In practice, customer claims for compensation arising from a capital reduction have become increasingly common where a company's decision to reduce its charter capital directly affects customers' rights, contractual relationships, and the company's financial capacity to perform its obligations. Understanding the legal grounds, customers' rights, and the appropriate handling procedures enables enterprises to minimize disputes while ensuring that the capital reduction is carried out in compliance with applicable laws.

I. The current situation of customer claims for compensation arising from capital reduction

At present, customer claims for compensation resulting from a capital reduction are becoming increasingly prevalent, particularly where the capital adjustment affects the performance schedule of contractual obligations, the company's payment capability, or its contractual commitments.

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In many cases, customers argue that the capital reduction weakens the company's ability to secure the performance of its obligations, thereby leading to claims for damages or requests for amendments to contractual terms. It demonstrates that a capital reduction is not merely an internal corporate decision but may also expose the enterprise to legal risks and disputes with customers if it is not properly planned and implemented in a transparent manner.

II. What is a customer's claim for compensation arising from capital reduction?

1. Definition of a customer's claim for compensation arising from capital reduction

A customer's claim for compensation arising from a capital reduction refers to a request made by a customer or business partner requiring the enterprise to compensate for losses incurred when the company's decision to reduce its charter capital adversely affects the performance of contractual obligations, its payment capacity, or the level of security for the commitments previously agreed upon. Such claims generally arise where the customer believes that the capital reduction has caused actual losses or has increased the legal or financial risks affecting its legitimate interests.

2. How to resolve a customer's claim for compensation arising from capital reduction

When a customer submits a claim for compensation arising from a capital reduction, the enterprise should first review the relevant contract, the resolution approving the capital reduction, and the extent of the actual damages incurred in order to determine whether there is any legal basis for compensation liability.

Based on such assessment, the enterprise should proactively communicate and negotiate with the customer regarding appropriate solutions, such as amending the contract, extending the time for performance, providing additional security, or agreeing on a reasonable amount of compensation. If the parties are unable to reach an agreement, the dispute may be resolved in accordance with the dispute resolution mechanism stipulated in the contract and applicable laws, including mediation, commercial arbitration, or litigation before a competent court.

III. Legal regulations governing customer claims for compensation arising from capital reduction

1. Relevant legal provisions applicable to customer claims for compensation arising from capital reduction

Law on Enterprise 2020 (as amended in 2025)

  • Article 68 (applicable to multi-member limited liability companies) and Article 87 (applicable to single-member limited liability companies) provide that a reduction of charter capital may only be conducted if the company is capable of fully satisfying all debts and other property-related obligations after the reduction.
  • Article 112 (applicable to joint stock companies) likewise requires that a capital reduction comply with the same conditions, as well as the competent authority and prescribed decision-making procedures of the enterprise. Accordingly, even if the enterprise lawfully reduces its charter capital, it remains obligated to perform all commitments previously made to its customers.

Civil Code 2015 (Liability for breach of obligations and compensation for damages)

  • Article 360: An obligor that breaches its obligations shall take civil liability toward the obligee.
  • Article 361: Civil liability arises where an obligor fails to perform or improperly performs its obligations.
  • Article 419: A party breaching a contract must compensate for all damages suffered, including actual losses and lost benefits.

2. Which authority has jurisdiction to resolve customer claims for compensation arising from capital reduction?

Jurisdiction over claims for compensation arising from a capital reduction is governed by the Civil Procedure Code 2015 and the Law on Commercial Arbitration 2010.

Specifically, under Articles 30 and 35 of the Civil Procedure Code 2015 (as amended by Clause 2, Article 1 of the Law Amending the Civil Procedure Code, the Law on Administrative Procedures, the Law on Juvenile Justice, the Law on Bankruptcy, and the Law on Mediation and Dialogue at Court 2025), business and commercial disputes, including claims for damages arising from a capital reduction, fall within the jurisdiction of the competent People's Courts.

In addition, based on Articles 5 and 7 of the Law on Commercial Arbitration 2010, if the parties have entered into a valid arbitration agreement, the dispute shall be resolved by commercial arbitration instead of the court.

3. What are the consequences if a customer's claim for compensation arising from capital reduction cannot be resolved?

If a customer's claim for compensation arising from a capital reduction cannot be resolved, the enterprise may face significant legal and commercial consequences. First, the dispute may be referred to commercial arbitration or brought before a competent court, resulting in increased legal expenses, prolonged proceedings, and disruption to the company's business operations.

Pursuant to Articles 360 and 419 of the Civil Code 2015 governing liability for breach of obligations and compensation for contractual breaches, if the enterprise fails to properly address the consequences of the capital reduction and such failure results in a breach of its contractual commitments to the customer, it may be required to compensate for the entirety of the actual damages incurred, including direct financial losses, remediation costs, and the benefits that the customer would otherwise have been entitled to receive.

Furthermore, under the rules governing civil liability, the enterprise may also be compelled to continue performing its contractual obligations, pay contractual fines where agreed by the parties, and fulfill all other contractual liabilities. Delayed or improper handling of the matter may further lead to prolonged disputes, reputational damage, and deterioration of business relationships with customers and commercial partners.

IV. Questions regarding customer claims for compensation arising from capital reduction

1. What rights does a customer have under the law when claiming compensation due to a capital reduction?

Pursuant to Articles 13 and 360 of the Civil Code 2015, individuals and organizations have the right to require a party that breaches its obligations to compensate for damages if such party fails to perform or improperly performs its obligations, thereby causing damage. In addition, Article 419 of the Civil Code 2015 provides that the aggrieved party in a contractual relationship is entitled to claim compensation for all actual damages suffered, including material losses and the benefits that it would otherwise have received.

Furthermore, customers have the right to request the enterprise to provide relevant information, submit evidence of damages, seek negotiations, or initiate legal proceedings to protect their lawful rights and interests pursuant to the right to institute legal proceedings under Article 186 of the Civil Procedure Code 2015.

2. What is the procedure for handling a customer's claim for compensation arising from a capital reduction?

- Step 1. The customer (creditor, business partner, etc.) submits a claim for compensation together with supporting documents evidencing the alleged damages. The enterprise should review the legal basis for the capital reduction under the relevant provisions governing charter capital reduction (for example, Articles 68 and 87 of the Law on Enterprise 2020 (as amended in 2025), depending on the type of enterprise) to determine whether the capital reduction has affected its payment capacity or contractual obligations.

- Step 2. Under the statutory provisions governing charter capital reduction, an enterprise may only reduce its charter capital if it remains capable of fully satisfying all debts and other property-related obligations after the reduction. If the capital reduction causes damage to a customer, liability for compensation may arise under the principles governing non-contractual compensation for damages set out in Articles 584 and 585 of the Civil Code 2015.

- Step 3. The enterprise and the customer should negotiate the amount of compensation, payment arrangements, or amendments to contractual obligations. Such an approach is consistent with the principles of freedom of contract and good faith in the performance of civil obligations as prescribed in Articles 3 and 6 of the Civil Code 2015.

- Step 4. Any decision regarding the settlement of the claim and the performance of compensation obligations (if applicable) should be implemented in conjunction with the resolution of the competent corporate authority approving the reduction of charter capital in accordance with Articles 68, 87, and 112, as well as the provisions governing corporate authority and the adoption of resolutions under Articles 138 and 148 of the Law on Enterprise 2020 (as amended in 2025).

- Step 5. If the parties fail to reach an agreement, the dispute may be resolved through the dispute resolution mechanisms prescribed by law, specifically:

  • Court Proceedings: Pursuant to Article 30 of the Civil Procedure Code 2015, the People's Courts have jurisdiction over business and commercial disputes, including disputes arising from contracts, compensation obligations, and commercial relationships between enterprises and customers.
  • Commercial Arbitration: Pursuant to Article 5 of the Law on Commercial Arbitration 2010, disputes may be resolved through arbitration if the parties have entered into a valid arbitration agreement.
  • Commercial Mediation: Pursuant to Articles 3 and 4 of Decree No. 22/2017/ND-CP on Commercial Mediation, the parties may voluntarily appoint a commercial mediator to resolve the dispute on the basis of mutual agreement.

3. What happens if a customer does not have sufficient evidence to support a compensation claim arising from a capital reduction?

Pursuant to Article 91 of the Civil Procedure Code 2015, each litigant bears the burden of proving that his or her claims are well-founded and lawful. Accordingly, the customer must submit documents and evidence establishing:

  • The enterprise's capital reduction;
  • The actual damages suffered; and
  • The causal relationship between the capital reduction and the alleged damages.

If these elements cannot be established, the Court may:

  • Dismiss all or part of the compensation claim;
  • Decline to order the enterprise to perform any compensation obligation; and
  • Require the customer to bear the procedural risks corresponding to the portion of the claim that is not upheld, in accordance with the Civil Procedure Code 2015.

4. Can a customer claim compensation for losses incurred as a result of a capital reduction?

Article 360 of the Civil Code 2015 provides that where damages arise from a breach of obligations, the obligor must compensate for the entirety of such damages unless otherwise agreed by the parties or otherwise prescribed by law. This provision constitutes the direct legal basis for claiming compensation for losses arising from an enterprise's capital reduction if such reduction results in a breach of contractual commitments, legal obligations, or adversely affects the customer's lawful rights and interests.

Moreover, Article 419 of the Civil Code 2015 entitles the aggrieved party to claim compensation not only for actual losses but also for the benefits that it would otherwise have received, together with any additional expenses incurred as a result of the obligor's failure to properly perform its obligations. Accordingly, financial losses, additional costs, and lost profits arising from the capital reduction may all be recoverable, provided that the statutory conditions are satisfied.

However, to succeed in such a claim, the customer must prove that:

  • Actual damages have occurred;
  • The enterprise committed a breach of its obligations or adopted a capital reduction decision contrary to its contractual or legal commitments; and
  • A direct causal relationship exists between the capital reduction and the claimed losses.

Failure to establish these elements may result in the compensation claim being rejected.

V. Looking for a reputable lawyer to handle matters relating to customer claims for compensation arising from capital reduction?

Where compensation claims arise as a consequence of a capital reduction, enterprises are often exposed to various legal risks, including contractual disputes, liability for damages, and legal claims initiated by customers. Seeking legal advice at an early stage enables an enterprise to assess the applicable legal grounds, formulate an appropriate response strategy, mitigate legal risks, and ensure that its capital reduction is implemented in full compliance with the law.

NPLaw provides comprehensive legal advisory services in relation to corporate disputes, compensation liability, and the legal consequences associated with capital reductions. Our experienced lawyers assist clients in reviewing legal documentation, developing negotiation strategies, and representing enterprises in commercial arbitration and court proceedings, thereby safeguarding clients' legitimate rights and effectively managing legal risks.

The above information is provided for reference purposes only. Should you require detailed legal advice regarding your specific circumstances, please contact NPLaw Firm for prompt professional assistance.