Legal consequences where a company registers an increase in charter capital but shareholders fail to pay or fail to fully pay, for the subscribed shares?

In practice, many joint stock companies have the need to offer shares for sale in order to increase their charter capital and expand the scale of their business operations. However, in many cases, joint stock companies have registered an increase in charter capital that does not reflect the actual situation, due to shareholders’ failure to pay, or failure to fully pay, for the shares they subscribed to purchase in such share offerings. What, then, are the legal consequences in these circumstances? Please follow the article below to gain further insight into this issue.

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1. Obligation to pay for subscribed shares and registration of increase in charter capital 

Pursuant to Article 112 of the Law on Enterprises 2020:

“1. A joint stock company’s charter capital is the total face value of the shares sold.

…

2. Sold shares are authorized shares that have been fully paid for the shareholders.”

Accordingly, the charter capital of a joint stock company is the total par value of the shares that have been fully paid for by the shareholders to the company.

In addition, pursuant to Clause 4 Article 123 of the Law on Enterprises 2020, the registration of changes to charter capital in the case of a share offering is stipulated as follows: “The company shall register the change in charter capital within 10 days from the day on which the shares offering is complete.” It may be understood that, under the above provision, the date of completion of a share offering is the date on which the joint stock company has received full payment from the shareholders who subscribed to purchase shares in such share offering.

Accordingly, only after the shareholders have fully paid for the shares they subscribed to purchase in a private placement may the company carry out the procedure for registering an increase in its charter capital with the business registration authority. In such case, the company must declare its charter capital in an amount equal to the total par value of the shares that have been fully paid for by the shareholders to the company. 

2. Legal consequences where a company registers an increase in charter capital while shareholders fail to pay, or fail to fully pay, for the subscribed shares 

2.1. The enterprise may be subject to administrative penalties for violations in enterprise registration due to making false or inaccurate declarations regarding its charter capital

Pursuant to Clause 3 Article 8 of the Law on Enterprises 2020 and Clause 1 Article 4 of Decree No. 168/2025/ND-CP, an enterprise is obliged to take responsibility for the truthfulness and accuracy of the information declared in its enterprise registration dossier.

Where a company registers an increase in charter capital at a level that does not reflect the actual situation due to shareholders’ failure to pay, or failure to fully pay, for the shares offered for sale, such conduct is deemed to constitute false and inaccurate declaration in the dossier for registration of changes to enterprise registration contents.

Accordingly, pursuant to Article 43 of Decree No. 122/2021/ND-CP, the enterprise may be subject to a monetary fine ranging from VND 20,000,000 to VND 30,000,000 for the act of making false or inaccurate declarations in the dossier for registration of changes to enterprise registration contents in order to obtain the Enterprise Registration Certificate. 

2.2. The enterprise is required to carry out procedures to adjust and reduce its charter capital corresponding to the amount of capital actually contributed

As analyzed above, the charter capital of a joint stock company comprises only the total par value of shares that have been fully paid for by the shareholders to the company. Therefore, where a company has registered an increase in its charter capital but, in reality, the shareholders fail to pay or fail to fully pay for the shares they subscribed to purchase, the portion of charter capital registered in excess of the actual capital contributed is inconsistent with the provisions of law.

In accordance with the principle of truthfulness and accuracy in enterprise registration, the company is responsible for reviewing the actual status of capital contribution and carrying out procedures to register a reduction of its charter capital corresponding to the amount of capital that has been fully paid by the shareholders. Such adjustment aims to ensure consistency between the enterprise registration information and the company’s actual financial position, thereby minimizing legal risks arising in the course of its operations and transactions with business partners and competent state authorities.

From the current legal provisions, it can be seen that a company is obliged to register an increase in its charter capital strictly in accordance with the actual situation, only after shareholders have fully paid for the shares they subscribed to purchase. Therefore, in order to avoid legal risks for the enterprise, including the risk of administrative sanctions for making false or inaccurate declarations, the enterprise should pay close attention to strictly controlling shareholders’ payment for shares and only proceed with the registration of an increase in charter capital on the basis of capital that has been actually contributed.

This article was prepared by Oanh Thai with consultation from Lawyer Y Huynh.

This article is provided for general informational purposes only and does not constitute legal advice for any specific case. The legal regulations cited herein are effective as at the time of publication but may have been amended, supplemented, replaced or ceased to be effective at the time readers refer to them. Accordingly, readers are advised to seek advice from a qualified lawyer before applying any information contained in this article.

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