Buying Securities Before the Record Date: Are You Entitled to Dividends?

What are dividends of a joint-stock company?

Under Clause 5 of Article 4 of the Law on Enterprises 2020, dividends are defined as follows:

“Article 4. Interpretation of terms

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In this Law, the terms below are understood as follows:

…

5. Dividends are net profits paid for each share in cash or in other assets.”

What are the forms of dividend payment of a joint-stock company?

Under Article 135 of the Law on Enterprises 2020, dividend payment is carried out as follows:

“Article 135. Dividend payment

1. Dividends paid for preference shares are made under the conditions specifically applied to each type of preference share.

2. Dividends paid for ordinary shares are determined based on realized net profits and dividends are paid from the retained earnings of the company. A joint-stock company may only pay dividends on ordinary shares when the following conditions are fully met:

a) The company has fulfilled its tax obligations and other financial obligations as prescribed by law;

b) It has appropriated the company’s funds and offset previous losses as prescribed by law and the company charter;

c) Immediately after paying all dividends, the company still ensures full payment of due debts and other asset obligations.

3. Dividends may be paid in cash, in shares of the company or in other assets as prescribed in the company charter. If paid in cash, it must be in Vietnamese dong and via the payment methods prescribed by law.

4. Dividends must be fully paid within 06 months from the date of the end of the Annual General Meeting of Shareholders. The Board of Directors shall prepare the list of shareholders entitled to receive dividends, determine the dividend rate for each share, and the time limit and form of payment no later than 30 days before each dividend payment. The notice of dividend payment shall be sent by a method ensuring delivery to shareholders at the addresses registered in the shareholder register no later than 15 days before the dividend payment is made. The notice must include the following contents:

a) Name of the company and head office address of the company;

b) Full name, contact address, nationality, personal legal document number of the individual shareholder;

c) Name, enterprise code or legal document number of the organization, head office address for the shareholder that is an organization;

d) Number of shares of each type of the shareholder; dividend rate for each share and the total dividends the shareholder will receive;

đ) Time and method of dividend payment;

e) Full name and signature of the Chairperson of the Board of Directors and the legal representative of the company.

5. Where a shareholder transfers its shares between the time of finalizing the shareholder list and the time of dividend payment, the transferor is the person receiving dividends from the company.

6. Where dividends are paid in shares, the company is not required to carry out share offering procedures under Articles 123, 124 and 125 of this Law. The company must register an increase in charter capital corresponding to the total par value of the shares used to pay dividends within 10 days from the date of completing the dividend payment.”

Based on the legal provisions, the forms of dividend payment of a joint-stock company include:

– Payment of dividends in cash. If paid in cash, it must be in Vietnamese dong and via the payment methods prescribed by law.

– Payment of dividends in shares of the company.

– Payment of dividends in other assets as prescribed in the company charter.

What are the conditions for shareholders of a joint-stock company to receive dividends?

Also under Article 135 of the Law on Enterprises 2020, for preference shares, dividends are paid under the conditions specifically applied to each type of preference share. For ordinary shares, a joint-stock company may only pay dividends on ordinary shares when the following conditions are fully met:

– The company has fulfilled its tax obligations and other financial obligations as prescribed by law;

– It has appropriated the company’s funds and offset previous losses as prescribed by law and the company charter;

– Immediately after paying all dividends, the company still ensures full payment of due debts and other asset obligations.

Thus, the conditions for a joint-stock company to pay dividends to shareholders must satisfy the above conditions, and do not depend on when the shareholder purchased the dividends.

Dividends must be fully paid within 06 months from the date of the end of the Annual General Meeting of Shareholders. The Board of Directors shall prepare the list of shareholders entitled to receive dividends, determine the dividend rate for each share, and the time limit and form of payment no later than 30 days before each dividend payment. The notice of dividend payment shall be sent by a method ensuring delivery to shareholders at the addresses registered in the shareholder register no later than 15 days before the dividend payment is made. The notice must include the following contents:

– Name of the company and head office address of the company;

– Full name, contact address, nationality, personal legal document number of the individual shareholder;

– Name, enterprise code or legal document number of the organization, head office address for the shareholder that is an organization;

– Number of shares of each type of the shareholder; dividend rate for each share and the total dividends the shareholder will receive;

– Time and method of dividend payment;

– Full name and signature of the Chairperson of the Board of Directors and the legal representative of the company.