Individual Shareholder Dies Without a Will: How Does the JSC Handle the Shares?

What is a joint stock company?

Under Article 111 of the Law on Enterprises 2020, a joint stock company is prescribed as follows:

“Article 111.Joint stock companies

Related services

Corporate Legal Advisory

If your company needs to review governance authority, resolutions, charter documents or internal dispute risk, ANT Legal can help assess the file and suggest appropriate next steps.

Explore this service Message on Zalo Copy WeChat Send consultation request

Website information is for general reference only and does not replace legal advice for a specific matter.

1. A joint stock company is an enterprise in which:

a) Charter capital is divided into equal parts called shares;

b) Shareholders may be organizations or individuals; the minimum number of shareholders is 03 with no maximum limit;

c) Shareholders are liable for the debts and other asset obligations of the enterprise only within the amount of capital contributed to the enterprise;

d) Shareholders have the right to freely transfer their shares to others, except as prescribed in Clause 3, Article 120 and Clause 1, Article 127 of this Law.

2. A joint stock company has legal person status from the date of issuance of the Enterprise Registration Certificate.

3. A joint stock company has the right to issue shares, bonds and other securities of the company.”

Who is a shareholder of a joint stock company?

Under Clause 3, Article 4 of the Law on Enterprises 2020, a shareholder of a joint stock company is defined as follows:

“Article 4. Interpretation of terms

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

…

3. A shareholder is an individual or organization owning at least one share of a joint stock company.”

May shares of a joint stock company be transferred where a shareholder dies?

Cases of share transfer of a joint stock company are prescribed in Article 127 of the Law on Enterprises 2020, including:

“Article 127. Share transfer

1. Shares are freely transferable, except as prescribed in Clause 3, Article 120 of this Law and where the company charter restricts share transfer. Where the company charter restricts share transfer, such restrictions are effective only when clearly stated in the corresponding share certificates.

2. Transfer is effected by contract or transactions on the securities market. For transfer by contract, the transfer documents must be signed by the transferor and transferee or their authorized representatives. For transactions on the securities market, the transfer sequence and procedures follow securities law.

3. Where a shareholder being an individual dies, the heir under the will or by law of such shareholder becomes a shareholder of the company.

4. Where a shareholder being an individual dies without an heir, the heir refuses the inheritance or is deprived of inheritance rights, the shares of such shareholder are settled under civil law.

5. Shareholders have the right to donate part or all of their shares in the company to other individuals or organizations; to use shares to pay debts. Individuals or organizations donated shares or receiving debt payment in shares become shareholders of the company.

6. Individuals or organizations receiving shares in the cases prescribed in this Article become company shareholders only from the time their information as prescribed in Clause 2, Article 122 of this Law is fully recorded in the shareholder register.

7. The company must register changes of shareholders in the shareholder register at the request of the relevant shareholder within 24 hours from receipt of the request as prescribed in the company charter.”

Accordingly, where an individual shareholder of the joint stock company dies:

– The heir under the will or by law of such shareholder becomes a shareholder of the company.

– If there is no heir, the heir refuses the inheritance or is deprived of inheritance rights, the shares of such shareholder are settled under civil law.

What is the solution for shares of a deceased shareholder of a joint stock company?

Your case involves an individual shareholder who died without leaving a will; therefore the inheritance of this shareholder’s shares shall be settled under the Civil Code and the Company Charter (if any).

Under Article 651 of the Civil Code 2015, statutory heirs of the deceased shareholder include:

“Article 651. Statutory heirs

1. Statutory heirs are prescribed in the following order:

a) First line of heirs: spouse, biological father, biological mother, adoptive father, adoptive mother, biological children and adopted children of the deceased;

b) Second line of heirs: paternal grandfather, paternal grandmother, maternal grandfather, maternal grandmother, full brothers and sisters of the deceased; full grandchildren of the deceased for whom the deceased is the paternal or maternal grandparent;

c) Third line of heirs: paternal and maternal great-grandparents of the deceased; full paternal uncles, paternal aunts, maternal uncles and aunts of the deceased; full nephews/nieces of the deceased for whom the deceased is the full paternal uncle, paternal aunt, maternal uncle or aunt; full great-grandchildren of the deceased for whom the deceased is the paternal or maternal great-grandparent.

2. Heirs of the same line equally share the inheritance.

3. Heirs of a subsequent line inherit only if no one in the preceding line is still alive, has no right to inherit, is deprived of inheritance rights or refuses the inheritance.”

Thus, where the heirs of the deceased founding shareholder qualify to inherit, they must notify the Company of the inheritance and become founding shareholders of the Company from the time their information is fully recorded in the shareholder register.

Where the heirs do not wish to inherit from the deceased founding shareholder, the Company should note Clause 3, Article 120 of the Law on Enterprises 2020 as follows:

“Article 120. Ordinary shares of founding shareholders

…

3. Within 03 years from the date the company is issued the Enterprise Registration Certificate, ordinary shares of founding shareholders are freely transferable to other founding shareholders and may only be transferred to non-founding shareholders with approval of the General Meeting of Shareholders. In this case, the founding shareholder intending to transfer ordinary shares has no voting right on such transfer.”

Accordingly, if the current time is after 03 years from the date the company was issued the Enterprise Registration Certificate, a founding shareholder may transfer shares to another founding shareholder or a non-founding shareholder without approval of the General Meeting of Shareholders.

ANT Legal