Question: Our company is a joint stock company. Currently, we are looking to redeem 51% of the total shares of company A. Please give advice on the conditions, order and procedures for us to do this.
Answer:
Thank you for your inquiry. For this question, we would like to advise as follows:
When your Joint Stock Company wishes to redeem 51% of the total shares of Company A, the transfer conditions and procedures shall be:
I. Implement internal procedures to approve the purchase of shares of Company A
Depending on the transaction value, the decision-making authority may belong to the General Meeting of Shareholders (“GMS”) or the Board of Directors (“BD”) of your company. Accordingly, the GMS/BD needs to adopt a Resolution on the implementation of the redemption transaction in accordance with the company’s Charter and the Law on Enterprises.
In case your company is a public company, the Resolution on the implementation of the redemption transaction shall be disclosed in accordance with the provisions of the securities law.
II. Implement relevant procedures to conduct the transaction of share purchase with Company A
1. In case Company A is a public company, in advance of the purchase of shares, you need to seek for the lawyer’s opinions to ensure the legality of the procedures in the tender offer and/or information disclosure (if any) for the transaction. This shall avoid the risk of being fined/cancelled for the transaction in accordance with the securities law (in which, the maximum penalty shall be up to VND 300 million for the failure of tender offer registration and up to 1.5 billion for the violation on information disclosure).
2. In case Company A is an ordinary joint stock company, there will be 2 cases: 1- shares of founding shareholders within the first 3 years from the company establishment date; 2- shares of founding shareholders after the first 3 years from the company establishment date and shares of non-founding shareholders.
In case 1, the purchase of share must adhere to the conditions in Article 120.3 of the Law on Enterprises: The ordinary shares of founding shareholders are freely transferred to other founding shareholders and can only be transferred to non-founding shareholders if approved by the GMS. In this case, the founding shareholder who intends to transfer ordinary shares shall be deprived of the right to vote on the transfer of such shares.
Accordingly, in this case, in advance of the implementation of share transfer procedure, if your company was not a founding shareholder of Company A, your company must request the transferor to carry out the procedures for obtaining approval from the GMS of Company A for this transaction. This transaction is only performed when the Company A’s approval gained with a voting rate of over 50% of the total number of voting shares (excluded the shares of the transferee).
The transfer transaction is subsequently performed as in case 2 hereinafter.
In case 2, the purchase of shares is only required to comply with the provisions of Company A’s Charter and applicable laws. Accordingly, in principle, the share purchase transaction must follow the following procedures:
* Share purchase dossiers
- Request for transfer of shares (usually made according to the company’s form);
- Share purchase agreement (original version);
- Minutes of liquidation of the share purchase agreement (original version);
- Share certificates of shareholders (original version);
- Enterprise registration certificate/Establishment license of the company – The transferee (copy version);
- Charter of the company – The transferee (copy version);
- Payment document of personal income tax (If the transferor is an individual).
* Share purchase procedure
- The transferor or related parties submit the dossiers at the shareholder management department of Company A;
- Company A reviews the dossiers and issues a receipt to the applicant;
- Company A conducts the procedure to amend information of shareholders in the company’ shareholders registration book and issues a new certificate of share ownership to the new shareholder.
The above are the consulting contents of ATA Legal Service. If you have any inquiries, please contact us by phone number, email or directly at the our office.
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