Latest regulations on types of shares and shareholders of credit institutions that is a joint-stock company in Vietnam

Latest regulations on types of shares and shareholders of credit institutions that is a joint-stock company in Vietnam (Internet image)

Latest regulations on types of shares and shareholders of credit institutions that is a joint-stock company in Vietnam 

According to Article 60 of the Law on Credit Institutions 2024, credit institutions that are joint stock companies must have ordinary shares. A holder of ordinary shares is an ordinary shareholder.

Additionally, credit institutions as joint stock companies may have preference shares. A holder of preference shares is a preference shareholder. Preference shares include the following types:

- Dividend preference shares;

- Voting preference shares.

In particular:

- Dividend preference shares are shares that are paid dividends at a higher rate than ordinary shares or a stable annual rate. Annual dividends include fixed and bonus dividends. Fixed dividends are not dependent on the business results of the credit institution and are only paid when the credit institution is profitable. If the credit institution suffers losses or has insufficient profits to pay fixed dividends, the fixed dividends for dividend preference shares are accumulated into subsequent years. The specific fixed dividend rate and method of determining bonus dividends are decided by the General Meeting of Shareholders and recorded on the share certificate of dividend preference shares. The total nominal value of dividend preference shares must not exceed 20% of the charter capital of the credit institution.

Members of the Board of Directors, members of the Control Committee, the General Director (Director), and other managers and officers of the credit institution are not permitted to purchase dividend preference shares issued by that credit institution. The individuals eligible to purchase dividend preference shares are determined by the credit institution's Charter or decided by the General Meeting of Shareholders.

Shareholders holding dividend preference shares have the same rights and obligations as ordinary shareholders, except for voting rights, attending the General Meeting of Shareholders, and nominating people to the Board of Directors and the Control Committee.

- Only the organization authorized by the Government of Vietnam and founding shareholders have the right to hold voting preference shares. The voting preference rights of founding shareholders are only effective for 3 years from the date the credit institution is granted a License. After this period, the voting preference shares of founding shareholders are converted into ordinary shares. Shareholders owning voting preference shares have the same rights and obligations as ordinary shareholders, except for the right to transfer those shares to others.

- Ordinary shares cannot be converted into preference shares. Preference shares can be converted into ordinary shares according to a resolution of the General Meeting of Shareholders.

- A credit institution as a joint stock company must have at least 100 shareholders without a maximum limit, except for credit institutions under special control and commercial banks undergoing compulsory transfer plans as stipulated in Section 4, Chapter X of the Law on Credit Institutions 2024.

Regulations on the Legal representatives of credit institutions in Vietnam

(1) The legal representative of a credit institution is specified in the credit institution’s Charter and must be one of the following persons:

- Chairman of the Board of Directors or Chairman of the Members' Council of the credit institution;

- General Director (Director) of the credit institution.

(2) The legal representative of a credit institution must reside in Vietnam. If absent from Vietnam, a written authorization must be given to another manager or officer of the credit institution residing in Vietnam to exercise the rights and obligations of the legal representative of the credit institution.

(3) The credit institution must notify the State Bank of the legal representative of the credit institution within 10 days from the date of election, appointment to the position of the legal representative under the provisions of the credit institution's Charter, or change of legal representative. The State Bank shall notify the legal representative of the credit institution to the business registration agency for updating into the national information system on business registration, cooperatives.

(Article 11 of the Law on Credit Institutions 2024)

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