Charter Capital Reduction in Vietnam: Conditions and Procedures

When a business runs more efficiently than planned, when its ownership structure changes, or simply when the registered charter capital no longer reflects reality, many business owners think of reducing charter capital. It sounds simple — but this is one of the most tightly controlled procedures under Vietnamese law. Not every company may reduce capital at will, and doing it the wrong way can expose the company to legal risks for years afterward.

This article maps out the conditions for charter capital reduction by company type, the filing dossier and procedures under the latest regulations, and the practical traps companies often fall into.

1. When may a company reduce charter capital? Three statutory cases

The Law on Enterprises 59/2020/QH14 (as amended by Law 76/2025/QH15, effective 1 July 2025) permits charter capital reduction in only three cases. Outside these cases, the business registration office will reject the filing.

Case 1: Refunding part of contributed capital

A company may refund part of the contributed capital or repurchase issued shares when both conditions are met:

• The company has operated continuously for at least 2 years from its establishment registration date; and
• It guarantees full payment of all debts and other asset obligations after the refund.

This is the most common scenario for “over-capitalized” companies — for example, a company registered VND 50 billion but needing only VND 20 billion to operate. The debt-payment guarantee is the key hurdle: the company must demonstrate it remains able to pay all due debts after the reduction.

Case 2: Repurchase of capital contributions or shares

The company repurchases capital contributions from members or shares from shareholders in accordance with the Law on Enterprises (repurchase at the request of members/shareholders or by company resolution). The repurchased portion reduces charter capital accordingly.

Case 3: Reduction due to unpaid committed capital

When members or shareholders fail to pay in full and on time their committed capital, the company must register a reduction of charter capital to the actually contributed value. This is an obligation, not an option.

2. Conditions by company type

Regardless of type, the common principle holds: reduction is allowed only in the three statutory cases and requires full change-registration procedures.

3. Dossier for charter capital reduction

Under Decree 168/2025/ND-CP (effective 1 July 2025, replacing the expired Decree 01/2021/ND-CP), the change-registration dossier includes:

1. Notice of change of enterprise registration contents, signed by the legal representative;
2. Resolution/decision of the Members Council (multi-member LLC), the owner (single-member LLC), or the General Meeting of Shareholders (JSC) on the capital reduction;
3. Meeting minutes of the Members Council / General Meeting of Shareholders (if any);
4. The latest financial statements evidencing the ability to pay debts after reduction (for capital refund cases);
5. Power of attorney (if the filer is not the legal representative).

Important: Since the 2025 administrative restructuring, the provincial business registration office sits under the Department of Finance (no longer the Department of Planning and Investment). Filings sent to the old authority will be returned.

4. Six-step procedure and deadlines to remember

1. Step 1 — Adopt the reduction resolution: The Members Council / GMS / owner approves the resolution, specifying the post-reduction capital and the reduction method.
2. Step 2 — Settle related payments: Complete the capital refund or repurchase under the resolution.
3. Step 3 — File the change registration: File with the Business Registration Office of the provincial Department of Finance where the head office is located. Processing time: 3 working days from receipt of a complete, valid dossier.
4. Step 4 — Notify creditors: Within 10 days of completing the reduction, notify creditors in writing.
5. Step 5 — Publish: Publish the enterprise registration contents on the National Business Registration Portal within 30 days.
6. Step 6 — License tax: abolished, no action needed: License tax (lệ phí môn bài) was abolished from 01/01/2026 under Article 10.7 of Resolution 198/2025/QH15 and Decree 362/2025/ND-CP (31/12/2025, repealing Decrees 139/2016/ND-CP and 22/2020/ND-CP). From 2026, no license-tax declaration is required when changing charter capital. Note: license-tax obligations for 2025 and earlier years remain fully payable — the abolition is not retroactive.

5. Six practical traps

Trap 1: Dropping below statutory minimum capital

Certain conditional business lines require minimum statutory capital (e.g., banking, insurance, some real estate segments). Reducing below that level means losing eligibility for the business line — sub-licenses may be revoked.

Trap 2: Forgetting to notify the lending bank

Most credit agreements contain a material adverse change clause listing charter capital reduction as an event requiring prior notice and bank consent. Reducing capital without notice may trigger an event of default and accelerated repayment.

Trap 3: Treating the abolition as retroactive

License tax was abolished from 01/01/2026 — unpaid license tax for 2025 and earlier years remains fully due; the abolition is not retroactive. Conversely, from 2026 a charter capital change triggers no license-tax declaration at all (Article 10.7, Resolution 198/2025/QH15; Decree 362/2025/ND-CP).

Trap 4: Foreign investors and investment reporting duties

For FDI enterprises, reducing charter capital changes the registered total investment — the Investment Registration Certificate must be adjusted in sync. Skipping this creates a mismatch between the two registration systems and complicates overseas profit remittance.

Trap 5: Financial statements that cannot prove debt-paying ability

The registration office may probe filings where the post-reduction debt-paying ability is doubtful. Large accumulated losses or negative cash flow are red flags that invite scrutiny or rejection.

Trap 6: Liability for debts arising after the reduction

Capital reduction does not erase existing debts. Worse, if the reduction is shown to be a scheme to dissipate assets to evade debt obligations, members/shareholders may face personal liability, including criminal liability in serious cases.

6. Three common misconceptions

Myth 1: “It is my company money; I can reduce capital anytime.”
Wrong. Charter capital is a commitment to the State, creditors, and partners. Only the three statutory cases qualify.

Myth 2: “After reduction, I am free of old debts.”
Wrong. Debt obligations survive the reduction; the debt-payment guarantee exists precisely to protect creditors.

Myth 3: “Filing with the Department is the end of it.”
Wrong. After registration comes a chain of duties: creditor notice (10 days), publication (30 days), bank notifications, sub-licenses — and for FDI companies, the investment certificate.

7. Pre-decision checklist

• ☐ Identify which of the 3 statutory cases the reduction falls under
• ☐ Verify 2 years of continuous operation (for capital refunds)
• ☐ Assess post-reduction debt-paying ability (financial statements, cash flow)
• ☐ Review loan covenants with banks
• ☐ Check statutory minimum capital for licensed business lines
• ☐ Prepare the resolution and dossier under Decree 168/2025/ND-CP
• ☐ Schedule: filing → creditor notice (10 days) → publication (30 days) — from 2026, no license-tax declaration is needed
• ☐ (FDI) Sync the Investment Registration Certificate adjustment

8. FAQ

Q: How long does a charter capital reduction take?
A: The registration office processes the dossier within 3 working days. The full chain — resolution, payments, creditor notice, publication — typically takes 1–2 months.

Q: Can capital be reduced multiple times in one year?
A: The law sets no limit on frequency, but each reduction must independently satisfy the conditions and procedures. Repeated reductions may raise questions from tax authorities and creditors about the company’s financial health.

Q: Does a capital reduction require a tax finalization?
A: No — it is not a dissolution, so no full tax finalization is required. But review any outstanding license-tax duties for 2025 and earlier years (abolished from 01/01/2026) and the tax implications of refunding capital to members/shareholders.

9. Legal bases

• Law on Enterprises 59/2020/QH14 (as amended by Law 76/2025/QH15, effective 1/7/2025): Articles 68, 87, 111–113, 132–133
• Decree 168/2025/ND-CP on enterprise registration (effective 1/7/2025; replacing Decree 01/2021/ND-CP)
• Resolution 198/2025/QH15: Article 10.7 (license-fee abolition from 01/01/2026); Decree 362/2025/ND-CP (31/12/2025 — repealing Decrees 139/2016/ND-CP and 22/2020/ND-CP)

Note: This article consolidates regulations in force as of 14 October 2026. Companies should check the original legal texts before acting.

Transparency note: This article was prepared by the FLAW AI Legal Council; its legal content is awaiting review by the QA Council before approval. This is general legal information, not a substitute for legal advice on a specific matter.

For advice on a specific case, please contact FLAT Law Firm.