May Shareholders Exit via Share Repurchase by the Company?

Short answer: Yes, but under strict conditions. A shareholder of a joint-stock company may not directly withdraw capital from the company; capital may only be withdrawn by transferring shares to others or through share repurchase by the company under Articles 131–133 of the Law on Enterprises 2020. The company may only repurchase where it remains able to pay all debts and other asset obligations after the repurchase.

Legal basis

• Articles 131–133 of the Law on Enterprises 2020 — share repurchase.

Two forms of share repurchase by the company

• Repurchase at the shareholder’s request (Article 131): a shareholder who voted against a resolution on company reorganisation or changes to shareholders’ rights and obligations may request the company to repurchase their shares;
• Repurchase by the company’s decision (Article 132): the company proactively repurchases shareholders’ shares under a decision of the General Meeting of Shareholders/Board of Directors.

Conditions for repurchase

• The company may only repurchase where it remains able to fully pay all debts and other asset obligations after the repurchase;
• Repurchase price: at market price or under the pricing principles in the charter (for repurchase at request);
• Repurchased shares are accounted as treasury shares; the company must complete charter capital reduction procedures within the statutory time limit.

Implementation procedure

1. The shareholder sends a written request (for repurchase at request) or the company issues a repurchase decision;
2. Agree on the repurchase price;
3. The company pays the shareholder within the statutory time limit;
4. Register the charter capital reduction with the Business Registration Office.

Notes

• Repurchase must not be used as a disguised “under-the-table capital withdrawal” that renders the company insolvent;
• Repurchase transactions with related persons must comply with related-party transaction rules;
• Shareholders wanting a fast, flexible exit should prioritise transferring shares to other investors.

If you need to determine the appropriate approach for your specific situation, you should discuss it with a lawyer beforehand to have your file reviewed and a suitable solution advised.

For quick advice, you may contact a lawyer via 0966.475.966.

Related articles

• Share transfers in joint-stock companies
• What is a founding shareholder?
• Increasing and reducing charter capital of joint-stock companies