Law on Enterprises 2020: Provisions on Dividend Preferred Shares and Redeemable Preferred Shares

Enterprise Law 2020: Regulations on Preferred Dividend Stocks and Redeemable Preferred Stocks - Illustrative image.

To be specific: Article 117 of the Enterprise Law 2020 stipulates that preferred dividend stocks are shares that receive a dividend at a higher rate than that of common shares or at a stable annual rate. Annual dividends are divided into fixed dividends and bonus dividends, with fixed dividends not contingent upon the company's business performance. The specific fixed dividend rate and the method of determining the bonus dividend are clearly indicated on the preferred dividend stock certificate.

Shareholders owning preferred dividend stocks have the following rights:

- Receive dividends at the rate and method clearly indicated on the stock certificate;- Receive the remaining assets in proportion to their shareholding in the company after the company has settled all debts, redeemable preferred shares when the company dissolves or goes bankrupt;- Other rights similar to common shareholders.

Note: Shareholders owning preferred dividend stocks do not have the right to vote, attend shareholder meetings, nominate individuals to the Board of Directors and the Supervisory Board, except in cases where the Resolution of the General Meeting of Shareholders contains content that negatively changes the rights and obligations of shareholders owning preferred shares, in which case, they are entitled to provide opinions as prescribed in the Enterprise Law 2020.

Moreover, Article 118 of the Enterprise Law 2020 also stipulates that redeemable preferred stocks are shares the company reimburses at the request of the holder or under the conditions stated on the redeemable preferred stock certificate and the company's Charter.

Shareholders owning redeemable preferred stocks have the same rights as common shareholders. However, they do not have the right to vote, attend shareholder meetings, nominate individuals to the Board of Directors and the Supervisory Board, except in certain cases as stipulated by the Enterprise Law 2020.

For details, see Enterprise Law 2020, effective January 1, 2021.

Le Vy

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