Does the Board of Directors of a joint stock company have the right to decide on the offering of treasury shares?

Does the Board of Directors of a joint stock company have the right to decide whether or not to offer treasury shares?

According to Clause 3, Article 3, Decree 155/2020/ND-CP has the following provisions:

Treasury shares are shares issued by a joint stock company and repurchased by that company.

According to the above definition, when a joint stock company buys back the shares it has issued, these repurchased shares are called treasury shares.

Pursuant to Clause 5, Article 36 of the 2019 Securities Law, it is stipulated as follows:

A public company buys back its own shares

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5. A public company that repurchases its own shares according to the provisions of Clause 1 and Point a, Clause 2 of this Article must carry out procedures to reduce its charter capital corresponding to the total value calculated according to par value of the shares repurchased by the company within 10 days from the date of completion of payment to repurchase shares.

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7. Securities companies and public companies that repurchase their own shares may sell shares immediately after repurchase in the following cases:

a) Securities companies repurchase their own shares to correct transaction errors or repurchase odd-lot shares;

b) Public companies repurchase odd shares according to the plan to issue shares to pay dividends, the plan to issue shares from equity capital ownership;

c) A public company buys back odd-lot shares at the request of shareholders.

Accordingly, Article 134 of the 2020 Enterprise Law has the following provisions:

Conditions for payment and handling of repurchased shares

1. The company may only pay the repurchased shares to shareholders according to the provisions of Articles 132 and 133 of this Law if, immediately after paying all the repurchased shares, the company still ensures full payment of all debts and other property obligations.

2. Shares repurchased according to the provisions of Articles 132 and 133 of this Law are considered unsold shares according to the provisions of Clause 4, Article 112 of this Law. The company must register a reduction in charter capital corresponding to the total par value of the shares repurchased by the company within 10 days from the date of completion of payment to repurchase shares, unless otherwise stipulated by the law on securities.

According to the above regulations, a joint stock company that is a public company will be allowed to sell treasury shares immediately after acquisition if it falls into the following 3 cases:

– Securities companies buy back their own shares to correct transaction errors or buy back odd-lot shares;

– Public companies buy back fractional shares according to the plan to issue shares to pay dividends, the plan to issue shares from equity sources;

– Public companies buy back odd-lot shares at the request of shareholders.

At Point c, Clause 2, Article 153 of the Law on Enterprises 2020, the board of directors has the right to decide to sell unsold shares within the number of shares authorized to be offered for each type; decide to mobilize additional capital in other forms.

According to Point b, Clause 2, Article 138 of the 2020 Enterprise Law, the General Meeting of Shareholders has the right to decide the types of shares and the total number of shares of each type that can be offered for sale; Decide the annual dividend level of each type of share.

According to the above regulations, the General Meeting of Shareholders is the competent unit to decide the types of shares and the total number of shares of each type that can be offered for sale.

After there is a decision of the General Meeting of Shareholders on the types of shares and the total number of shares of each type that can be offered for sale, the Board of Directors can decide to sell unsold shares according to the decision of the General Meeting of Shareholders.

Does a joint stock company that can repurchase shares at the request of shareholders need to have a decision of the General Meeting of Shareholders approving the repurchase of shares to reduce charter capital? no?

Does a joint stock company that repurchases shares at the request of shareholders need to have a decision of the General Meeting of Shareholders approving the repurchase of shares to reduce charter capital? According to the provisions of Point a, Clause 2, Article 36 of the 2019 Securities Law as follows:

A public company buys back its own shares

1. A public company that repurchases its own shares must meet the following conditions:

a) There is a decision of the General Meeting of Shareholders approving the repurchase of shares to reduce charter capital, the repurchase plan, which clearly states the quantity, implementation time, and principles for determining the repurchase price;

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2. Buying back shares is exempt from the conditions specified in Points a, b, c and d, Clause 1 of this Article in the following cases:

a) Buy back shares at the request of shareholders according to the provisions of the Enterprise Law;

b) Buy back shares from employees according to the company’s regulations on issuing shares to employees, buy back fractional shares according to the plan to issue shares to pay dividends, issue shares from equity sources;

c) Securities companies buy back their own shares to correct transaction errors or buy back odd-lot shares.

Thus, a joint stock company that can repurchase shares at the request of shareholders does not need to have a decision from the General Meeting of Shareholders approving the repurchase of shares to reduce charter capital, the repurchase plan, which clearly states the quantity, implementation time, and principles for determining the repurchase price.

In what cases is a joint stock company not allowed to buy back its own shares?

According to Clause 3, Article 36 of the Securities Law 2019, a joint stock company is not allowed to buy back its own shares in the following cases:

– Have overdue debts based on the most recent audited annual financial statements; In case the expected time to repurchase shares is more than 6 months from the end of the fiscal year, the determination of overdue debt is based on the most recent 6-month financial statements audited or reviewed; except for the cases specified in Point c, Clause 2 of this Article;

– Is in the process of offering or issuing shares to raise additional capital, except for the case specified in Point c, Clause 2 of this Article;

– The company’s shares are subject to a public tender offer, except for the case specified in Clause 2 of this Article;

– Has repurchased its own shares within 06 months from the date of reporting the repurchase results or has just completed the offering or issuance of shares to increase capital no more than 06 months from the date of completion of the offering or issuance, except for the case specified in Clause 2 of this Article.