May the Board of Directors of a Joint-Stock Company Decide to Offer Treasury Shares?

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

Clause 3, Article 3 of Decree 155/2020/ND-CP prescribes as follows:

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

Under the above definition, where a joint-stock company repurchases its own issued shares, the repurchased shares are called treasury shares.

Under Clause 5, Article 36 of the Securities Law 2019 (as amended and supplemented by Law No. 56/2024/QH15), the following is prescribed:

Public companies repurchasing their own shares

…

5. Public companies repurchasing their own shares under Clause 1 and point a, Clause 2 of this Article must carry out procedures to reduce 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 for the share repurchase.

…

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

a) Securities companies repurchasing their own shares to correct transaction errors or repurchasing odd lots of shares;

b) Public companies repurchasing odd shares under the plan to issue shares for dividend payment or the plan to issue shares from owner’s equity;

c) Public companies repurchasing odd lots of shares at shareholders’ request.

Accordingly, Article 134 of the Law on Enterprises 2020 prescribes as follows:

Payment conditions and handling of repurchased shares

1. A company may only pay for shares repurchased from shareholders under Articles 132 and 133 of this Law if, immediately after paying for all the repurchased shares, the company still ensures full payment of debts and other property obligations.

2. Shares repurchased under Articles 132 and 133 of this Law are deemed unsold shares under Clause 4, Article 112 of this Law. The company must register a reduction of 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 for the share repurchase, except where securities law provides otherwise.

Under the above regulations, a joint-stock company that is a public company may sell treasury shares immediately after repurchase in the following 3 cases:

– Securities companies repurchasing their own shares to correct transaction errors or repurchasing odd lots of shares;

– Public companies repurchasing odd shares under the plan to issue shares for dividend payment or the plan to issue shares from owner’s equity;

– Public companies repurchasing odd lots of shares at shareholders’ request.

Under point c, Clause 2, Article 153 of the Law on Enterprises 2020, the Board of Directors has the right to decide the sale of unsold shares within the number of shares authorized for offering of each class; and to decide the raising of additional capital in other forms.

Under point b, Clause 2, Article 138 of the Law on Enterprises 2020, the General Meeting of Shareholders has the right to decide the classes of shares and the total number of shares of each class authorized for offering; and to decide the annual dividend rate of each class of shares.

Under the above regulations, the General Meeting of Shareholders is the competent body to decide the classes of shares and the total number of shares of each class authorized for offering.

Only after the General Meeting of Shareholders has decided the classes of shares and the total number of shares of each class authorized for offering may the Board of Directors decide the sale of unsold shares in accordance with the decision of the General Meeting of Shareholders.

Must a joint-stock company repurchasing shares at shareholders’ request have a General Meeting of Shareholders’ decision approving the share repurchase to reduce charter capital?

Whether a joint-stock company repurchasing shares at shareholders’ request must have a General Meeting of Shareholders’ decision approving the share repurchase to reduce charter capital is prescribed in point a, Clause 2, Article 36 of the Securities Law 2019 (as amended and supplemented by Law No. 56/2024/QH15) as follows:

Public companies repurchasing their own shares

1. Public companies repurchasing their own shares must satisfy the following conditions:

a) Having a decision of the General Meeting of Shareholders approving the share repurchase to reduce charter capital and the repurchase plan, specifying the quantity, implementation timeline and principles for determining the repurchase price;

…

2. Share repurchase is exempt from the conditions prescribed in points a, b, c and d, Clause 1 of this Article in the following cases:

a) Repurchase of shares at shareholders’ request under the Law on Enterprises;

b) Repurchase of shares from employees under the company’s share issuance regulations for employees, repurchase of odd shares under the plan to issue shares for dividend payment, issuance of shares from owner’s equity;

c) Securities companies repurchasing their own shares to correct transaction errors or repurchasing odd lots of shares.

Accordingly, a joint-stock company repurchasing shares at shareholders’ request does not need a General Meeting of Shareholders’ decision approving the share repurchase to reduce charter capital and the repurchase plan, specifying the quantity, implementation timeline and principles for determining the repurchase price.

In which cases may a joint-stock company not repurchase its own shares?

Under Clause 3, Article 36 of the Securities Law 2019 (as amended and supplemented by Law No. 56/2024/QH15), a joint-stock company may not repurchase its own shares in the following cases:

– Having overdue debts based on the most recent audited annual financial statements; where the expected share repurchase date is more than 06 months after the end of the fiscal year, the determination of overdue debts shall be based on the most recent audited or reviewed 06-month financial statements; except for the case prescribed in point c, Clause 2 of this Article;

– Being in the process of offering or issuing shares to raise additional capital, except for the case prescribed in point c, Clause 2 of this Article;

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

– Having repurchased its own shares within 06 months from the date of reporting the repurchase results, or having just completed an offering or issuance of shares to increase capital within 06 months from the date of completion of the offering or issuance, except for the case prescribed in Clause 2 of this Article.