Current forms of increasing charter capital of joint stock companies

Form of increasing charter capital of a joint stock company through many different forms, each form has its own advantages and regulations. The article below will analyze in detail the current popular forms of charter capital increase, and provide important notes to help customers increase charter capital effectively and in accordance with legal regulations.

When does a joint stock company need to increase its charter capital?

Increasing charter capital is an important decision, directly affecting the operations and development of the joint stock company. Therefore, determining the right time and reason to increase capital is extremely necessary. Below are some common cases where a joint stock company needs to consider increasing its charter capital:

• Expanding the scale of operations: When the company plans to expand production and business, invest in new projects, and develop markets, increasing charter capital will provide the necessary financial resources to realize these goals.
• Meet partner requirements: In some cases, business partners may request the company to increase charter capital to ensure financial capacity and commitment to long-term cooperation.
• Enhance reputation: The increase in charter capital demonstrates the company’s stable development, helping to strengthen the confidence of shareholders, partners and credit institutions.
• Limit the risk of being taken over: Increasing charter capital can reduce the ownership ratio of existing shareholders, thereby limiting the risk of being taken over by outside investors.

Clearly identifying the need to increase charter capital will help joint stock companies make timely decisions, seize development opportunities and improve competitiveness in the market.

Forms of increasing charter capital of joint stock companies

Pursuant to Clause 2, Article 123 of the Law on Enterprises 2020 stipulates the following forms of increasing charter capital of joint stock companies:

Offering shares to existing shareholders

This is a form of the company issuing additional shares and offering them to existing shareholders according to their share ownership ratio in the company. This form is specified in Article 124 of the Law on Enterprise 2020. The advantage of this form is that it is simple, fast, less expensive and does not change the company’s ownership structure.

Process of offering shares to existing shareholders:

Step 1: The Company notifies each shareholder in writing about the share offering. The notice must be sent no later than 15 days before the end of the share purchase registration period.

Step 2: Shareholders register to buy shares within the prescribed time limit. Shareholders have the right to transfer their priority right to buy shares to others.

Step 3: In case existing shareholders do not buy all the shares offered, the Board of Directors has the right to offer the remaining shares to others with conditions less favorable than the conditions offered to existing shareholders.

Step 4: Complete payment procedures and record new shareholders in the shareholder register.

Offering individual shares

This form is prescribed in Article 125 of the Law on Enterprise 2020.

Conditions for private share offering:

• Do not offer for sale through mass media.
• Offering to less than 100 investors, excluding professional securities investors, or only offering to professional securities investors.

Private share offering process:

Step 1: The company develops a private share offering plan, including information on type, quantity, par value of shares offered, offering price, payment method, payment term,…

Step 2: The Company notifies existing shareholders of the plan to offer private shares and exercise the priority right to purchase shares for existing shareholders.

Step 3: In case existing shareholders do not buy all, the company is allowed to offer the remaining shares to other investors according to the private share offering plan.

Step 4: Complete payment procedures and record new shareholders in the shareholder register.

Offering shares to the public

Offering shares to the public is a form of increasing charter capital in which a public joint stock company issues new shares and offers them for sale to a large number of people for the purpose of increasing capital and developing production and business.

Public companies must fully meet the conditions for offering shares to the public, including:

• The charter capital contributed at the time of registration for the offering is 30 billion VND or more.
• Business activities for 02 consecutive years immediately preceding the year of registration for offering must be profitable and have no accumulated losses.
• There is an issuance plan and a plan for using capital obtained from the stock offering approved by the General Meeting of Shareholders.
• A minimum of 15% of the voting shares of the issuer must be sold to at least 100 investors who are not major shareholders; In case the charter capital is 1,000 billion VND or more, the minimum ratio is 10%.
• Major shareholders before the time of offering must commit to holding at least 20% of the charter capital for a minimum of 01 year from the date of completion of the offering.
• The issuing organization is not under criminal prosecution or has been convicted of crimes that violate the economic management order.
• There is a securities company that advises on registration documents to offer shares to the public (except in cases where the issuing organization is a securities company).
• There is a commitment and must list or register to trade shares on the stock exchange system after the end of the offering.
• The issuing organization must open an escrow account to receive money to buy shares in the offering.

>>> See more: Reducing charter capital of joint stock companies: Conditions and procedures.

Notes after increasing the charter capital of a joint stock company

After completing the charter capital increase, the joint stock company needs to pay attention to the following issues:

• Update company charter: The company charter needs to be amended and supplemented to reflect changes in charter capital.
• Notify tax authorities: The company needs to notify tax authorities about the increase in charter capital to adjust tax registration information.
• Effective capital management and use: The use of additional capital needs to be clearly planned, ensuring investment efficiency and sustainable development of the company.

Effective consulting and support services for increasing charter capital of joint stock companies in Long Phan

Long Phan is a professional consulting unit with extensive experience in supporting the implementation of procedures to increase charter capital of joint stock companies. We provide the following services:

• Consulting on choosing the form of charter capital increase suitable to the needs and actual situation of the company;
• Consulting on conditions for increasing charter capital of each form;
• Guidance on documents and procedures for increasing charter capital;
• Representing customers to submit applications and work with business registration agencies;
• Consulting and developing plans to use capital effectively;
• Consulting on issues that arise and must be implemented after capital increase;
• Consulting and answering other related questions.

Increasing charter capital is an important step in the development process of a joint stock company. Choosing the appropriate form of capital increase and complying with regulations will help the company improve its financial capacity, expand its operational scale and achieve business goals. Customers who need advice on procedures for increasing charter capital, please contact the hotline: 0906735386 for support from Long Phan.