Reducing charter capital is an important procedure, often associated with company restructuring, profit distribution, or members’ capital withdrawal. This activity carries significant legal risks if not conducted in accordance with regulations. With experience handling hundreds of capital reduction cases for both domestic and foreign enterprises, VPL is committed to providing comprehensive, lawful, and secure support.
√ Concept
Charter capital is the total value of assets contributed or committed to be contributed by the company’s members or owners when establishing a limited liability company or a partnership; it is also the total par value of shares sold or registered for purchase when establishing a joint-stock company.
During its operations, an enterprise may register to reduce its charter capital; however, it is necessary to carefully check the conditions to avoid potential legal risks later on.
√ Forms of charter capital reduction
Enterprises may reduce their charter capital in cases prescribed by the Law on Enterprises 2020, specifically:
+ The company must have been operating continuously for at least 2 years from the date of its establishment registration and must ensure full payment of all debts and other property obligations after returning capital to the owners/members/shareholders.
+ For multi-member limited liability companies and joint-stock companies, the return must be made in proportion to each member’s or shareholder’s contributed capital or shareholding ratio in the company.
Enterprises are only allowed to reduce charter capital in cases permitted by law. Depending on the type of enterprise, the method of reducing charter capital will differ. Therefore, it is necessary to carefully review the legal provisions on cases of capital reduction and the conditions applicable to the specific type of enterprise.
In certain provinces/cities, when registering for a charter capital reduction, the Business Registration Office may forward the application to the Inspectorate of the Department of Finance for review of capital contribution and capital use. If any violations are found regarding capital contribution or capital use, the enterprise may be subject to administrative penalties. Only after completing the payment of fines and remedying any consequences (if applicable) will the Department of Finance proceed with reviewing the capital reduction application.
The enterprise must commit to ensuring full payment of debts and other property obligations after the capital reduction. In addition, a multi-member limited liability company must also submit its latest financial statements if the capital reduction is carried out by means of the company repurchasing members’ contributed capital or returning part of the contributed capital to its members.
Capital reduction for a joint stock company is more complex and subject to stricter conditions, which are embedded within various provisions applicable to this type of enterprise.
In addition, the statutory deadline for submitting a capital reduction application to the Business Registration Office varies depending on the type of enterprise and the form of capital reduction. Therefore, enterprises should carefully and comprehensively review the provisions of the Law on Enterprises.
Before initiating the process, VPL assists enterprises in reviewing the conditions for capital reduction under the Law on Enterprises 2020, taking into account factors such as debt status, payment capacity, and commitments to partners, to ensure the capital reduction is legally valid.
If the Business Registration Office, the Department of Finance Inspectorate, or the tax authority requests additional documents or an explanation for the capital reduction, VPL will represent the client in direct dealings with the authorities, provide effective explanations, and ensure prompt approval of the capital reduction.
Based on the actual circumstances, our lawyers will recommend the most suitable capital reduction plan, minimizing any impact on the rights of owners/members/shareholders and the company’s operations. Upon completion of the service, VPL will continue to assist in updating relevant authorities and stakeholders (tax, banks, partners, etc.) to avoid inconsistencies in records or disruptions to financial and accounting transactions.
VPL’s lawyers go beyond procedural assistance, advising on potential impacts of the capital reduction on the company’s reputation, relationships with partners, and tax obligations. This enables businesses to have an overall view and prepare appropriate solutions.
If the enterprise has outstanding debts, our lawyers will advise on how to notify and negotiate with creditors to avoid unnecessary legal disputes in the future.
Comprehensive legal advice on all regulations relating to capital reduction, including selecting the most suitable form to ensure legal compliance and avoid future risks.
Preparation of legal documents for amending the Enterprise Registration Certificate and other internal company documents, such as the company charter, updated shareholder register, or capital contribution certificates (if requested by the client).
Representation of the enterprise in filing applications, receiving results, providing explanations, and liaising with the Department of Finance, inspection authorities, and tax authorities regarding amendments to the Enterprise Registration Certificate, specifically the reduction of charter capital. During the process, VPL will also assist in attending meetings and receiving inspection teams (if any) reviewing capital contribution and capital use.
Advising, supporting, and guiding the implementation of related legal procedures after the Business Registration Office approves the capital reduction.
Pursuant to Clause 1, Article 44 of Decree No. 168/2025/ND-CP, the application dossier for a charter capital reduction includes:
In addition, if the Business Registration Office forwards the application to the Department of Finance Inspectorate for review of capital contribution and capital usage, the enterprise must provide the Inspectorate with documents and evidence related to the capital contribution, financial statements from its establishment to the present, and other accounting records. VPL will assist in compiling and guiding the enterprise in preparing the documents as required by the Inspectorate.
Possibly. A reduction in charter capital may change the business license tax rate if the new charter capital decreases from over VND 10 billion to below VND 10 billion. In such cases, the enterprise must re-declare the business license tax and pay at the new rate starting from the year following the year in which the change occurred.
Yes. When there is a change in capital information, the enterprise must notify the tax authority and submit the business license tax declaration no later than January 30 of the year following the year in which the change occurred.
The Law on Enterprises does not stipulate a general minimum charter capital. However, if the enterprise operates in certain business sectors that have statutory capital requirements (e.g., insurance, banking, etc.), the charter capital after the reduction must not be lower than the prescribed statutory capital.
According to the Law on Enterprises, a company may only return part of the contributed capital to the owner/member/shareholder after it has fully paid all debts and other property obligations. If the enterprise has outstanding debts, the capital reduction may be rejected by the competent authority.
If the regulations on capital reduction are not complied with, the enterprise may be subject to administrative penalties. In addition, members/shareholders will be jointly liable for the company’s debts and other property obligations.
Contact VPL today for expert legal consultation and services, ensuring maximum protection of your rights and interests!
