Tiếng ViệtIn just the past two years, the number of shareholder disputes brought before arbitration and courts in Vietnam has increased by more than 30% (according to statistics from the Vietnam International Arbitration Center – VIAC). These disputes go far beyond mere differences of opinion — many have forced enterprises to seek corporate legal services to protect their rights, avoid operational paralysis, loss of major contracts, or even loss of control over the company. In this context, the role of corporate lawyers has become increasingly vital.
Consider the following scenarios: a shareholder who has not fully contributed capital still participates in voting on key corporate decisions; a group of shareholders secretly transfers shares to your strategic competitor; or a minority shareholder wields veto power at a sensitive moment. Each of these can escalate into complex legal conflicts if not identified and addressed promptly.
In this article, LexConsult & Partners identifies the five most common types of shareholder disputes in enterprises, analyzes their causes and legal grounds, and provides practical legal solutions to help you both manage conflicts effectively and prevent risks from the outset.
1. Shareholder Disputes over Capital Contribution Ratio and Share Ownership
Disputes concerning capital contribution ratios and share ownership are among the leading causes of internal conflicts within enterprises, particularly in startups, family-owned businesses, and companies with unstandardized legal documentation. Such disputes often arise when the parties cannot agree on the proportion of contributed capital, thereby affecting voting rights and profit distribution. Without a well-drafted shareholders’ agreement and company charter, these conflicts can easily escalate into litigation.
Common causes of capital contribution disputes:
– Unclear valuation of contributed assets: The company records contributions in the form of assets (vehicles, machinery, land use rights, etc.) but lacks valuation minutes or transfer contracts, making it impossible to prove the actual value contributed;
– Improper share transfer procedures: Some shareholders unilaterally transfer their shares to others without the consent of existing members (in an LLC) or without proper notification (in a JSC), leading to disputes over the rightful owner;
– Failure to contribute capital in full or on time: An individual commits to contributing capital but fails to fulfill the obligation while still participating in management and decision-making, causing disputes with other shareholders;
– Lack of legal documentation proving ownership: Absence of a shareholders’ register, valid capital contribution agreements, or lawful transfer records prevents verification of who is the legitimate shareholder.
Relevant legal bases:
– Articles 47 and 48 of the Law on Enterprises 2020 (for LLCs): Regulate the time limit for capital contribution and consequences for failure to contribute as committed;
– Articles 122, 124, and 126 of the Law on Enterprises 2020 (for JSCs): Regulate the transfer and registration of share ownership;
– Articles 35 and 36 of the Civil Code 2015: Stipulate that contributed assets must be transferred in accordance with ownership regulations.
Preventive and remedial measures:
– Establish a comprehensive capital contribution agreement from the outset: Clearly specify the form, value, and deadline of the contribution, accompanied by supporting documents;
– Comply fully with legal procedures: For asset contributions, conduct valuation, prepare minutes, and transfer ownership in accordance with the law;
– Regularly update the members’ or shareholders’ register: All share transfers or ownership changes must be recorded and archived;
– Restrict decision-making rights of shareholders who have not fully contributed capital: Under the law, such shareholders have no voting rights on major company matters;
– Consult a corporate lawyer in complex cases such as contributions involving land use rights, intellectual property, or foreign investment capital.
2. Shareholder Disputes over Management and Corporate Governance Rights
This type of dispute typically arises among founding shareholders or major shareholder groups when disagreements occur regarding appointments, decision-making authority, or internal management control. It is especially common in companies with cross-ownership structures or non-transparent appointment processes. The most effective solution is to engage a shareholder dispute lawyer from the outset to ensure proper legal guidance and prevent escalation.
Common causes of management and governance disputes:
– The company charter is unclear regarding the scope of authority and delegation of management powers;
– Power struggles between major shareholder groups, each seeking to control the company’s operations;
– Improper or abusive appointment of the legal representative, resulting in multiple individuals claiming to be the lawful representative;
– Failure to convene Members’ Council, Board of Directors, or General Meeting of Shareholders within the statutory timeframe, leading to paralysis in decision-making;
– Conflicts arising from capital contributions or share transfers, creating disputes over voting rights and management control.
Relevant legal framework:
– Articles 12 and 13, Law on Enterprises 2020: Regulations on legal representatives and principles of liability;
– Articles 54–56, Law on Enterprises 2020 (for LLCs): Rights and obligations of members and managers;
– Articles 149–151, Law on Enterprises 2020 (for JSCs): Regulations on the organization and operation of the Board of Directors, Director/General Director, and Supervisory Board;
– The Company Charter and Internal Governance Regulations are key bases for determining authority and procedures for appointment or dismissal of executives.
Solutions to establish transparent corporate governance mechanisms:
– Review and amend the company charter: Clearly define the authority of each position (General Director, Chairperson, Members’ Council, etc.); establish strict appointment and dismissal procedures aligned with the law;
– Develop transparent internal regulations governing voting, personnel, seals, and bank accounts — including clear rules for meetings, voting, investment decisions, HR appointments, and use of seals and accounts;
– Limit the number of legal representatives unless necessary; where multiple exist, clearly allocate authority and signing powers to avoid overlaps;
– Hold regular and lawful meetings of shareholders, the Members’ Council, or the Board of Directors — ensuring all resolutions are legally valid to serve as evidence in the event of disputes;
– Engage ongoing legal counsel: Especially for high-level personnel changes, share transfers, or charter amendments;
– If a dispute has already arisen: The company may pursue internal mediation, commercial arbitration, or court proceedings to re-establish the legitimate legal representative and restore governance stability.
3. Shareholder Disputes over Dividend Distribution and Profit Allocation
Disputes concerning dividends often occur when a company earns profits but fails to distribute dividends or does not transparently justify retained earnings. This issue becomes particularly sensitive when minority shareholders are involved. The resolution of such disputes must comply with the Law on Enterprises 2020 and should ideally involve corporate legal advisory services to minimize risks.
Common causes of profit distribution disputes:
– The company charter lacks clarity on profit distribution policies;
– Shareholders do not receive expected dividends or are not informed of the reasons for retaining profits;
– The company uses profits for non-transparent expenditures;
– Capital contributors suspect manipulation of financial statements to reduce the actual distributable profit.
These conflicts can prolong, resulting in complaints or litigation among shareholders or against company managers.
Legal provisions on profit distribution:
– Article 135, Law on Enterprises 2020 stipulates: “Dividends shall only be distributed when the company has profit after fulfilling tax and other financial obligations, and must ensure full payment of due debts and liabilities.”
– Article 93 (for LLCs) and Article 135 (for JSCs) of the Law on Enterprises 2020 also affirm the right of members/shareholders to receive profits proportional to their capital contribution or shareholding. However, the distribution must follow resolutions of the Members’ Council, Board of Directors, or General Meeting of Shareholders, and comply with proper procedures and voting ratios as prescribed in the charter.
Unlawful distribution of profits that causes damage to the company or its shareholders may lead to civil compensation or even criminal liability if misappropriation is involved.
Measures to ensure transparency and fairness in dividend distribution:
– Include detailed profit distribution policies in the company charter — defining dividend conditions, decision-making procedures, timing, and rules for retained earnings;
– Ensure transparent financial reporting and disclosure of business results, with internal or independent audit verification to minimize suspicion and enhance financial transparency;
– Hold periodic shareholder or members’ meetings with clear resolutions on dividend distribution, recorded minutes, and public disclosure of decisions including voting ratios and legal bases;
– Provide regular transparent reports on profit allocation and capital use, especially to minority shareholders or passive investors, to foster trust and prevent disputes;
– If disputes arise, review all related documentation — dividend resolutions, financial statements, meeting minutes, and shareholder rights. Companies should attempt mediation first, and if unsuccessful, proceed to arbitration or court litigation for final resolution.
4. Shareholder Disputes over Share Transfer and Preferred Shares
This type of dispute commonly arises in non-listed companies or those with preferred share structures. Conflicts often occur when pre-emptive rights are disregarded or when the transfer process fails to comply with the company charter. Such disputes may lead to lawsuits seeking invalidation of transactions or non-recognition of shareholder status. Enterprises are strongly advised to consult a corporate dispute resolution lawyer before proceeding with any share transfer.
Common causes of share transfer disputes:
– Failure to comply with existing shareholders’ pre-emptive purchase rights;
– Transfer executed without proper procedures (e.g., lacking resolutions or violating the company charter);
– Preferred shares transferred in violation of contractual terms, such as fixed dividends or restricted voting rights;
– Conflicts of interest between controlling shareholders and minority shareholders during the transfer process.
These issues may result in legal challenges to invalidate transactions or deny recognition of transferees’ shareholder status.
Legal framework on pre-emptive rights and transfer restrictions:
– Under the Law on Enterprises 2020, Article 127 (share transfer) and Article 52 (capital contribution transfer) stipulate that all transfers must comply with procedural requirements — particularly for LLCs, where internal offering is mandatory before external transfer;
– Article 114 defines the types of preferred shares (e.g., dividend preference, voting preference, redeemable shares) and prescribes the corresponding rights and restrictions. Failure to clearly specify these terms in the charter or agreements may lead to disputes between transferees and the company;
– Non-compliance with these provisions may render a transfer invalid, and the transferee may lose shareholder status or be required to return received benefits.
Solutions for standardized contracts and transfer procedures:
– Clearly define conditions and procedures for share transfers in the company charter, including both common and preferred shares. The charter should explicitly state pre-emptive rights, internal offering procedures, and approval conditions from the Board of Directors or shareholders;
– Establish standardized share transfer templates with detailed appendices specifying the rights and obligations associated with each share class to prevent misinterpretation or abuse;
– Fulfill all internal procedures before and after the transfer: hold necessary meetings, record the transfer in the shareholder register, and update the Enterprise Registration Certificate (ERC) if there is a change in major shareholders (for LLCs);
– Conduct legal due diligence on transferees, especially for strategic investors, institutional shareholders, or transfers involving preferred shares with voting or financial restrictions;
– In case of disputes, review all relevant documentation — transfer contracts, company charter, shareholder register, and evidence of payment or ownership transfer — to assess the transferee’s legal status. Possible resolution routes include internal mediation, contract renegotiation, or litigation/arbitration to declare the transfer void if necessary.
5. Shareholder Disputes over Improper Capital Withdrawal or Forced Divestment
Improper or forced capital withdrawal is common in limited liability companies (LLCs) or companies with strict internal transfer restrictions. This type of dispute poses significant legal risk, as it may result in company dissolution, compensation claims, or transaction invalidation.
Causes and legal risks of improper capital withdrawal:
– Shareholders unlawfully demand the company to return contributed capital;
– Transfer of ownership conducted without internal offering procedures;
– Violation of founding shareholders’ transfer restrictions;
– Lack of understanding of the rights and obligations of capital contributors.
Legal framework on lawful divestment:
– Under Articles 51 and 52, Law on Enterprises 2020, LLC members are prohibited from withdrawing capital by requesting repayment from the company. Lawful “divestment” can only occur through transferring capital contributions to others, following internal offering procedures unless otherwise provided by the charter;
– For joint-stock companies, Article 127 governs share transfers. Shareholders may freely transfer shares except for founding shareholders, who may be restricted from transfer within the first three years or as otherwise stipulated by the charter;
– Any act of withdrawal that violates statutory procedures may be deemed illegal, causing financial harm to the enterprise and exposing the parties to civil liability or internal disputes.
Practical solutions for handling divestment disputes:
– Clearly stipulate in the company charter the conditions and procedures for capital transfer or distribution, especially concerning founding members, strategic investors, or preferred shareholders;
– Educate shareholders about the legal boundaries of “capital withdrawal” — emphasizing that divestment can only occur through lawful transfer, not by reclaiming capital from the company;
– Implement a transparent transfer process with proper internal approvals and timely updates to the shareholder/member register, preventing future disputes over ownership;
– Obtain legal counsel before executing divestment transactions to review the charter, investment agreements, and compliance with law, thereby avoiding invalid transactions or financial loss;
– In the event of a dispute, effective resolutions include internal negotiation, lawyer-assisted mediation, or litigation/arbitration through competent authorities such as the Court or Commercial Arbitration Center (if agreed).
It is important to note that shareholder disputes are among the most serious legal risks for any enterprise, as they directly affect management control, profit distribution, and corporate reputation. The optimal solution lies not only in resolving conflicts when they arise but also in establishing strong legal safeguards from the formation stage and throughout the company’s operations.
With an experienced corporate legal team and comprehensive corporate legal services, LexConsult & Partners assists businesses by:
– Drafting robust company charters and shareholder agreements;
– Designing transparent governance mechanisms to minimize conflicts;
– Representing clients in negotiation, mediation, or dispute resolution proceedings efficiently and lawfully to protect their interests.
📞 Contact us: +84 938 657 775
📧 Email: info@lexconsult.com.vn
to receive strategic advice on shareholder dispute prevention and resolution, ensuring your business operates safely, stably, and sustainably.
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📞 Contact us: +84 938 657 775
📧 Email: info@lexconsult.com.vn
To receive strategic advice on shareholder dispute prevention and resolution, ensuring your business operates safely, stably, and sustainably.
