A share buyback is one of the cleanest ways to return surplus cash, buy out a departing investor or simplify a cap table, and one of the easiest to get wrong. In Vietnam, a share buyback or a charter capital reduction engages the Law on Enterprises 2020, the Law on Securities 2019, investment and foreign-exchange rules and tax law at the same time.
This guide maps the legal routes for joint-stock companies and limited liability companies, the solvency conditions, foreign-investor repatriation, tax, registrations, sequencing and disputes.
Contents
- Share Buyback vs Charter Capital Reduction: The Legal Map
- Share Buyback by Joint-Stock Companies
- Treasury Shares of Public Companies
- LLC Capital Reduction and Repurchase of Contributed Capital
- Solvency Test and Creditor Protection
- Foreign Investors: Capital Repatriation and FX Registration
- Tax Consequences of a Share Buyback
- Registrations and Regulatory Reporting
- Practical Sequencing and Disputes
- Frequently Asked Questions
Share Buyback vs Charter Capital Reduction: The Legal Map
Vietnamese law does not treat a share buyback and a capital reduction as the same event, although both end with fewer shares or less contributed capital on the register. The route depends on the company form, who initiates it and whether the company is public.
In a joint-stock company (JSC), the main route is the share buyback, which reduces charter capital by the par value of the shares retired. In a limited liability company (LLC), the company either buys back a member’s contribution or returns part of the contributed capital to all members pro rata.
| Route | Typical entity | Initiated by | Core legal basis |
|---|---|---|---|
| Repurchase at shareholder request | JSC | Dissenting shareholder | Law on Enterprises 2020, Art. 132 |
| Repurchase at company decision | JSC | Board or general meeting | Law on Enterprises 2020, Art. 133 |
| Repurchase and resale of treasury shares | Public company | Board or general meeting | Law on Securities 2019 and Decree 155/2020/ND-CP (verify article numbers) |
| Repurchase of contributed capital | Multi-member LLC | Dissenting member | Law on Enterprises 2020, Art. 51 (verify) |
| Pro rata capital reduction | LLC | Members’ council or owner | Law on Enterprises 2020, Art. 68 for multi-member LLCs (verify; single-member LLCs follow a separate article) |
The Law on Enterprises was amended in 2025 and the Law on Securities in 2024, so check the text in force on your transaction date before relying on any article number below.
Share Buyback by Joint-Stock Companies
Repurchase at the shareholder’s request (Article 132)
In a share buyback at the shareholder’s request, a shareholder who voted against a general meeting resolution on reorganising the company, or on changing shareholder rights and obligations in the charter, may ask the company to repurchase their shares. The written request, stating the number of shares and proposed price, must reach the company within ten days of the resolution date.
The company must repurchase at the market price or at the price set by the charter within 90 days of receiving the request. If the parties cannot agree on price, either side may ask a professional valuer. The company proposes at least three valuers, and the shareholder’s selection is final.
Company-initiated share buyback (Article 133)
A JSC may launch a share buyback on its own initiative. The board may decide to repurchase up to 30% of the total ordinary shares sold, and part or all of the dividend preference shares sold, unless the charter says otherwise. Anything beyond those thresholds requires a general meeting resolution.
The board sets the price. For ordinary shares the price may not exceed the market price, while for other repurchase scenarios the price may not be lower than the market price unless the charter provides differently. An offer to all shareholders must be made proportionally to their holdings.
Repurchased shares are treated as unsold shares. The company must adjust charter capital by the aggregate par value of the repurchased shares within ten days of completing payment, unless securities law provides otherwise. Payment is allowed only if the company can still pay its debts and other property obligations afterwards. Directors who approve a share buyback in breach of this condition face personal liability, so the board should minute its solvency reasoning.
Treasury Shares of Public Companies
The securities-law overlay
For a public company, a share buyback is governed by the Law on Enterprises and by the Law on Securities 2019, which refers to the repurchased stock as treasury shares. The Law on Enterprises itself speaks of “unsold shares”, so the two regimes must be read together. Treasury shares carry no voting rights or dividend entitlement while the company holds them. Resale has its own conditions and disclosure steps (verify Law on Securities 2019, Art. 36, and its implementing decree).
A listed company typically executes a share buyback through the stock exchange or by an offer to all holders. It must announce the plan beforehand, report results afterwards and disclose any later resale or cancellation. Funding is usually limited to retained earnings and equity funds, so the audited statements should show enough distributable reserves (verify the funding rule in the implementing decree).
Tender offers, foreign room and cross-ownership
Two issues regularly surprise issuers. First, a share buyback shrinks the number of shares outstanding, so every remaining holder’s percentage rises. A holder who crosses the 25% threshold could in principle trigger a public tender-offer obligation, although the decree grants exemptions for passive increases caused by company repurchases (verify the exemption wording). Second, the same arithmetic lifts the foreign ownership ratio.
For a company in a conditional sector, or one with a foreign ownership limit, a buyback can push the foreign share above the permitted level without any foreign investor buying a single share. Model post-buyback percentages before launching.
LLC Capital Reduction and Repurchase of Contributed Capital
Member-request repurchase
In a multi-member LLC, a member who voted against a resolution amending the charter provisions on member rights and obligations, or on reorganising the company, may ask the company to buy their stake. This is the repurchase of contributed capital. The request must be made within 15 days of the resolution date, and the company must complete the repurchase within 90 days at market price or the price set in the charter.
Payment is subject to the same solvency condition as in a JSC (verify Art. 51 of the Law on Enterprises 2020).
Pro rata return of capital to members
The second LLC route is a general charter capital reduction by returning part of contributed capital to all members in proportion to their holdings. Two conditions apply: the company must have operated continuously for at least two years from its establishment date, and it must still be able to pay its debts and other property obligations after the return. A reduction also follows a member-request repurchase, or arises when members fail to contribute in full and on time.
Single-member LLCs follow a separate article (verify). Banks, insurers, securities firms and other regulated entities cannot reduce capital below minimum legal capital, and many need prior regulator approval.
Solvency Test and Creditor Protection
Building a defensible solvency test
The statutory wording is simple: after paying for a share buyback or returning capital, the company must still be able to pay its debts and other property obligations as they fall due. With no prescribed formula, the solvency test is a matter of evidence. A defensible file normally contains:
- the latest audited or reviewed financial statements and a post-transaction pro forma balance sheet;
- a 12-month cash-flow forecast showing debt service, tax and payroll commitments after the payment;
- a schedule of contingent liabilities and pending claims; and
- a board certificate that the solvency condition is met.
If an auditor, tax inspector or creditor later challenges the transaction, this record is the directors’ first line of defence.
Creditors, lenders and contractual covenants
The current Law on Enterprises does not impose a stand-alone, universal creditor-notification procedure of the kind found in earlier statutes, and the registration dossier requirements for a reduction should be confirmed against the latest decree on enterprise registration (verify). That does not mean creditors can be ignored.
Loan agreements, bond terms and project-finance documents typically restrict distributions, require lender consent for any share buyback or capital reduction, and treat an unauthorised payment as an event of default. Giving written notice of a planned share buyback to material creditors before the transaction, and obtaining waivers where needed, is a practical necessity even where it is not a statutory one.
Foreign Investors: Capital Repatriation and FX Registration
When a foreign investor is paid on a share buyback or capital reduction, the money has to leave Vietnam through a compliant channel. The Investment Law 2020 guarantees foreign investors the right to remit capital and profits abroad, but exercising it runs through foreign-exchange rules administered by the State Bank of Vietnam.
The key concept is the direct investment capital account (DICA) held at an authorised bank in Vietnam. Under Circular 06/2019/TT-NHNN (verify the current version), contributions, dividends and returns of capital for direct investment flow through that account. For capital repatriation, a foreign investor should expect the bank to request:
- the investment registration certificate and enterprise registration certificate, updated for the reduced capital;
- the resolution or decision approving the share buyback or reduction, with the payment schedule;
- evidence that tax obligations arising on the transaction have been declared and paid; and
- the capital contribution history showing the amount originally contributed.
Amounts exceeding the investor’s original contribution are generally characterised as income and may need to be paid as a profit or gain rather than as return of capital, with different documentation requirements. Agree the characterisation with the bank and tax adviser before payment, because mismatched labels across the resolution and remittance instruction are a common cause of delay.
Tax Consequences of a Share Buyback
Tax on a share buyback depends on who the seller is and how the payment is characterised. The table summarises the usual starting points. Corporate and personal income tax laws were reformed in 2025, so verify each cell against the law in force.
| Seller | Typical treatment | Withholding or filing point |
|---|---|---|
| Vietnamese corporate shareholder | Gain over cost treated as taxable corporate income at the standard rate (20% historically; verify) | Self-declared in the annual CIT return |
| Foreign corporate shareholder without a permanent establishment | Foreign contractor tax: CIT on gain for non-securities capital, or a percentage of proceeds for securities (Circular 103/2014/TT-BTC; verify) | Company or buyer withholds and files; the foreign seller does not file |
| Resident individual | PIT on capital gain (20% of gain, or 0.1% of proceeds for securities, historically; verify under the new PIT law) | Company withholds or the individual files within the deadline |
| Non-resident individual | Flat percentage of transfer price under the PIT rules (verify) | Company withholds and remits |
Three further points. First, value-added tax generally does not apply to a transfer of capital (verify against the VAT law in force). Second, the company cannot deduct the repurchase price as a business expense; it is an equity transaction. Third, tax authorities look closely at payments that exceed the investor’s contributed capital and may treat the excess as taxable income even when the legal form is a capital reduction.
Obtain a written tax position before paying. Our tax advisory team handles this analysis alongside the corporate steps.
Registrations and Regulatory Reporting
After a share buyback is paid, the paperwork has to catch up with the economics. Typical steps are:
- Enterprise registration. Notify the business registration authority of the new charter capital and, for a JSC, the amended share structure. After the 2025 reorganisation of provincial agencies, confirm which office handles registration (verify).
- Investment registration for FDI companies. Where the project’s investment registration certificate states charter capital or the foreign investor’s contribution ratio, the certificate must be adjusted under the Investment Law 2020 and Decree 31/2021/ND-CP.
- Charter and register. Amend the charter and update the shareholder or member register.
- SSC and exchange reporting for public companies. Disclose the share buyback plan, any milestone and the results to the State Securities Commission (SSC) and the exchange, and update registration with the Vietnam Securities Depository and Clearing Corporation. Deadlines are set by the information-disclosure circular, currently Circular 96/2020/TT-BTC as amended (verify).
For corporate-side steps, our corporate and commercial practice prepares the resolutions, charter amendments and filings as a single package. You can consult the official State Securities Commission portal at ssc.gov.vn for disclosure forms and notices, and the State Bank of Vietnam at sbv.gov.vn for foreign-exchange regulations.
Practical Sequencing and Disputes
A workable roadmap
Most problems arise from steps taken in the wrong order. A sequence that works in practice:
- Feasibility. Confirm the share buyback route, funding source, sector limits, minimum capital, tender-offer and foreign-room effects, and lender consents.
- Solvency file. Prepare the pro forma balance sheet and forecast before any resolution is passed.
- Corporate approval. Obtain the board, general meeting or members’ council resolution, and send the required notices to shareholders.
- Pricing. Fix the price under the statutory and charter rules, with a valuation where the price is contested.
- Tax and FX preparation. Agree the characterisation of the payment, tax withholding and the bank’s documentation list.
- Payment. Pay through the correct channel, including the DICA for foreign investors.
- Post-closing. Adjust charter capital within the statutory period, update registers, amend the enterprise and investment certificates, and file the disclosures.
Where disputes arise
Share buyback disputes cluster around five points: price under Article 132 or the LLC equivalent, missed deadlines for dissenting requests, payments made while the company was insolvent, unequal treatment of shareholders in a partial offer, and tax characterisation of any excess over contributed capital. A dissenting shareholder may sue for the repurchase price, and creditors may challenge a payment that left the company unable to pay its debts, with directors personally exposed.
The charter and shareholders’ agreement should specify governing law and forum; arbitration is common in foreign-invested companies.
A share buyback can also serve as a negotiated exit tool instead of a transfer to a third party: the buyer is the company, no new shareholder needs approval and the foreign-ownership percentage may improve. The trade-off is tax cost, solvency risk and a longer registration trail.
Frequently Asked Questions
Can a Vietnamese JSC approve a share buyback without a general meeting?
Yes, within limits. The board may decide on a share buyback of up to 30% of ordinary shares sold, unless the charter says otherwise. Larger repurchases need a general meeting resolution, and payment must leave the company able to pay its debts.
Are shares from a public-company share buyback cancelled?
Not necessarily. Securities law allows treasury shares to be held and later resold, subject to conditions and disclosure. They carry no vote or dividend while held. Whether to cancel or resell should be decided and disclosed in advance.
Can an LLC return capital to members at any time?
No. A pro rata return of contributed capital generally requires the company to have operated for at least two years and remain able to pay its debts afterwards. Member-request repurchase has separate triggers and deadlines.
How does a foreign investor remit share buyback proceeds?
Through the direct investment capital account at an authorised bank, after taxes are declared and paid and the registration certificates are updated. The bank will ask for the resolution and contribution records. Verify current foreign-exchange circulars first.
Is a share buyback always taxable?
Not always. In a share buyback, a return of capital up to the investor’s original contribution is generally not income, while the excess may be taxable as gain. Treatment varies by seller type, so obtain a tax analysis before payment.
Planning a share buyback or capital reduction? IVLF Advisors LLC offers a confidential preliminary consultation covering the legal route, solvency evidence, tax cost and foreign-exchange steps for your company, from our offices in Ho Chi Minh City and Hanoi.
Your next action: before any board meeting on a share buyback is called, ask your finance team for a post-transaction balance sheet and a 12-month cash-flow forecast, then share them with your legal and tax advisers so the route, price and timetable can be fixed on evidence.
This article provides general information only and does not constitute legal, tax or financial advice. Laws and regulations change, and the analysis of any transaction depends on its specific facts. Seek professional advice before acting.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
