back shares if they have voted against the resolution of the General Meeting of Shareholders regarding the restructuring of the company or the amendment of the rights and obligations of shareholders as stipulated in the company's Charter.

The company's repurchase of shares upon the request of shareholders must be in writing and sent to the company within 10 days from the date of the General Meeting of Shareholders passing the resolution on the above-mentioned issues.

Repurchasing shares upon the request of shareholders

a. Request for company to buy back shares

The request for the company to buy back shares from shareholders must state the following:

- Name and address of the shareholder

- Number of shares of each type

- Expected selling price

- Reason for requesting the company to repurchase

The company is responsible for repurchasing the shares of this shareholder within 90 days from the date of receiving the request.

b. Share repurchase price:

The share repurchase price is determined based on the market price or according to the principles specified in the company's charter. In case the two parties cannot agree on the price, a professional appraisal organization can be requested to determine the price. The company should introduce at least 3 professional appraisal organizations for the shareholder to choose from and make the final decision.

c. Payment:

Payment can only be made if the company still ensures to pay off all debts and other asset obligations immediately after repurchasing the shares. If not, the shareholder must refund to the company the amount and other assets received. If the shareholder cannot refund the company, then all members of the Board of Directors must jointly be responsible for the debts and other asset obligations of the company within the value of the amount and assets paid to the shareholder that have not been returned.

d. Procedures after completing the repurchase of shares at the request of the shareholder:

Step 1: Complete the procedures for adjusting the charter capital reduction with the Business Registration Office - Department of Planning and Investment within 10 days from the completion date of the share repurchase payment, except in cases where securities laws have other regulations. The adjusted charter capital will correspond to the total par value of the shares repurchased by the company.

Step 2: Destroy the shares confirming ownership of the shareholder's equity right immediately after completing the payment. In case of damage to the company due to failure to destroy or delayed destruction of these shares, the Chairman of the Board of Directors and the Director or General Director must jointly take responsibility.

Step 3: If after paying off the repurchased shares, the total value of the company's recorded assets in the accounting book decreases by more than 10%, the company must notify all creditors of the company. This notification must be made within 15 days from the date of payment of the repurchased shares.

2.2. Buy back shares according to the company's decision

Buying back shares according to the company's decision is when the company repurchases its own shares from shareholders within the company.

The Board of Directors has the authority to make a decision to repurchase shares, but not exceeding 10% of the total of each type of shares that have been offered for sale within 12 months. In other cases, the General Meeting of Shareholders makes the decision.

a. Repurchase price of shares:

The repurchase price is determined by the Board of Directors:

• For common shares, the repurchase price cannot be higher than the market price at the time of repurchase, except in cases where the company buys back shares from each shareholder in proportion to their stake in the company.
• For other types of shares, the repurchase price cannot be lower than the market price, if the company's charter does not specify or there is no other agreement between the company and related shareholders.

Buying back shares according to the company's decision

b. Procedure for a company to buy back shares from each shareholder in proportion to their shareholding in the company:

Step 1: The Board of Directors shall notify in writing the buying back shares according to the company's decision to the shareholders within 30 days from the date the decision is passed.

The notification must include:

- Name and registered address of the company;

- Total number of shares and type of shares to be repurchased;

- Repurchase price or pricing principles;

- Procedures and deadlines for payment;

- Procedures and deadlines for shareholders to offer their shares to the company.

The notification of the company's share repurchase must be sent by secured means.

Step 2: Shareholders who agree to sell their shares must offer their shares by secured means to the company within 30 days from the date of receiving the decision to repurchase shares.

Step 3: The company shall pay and process the repurchased shares:

The payment process is similar to that in section 2.1.

After payment, the company must immediately cancel the share certificates confirming ownership of the repurchased shares. The Chairman of the Board of Directors and the Director or General Director must be jointly responsible for any damage caused to the company by failing to cancel or delaying the cancellation of the shares.

Step 4: Complete the procedure for adjusting the charter capital corresponding to the total par value of the shares repurchased by the company within 10 days from the date of completing the payment for the repurchased shares, except for cases where securities laws have other regulations.

Step 5: Notify all creditors of the company within 15 days from the date of payment for the repurchased shares, in case the total value of the company's assets recorded in the accounting ledger decreases by more than 10% after completing the payment for the repurchased shares.

3. Some notes when carrying out the buying back a joint stock company:

• To avoid risks when buying back a joint stock company, the buyer should require the company to settle taxes with the tax authorities.
• The deadline for submitting personal income tax returns is 10 days from the date of signing the transfer contract.
• The total number of shares to be repurchased according to the decision of the Board of Directors and the General Meeting of Shareholders must not exceed 30% of the total outstanding common shares, a portion or all of the preferred shares already sold.

Conclusion:

With over 15 years of experience in investment consulting, INMERGERS - a pioneering platform connecting international investments was born to help investors automatically connect with M&A transactions, business acquisitions, licensing, and distribution, and agency services.

Join the MMatch business trading platform now to receive legal support and connect with SMEs, together developing businesses and bringing successful M&A deals!