Procedures for buying shares of a joint stock company according to the company’s decision 

Buying shares of a joint stock company to change the owner of the shares sold in the company. This is a financial strategy aimed at achieving goals such as restructuring capital, reducing shareholder ownership, or improving control of the company. To protect legitimate rights and interests, shareholders need to analyze and evaluate the feasibility of share purchase activities. This article will provide detailed instructions on the procedures for purchasing shares according to the company’s decision.

What is a joint stock company?

According to Article 111 of the Law on Enterprises 2020, a joint stock company is a type of enterprise, in which:

• Charter capital is divided into equal parts called shares;
• Shareholders are individuals or organizations that own shares. There must be at least 3 shareholders and there is no maximum number limit. Shareholders are only responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise;
• The profits that shareholders receive from owning shares are dividends;
• Joint stock companies can raise capital by issuing shares;
• A joint stock company has all the elements to be considered a legal entity according to Article 74 of the Civil Code 2015. After being granted a Business Registration Certificate, the company officially has legal status.

The process of buying shares of a joint stock company as the company’s discretion

Buying shares of a joint stock company according to the company’s decision, also known as share purchase, is the process where the company decides to buy back part or all of the company’s own shares from shareholders in the company. To protect the rights and interests of shareholders and the company, buying shares of a joint stock company according to the company’s decision needs to be carried out according to the procedures prescribed by the Law on Enterprises 2020, including the following procedures:

Approve the decision to purchase shares

The decision to purchase shares is the first step in the process of purchasing shares at the company’s discretion. The Board of Directors has the right to decide to buy back no more than 10% of the total shares sold within 12 months. In other cases, the purchase of shares is decided by the General Meeting of Shareholders.

The decision to purchase shares must include specific contents such as the purpose of purchase, the number of shares expected to be purchased, the method of purchase, implementation time, and principles for determining the purchase price. This decision must be approved in accordance with the authority and voting process specified in the Company Charter and the Enterprise Law.

After passing the decision, the company must notify all shareholders of the purchase of shares within 30 days from the date the decision is approved. The notice must be sent by a method that ensures it reaches the shareholder’s contact address in the shareholder register.

Determine the ratio and purchase price of shares

Determining the share purchase rate and price is an important step in the share purchase process. The share purchase ratio must comply with the provisions of the Law on Enterprises, not exceeding 30% of the total number of common shares sold, except in cases of purchase according to the ownership ratio of each shareholder. The acquisition price is determined based on the principle of fairness and reasonableness.

For common shares, the purchase price must not be higher than the market price at the time of purchase, except for the case specified in Clause 3, Article 133 of the Law on Enterprises 2020.

For shares of other types, the purchase price must not be lower than the market price, unless the company charter provides otherwise or the company and relevant shareholders have otherwise agreed.

The company needs to carefully consider determining the acquisition price to ensure the interests of the company and the rights of shareholders. Valuation can be based on methods such as book value, market value, or other valuation methods appropriate to the actual situation of the company and the market.

Notify and negotiate with shareholders

After determining the share purchase rate and price, the company needs to notify shareholders of the decision to purchase shares. This notice must be sent by a method guaranteed to reach the shareholder’s contact address in the shareholder register no later than 15 days before the date of redemption.

The content of the notice must clearly state the name, head office address of the company, total number of shares and types of shares to be purchased, purchase price or purchase pricing principles, payment procedures and deadlines, and procedures for purchase. procedures and deadlines for shareholders to offer their shares to the company.

Companies should note that share purchases can only be carried out if they do not affect the payment of debts and other property obligations of the company. At the same time, the company must ensure compliance with regulations on information disclosure according to the provisions of securities law for public companies.

Sign a share purchase and sale contract

After agreeing on the purchase and sale of shares, the company and shareholders sign a share purchase contract. This contract is an important legal basis for share trading transactions, clearly defining the rights and obligations of the participating parties.

The contract content should include basic information such as names and addresses of the parties; number of shares traded; purchase price; payment method; transaction execution deadline.

Share purchase and sale contracts must comply with the provisions of the Civil Code and Enterprise Law. In particular, it is necessary to pay attention to the provisions on the validity conditions of the contract, the responsibilities of the parties in case of contract violation, and the provisions on dispute resolution, if any.

Payment and transfer of shares

After signing the share purchase contract, the company makes payments to shareholders according to the agreed method. Payment must be made on time as specified in the contract and comply with the provisions of law on payment.

The company can use capital surplus, development investment fund, undistributed after-tax profits, and other capital sources as prescribed by law to pay for purchased shares.

After completing payment, the company proceeds with share transfer procedures. For joint stock companies that have not yet registered to trade on the stock market, the transfer is carried out by recording the shareholder book. For companies listed or registered to trade on the stock market, the transfer is carried out in accordance with the provisions of securities law.

Legal basis: Article 133, Article 134 of the Law on Enterprises 2020.

Issues to keep in mind when buying shares of a joint stock company

When buying shares of a joint stock company, there are many issues to keep in mind to ensure the process goes smoothly and complies with the law. Specifically:

• The company needs to ensure that share purchases do not reduce charter capital below the legal capital level for specific business lines;
• Share purchases must not affect the company’s ability to pay debts and other property obligations;
• Companies need to strictly comply with regulations on information disclosure, especially for public companies. Information disclosure must be done on time, fully and accurately in accordance with the provisions of the Securities Law and its guiding documents;
• Companies need to pay attention to restrictions on share purchases. According to the Enterprise Law, the company is not allowed to buy back shares in the following cases: Being in a state of paying due debts; is in the process of dissolution; There are grounds to believe that the company is unable to pay due debts;
• Accounting for share purchase transactions also needs to be done carefully and accurately;

Buying shares requires complicated procedures. The regulations provided by law are intended to protect buyers and sellers in all cases of buying and selling shares. Therefore, businesses need to pay attention to the above issues to ensure the purchase of shares is successful.

Legal consulting services on buying shares of a joint stock company in Long Phan

Long Phan provides in-depth consulting services on buying shares of a joint stock company. Our team has extensive experience in the field of corporate and securities law and is ready to support customers throughout the entire share purchase process. Our services include:

• Consulting on issues related to purchasing shares;
• Assist in drafting and reviewing necessary legal documents;
• Consulting on processes and procedures for purchasing shares, ensuring compliance with current legal regulations;
• Consulting and supporting customers in the process of negotiating and implementing share purchase transactions.

Services at Long Phan will help the process of buying shares of a joint stock company go smoothly and effectively. Customers can contact us for detailed advice on services and receive support tailored to their specific needs.

Buying shares of a joint stock company according to the company’s decision requires strict compliance with legal processes and specific procedures. With extensive experience and expertise, Long Phan provides comprehensive consulting solutions, supporting you in the process of buying shares of a joint stock company on the basis of ensuring legal compliance and protecting investment interests. Please contact Long Phan via Hotline 090.673.5386 for detailed advice.