Founding Shareholders of the Joint-stock Company in Vietnam

Founding Shareholders, when mentioning the term "founding," one might think of individuals who laid the first bricks to establish a completely new business, enduring countless challenges in the market to develop their enterprise. However, reality is not always so.

According to Clause 2, Article 4 of the 2014 Law on Enterprises, "A founding shareholder is a shareholder who owns at least one ordinary share and signs the list of founding shareholders of the joint-stock company."

Vietnamese law stipulates that a newly established joint-stock company must have at least 03 founding shareholders. However, for joint-stock companies converted from state-owned enterprises, limited liability companies, or those formed by merging, dividing, or splitting from other joint-stock companies, it is not necessary to have founding shareholders. In such cases, the company's charter in the enterprise registration dossier must bear the signature of the legal representative or common shareholders of the company.

Ordinary shares are mandatory for joint-stock companies. Besides ordinary shares, joint-stock companies can also have preferred shares. Preferred shares include the following types:

- Voting preferred shares;

- Dividend preferred shares;

- Redeemed preferred shares;

- Other preferred shares as stipulated in the company's charter.

The list of founding shareholders and foreign investor shareholders in joint-stock companies must contain the following essential contents:

- Name, signature, address, nationality, permanent address, and other basic characteristics of the founding shareholders and foreign investor shareholders who are individuals;

- Name, enterprise code number, and head office address of the founding shareholders and foreign investor shareholders who are organizations;

- Name, signature, address, nationality, permanent address of the authorized representative or legal representative of founding shareholders and foreign investor shareholders who are organizations;

- Number of shares, type of assets, quantity of assets, and value of each type of contributed capital shares by each founding shareholder and foreign investor shareholder.

Some rights and responsibilities of founding shareholders according to the 2014 Law on Enterprises (based on Clause 3, Article 113 and Article 119 of the 2014 Law on Enterprises):

1. Founding shareholders have the right to hold voting preferred shares. The preferential voting rights of founding shareholders are only valid for 03 years, from the date the company is issued the Enterprise Registration Certificate. After this period, the voting preferred shares of founding shareholders are converted into ordinary shares.
2. In the case of a newly established company, common shareholders must together register to purchase at least 20% of the total number of common shares authorized for sale at the time of business registration.
3. Also within 03 years from the date the company is issued the Enterprise Registration Certificate, founding shareholders have the right to freely transfer their shares to other founding shareholders and may only transfer their common shares to persons who are not founding shareholders if approved by the General Meeting of Shareholders. In this case, the shareholder intending to transfer shares has no right to vote on the transfer of those shares.
4. Restrictions on ordinary shares of founding shareholders are lifted after a period of 03 years from the date the company is issued the Enterprise Registration Certificate. These restrictions do not apply to shares that founding shareholders acquire after the company’s registration and shares that founding shareholders transfer to others who are not founding shareholders of the company.

Thus, founding shareholders are not necessarily the first people who came up with the idea and established a company. They can join the company before, at, or even after the business registration point. As long as the shareholder holds at least one ordinary share and signs the list of founding shareholders of the joint-stock company.

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE