Is a company with 97% state capital a state-owned enterprise? Is a company with state capital and business losses required to buy back shareholders’ shares when shareholders request?

1. Is a company with 97% state capital a state-owned enterprise?

Is a company with 97% state capital a state-owned enterprise, according to the provisions of Article 88 of the 2020 Enterprise Law as follows:

State-owned enterprise

1. State-owned enterprises are organized and managed in the form of limited liability companies or joint stock companies, including:

a) Enterprises in which 100% of charter capital is held by the State;

b) Enterprises in which the State holds more than 50% of charter capital or the total number of voting shares, except for enterprises specified in Point a, Clause 1, Article this.

2. Enterprises with 100% charter capital held by the State as prescribed in Point a, Clause 1 of this Article include:

a) Single-member limited liability companies with 100% charter capital held by the State that are parent companies of state-owned economic groups, parent companies of state-owned corporations, parent companies in the group of parent companies – subsidiaries;

b) Liability companies One-member limited liability company is an independent company with 100% charter capital held by the State.

3. Enterprises in which the State holds more than 50% of the charter capital or the total number of shares with voting rights as prescribed in Point b, Clause 1 of this Article include:

a) Limited liability companies with two or more members, joint stock companies in which the State holds more than 50% of the charter capital, the total number of shares with voting rights are parent companies of economic groups, parent companies of state corporations, parent companies in a group of companies parent – subsidiary;

b) Limited liability company with two or more members, joint stock company is an independent company in which the State holds more than 50% of charter capital, total number of shares with voting rights.

4. The Government regulates this Article in detail.

According to the above regulations, companies with state capital of 97% of voting shares are considered state-owned enterprises.

2. Is a company with state capital and business losses required to buy back shareholders’ shares when shareholders request?

Is a company with state capital operating at a loss required to buy back shareholders’ shares when requested by shareholders, according to the provisions of Article 132 of the 2020 Enterprise Law as follows:

Buy back shares at the request of shareholders

1. Shareholders who have voted not to pass a resolution on reorganizing the company or changing the rights and obligations of shareholders specified in the company’s charter have the right to request the company to buy back their shares. The request must be in writing, clearly stating the name and address of the shareholder, number of shares of each type, intended selling price, and reason for requesting the company to buy back. The request must be sent to the company within 10 days from the date the General Meeting of Shareholders passed a resolution on the issues specified in this Clause.

2. The company must buy back shares at the request of shareholders specified in Clause 1 of this Article at the market price or price calculated according to the principles stipulated in the company charter within 90 days from the date of receipt of the request. In case a price cannot be agreed upon, the parties can request a valuation organization to determine the price. The company introduces at least 03 valuation organizations for shareholders to choose from and that choice is the final decision.

Accordingly, in principle, shareholders have the right to request the company to buy back their shares in case of not passing a resolution on reorganizing the company or changing the rights and obligations of shareholders specified in the company’s Charter.

The company’s business losses are not included in the above cases. So in the case of your question, this company is not required to buy back the shares requested by shareholders.

3. In a company with state capital, can shareholders’ preferred shares be converted into common shares?

Can preferred shares of shareholders in companies with state capital be converted into common shares, according to the provisions of Article 114 of the 2020 Enterprise Law as follows:

Types of shares

1. A joint stock company must have common shares. The owner of common shares is a common shareholder.

2. In addition to common shares, a joint stock company may have preference shares. Owners of preference shares are called preference shareholders. Preference shares include the following types:

a) Dividend preference shares;

b) Redeemable preference shares;

c) Voting preference shares;

d) Other preference shares as prescribed in the company’s charter and the law on securities securities.

3. Persons with the right to buy dividend preference shares, redeemable preference shares and other preference shares as prescribed by the company’s Charter or decided by the General Meeting of Shareholders.

4. Each share of the same type gives the owner of that share equal rights, obligations and benefits.

5. Common shares cannot be converted into preferred shares. Preferred shares can be converted into common shares according to the resolution of the General Meeting of Shareholders.

6. Common shares used as the underlying asset to issue depository receipts without voting rights are called underlying common shares. Non-voting depositary certificates have economic benefits and obligations corresponding to the underlying common shares, excluding voting rights.

7. The government regulates depository certificates without voting rights.

Thus, in companies with state capital, shareholders’ preferred shares can be converted into common shares according to the resolution of the General Meeting of Shareholders.