If a shareholder of a Joint Stock Company passes away without leaving a will, how must the Company deal with that person’s shares?

What is a joint stock company?

According to the provisions of Article 111 of the Law on Enterprises 2020, a joint stock company is regulated as follows:

“Article 111. Joint-stock company

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

a) The charter capital is divided into equal parts called shares;

b) Shareholders can be organizations or individuals; the minimum number of shareholders is 03 and there is no limit to the number da;

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

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

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

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

Who are the shareholders of a Joint Stock Company?

According to the provisions of Clause 3, Article 4 of the Law on Enterprises 2020. The meaning of shareholder of a Joint Stock Company is as follows:

“Article 4. Interpretation of terms

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

…

3. Shareholder is an individual or organization that owns at least one share of a joint stock company shares.”

Can shares of a Joint Stock Company be transferred in the event of a shareholder’s death?

Cases of transferring shares of a Joint Stock Company are specified in Article 127 of the Law on Enterprises 2020 including:

“Article 127. Transfer of shares

1. Shares Shares are freely transferable, except in the case specified in Clause 3, Article 120 of this Law and the company’s charter has regulations restricting the transfer of shares. In case the company charter has regulations restricting the transfer of shares, these regulations are only effective when clearly stated in the shares of the corresponding shares.

2. The transfer is carried out by contract or transaction on the stock market. In case of transfer by contract, the transfer documents must be signed by the transferor and transferee or their authorized representatives. In case of transactions on the stock market, the transfer order and procedures are carried out in accordance with the provisions of law on securities.

3. In case a shareholder who is an individual dies, the shareholder’s will or legal heir becomes a shareholder of the company.

4. In case a shareholder who is an individual dies without an heir, the heir refuses to inherit or is disqualified from inheritance, the number of shares of that shareholder will be resolved according to the provisions of civil law.

5. Shareholders have the right to donate part or all of their shares in the company to other individuals or organizations; Use shares to repay debt. Individuals and organizations that are gifted or receive debt repayment in the form of shares will become shareholders of the company.

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

7. The company must register a change of shareholders in the shareholder register at the request of the relevant shareholder within 24 hours of receiving the request as prescribed in the company charter.”

Accordingly, in case a shareholder who is an individual of the Company dies, then:

– Heirs according to the will or law of that shareholder become shareholders of the company.

– If there is no heir, the heir refuses to inherit or is disinherited, the number of shares of that shareholder will be resolved according to the provisions of civil law.

What is the solution for shares of deceased shareholders of a Joint Stock Company?

In the case you mentioned, the shareholder is an individual who dies and does not leave a will, so the inheritance of this shareholder’s shares will be resolved according to the provisions of the Civil Code and the Company’s Charter (if any regulations).

According to the provisions of Article 651 of the 2015 Civil Code, legal heirs of deceased shareholders include:

“Article 651. Legal heirs

1. The heirs at law are specified in the following order:

a) The first line of inheritance includes: wife, husband, biological father, biological mother, adoptive father, adoptive mother, biological children, adopted children of the deceased;

b) The second line of inheritance includes: grandfather, grandmother, maternal grandfather, maternal grandmother, biological brother, biological sister, younger sibling of the deceased; biological grandchildren of the deceased and the deceased is the grandfather, grandmother, maternal grandfather, maternal grandmother;

c) The third line of inheritance includes: the deceased’s paternal and maternal great-grandparents; paternal uncle, paternal uncle, paternal uncle, paternal aunt, paternal aunt of the deceased; nephew of the deceased and the deceased is a paternal uncle, maternal uncle, maternal uncle, maternal aunt, maternal aunt; The deceased’s great-grandchild is the paternal and maternal great-grandparents.

2. Heirs of the same line enjoy equal shares of the inheritance.

3. Those in the next line of inheritance are only entitled to inherit, if there is no one left in the previous line of inheritance who has died, has no right to inherit, has been disqualified from inheriting or refuses to receive the inheritance.”

Thus, in case there are heirs of founding shareholders who are no longer eligible to receive inheritance, those people must notify the Company of their inheritance and become founding shareholders of the Company from the moment their information is fully recorded in the shareholder register.

In case the heirs do not want to receive the inheritance of a deceased founding shareholder, the Company should pay attention to the provisions in Clause 3, Article 120 of the Law on Enterprises 2020 as follows:

“Article 120. Common shares of founding shareholders

…

3. Within 03 years from the date the company is granted the Business Registration Certificate, common shares of founding shareholders are freely transferable to other founding shareholders and can only be transferred to people who are not founding shareholders if approved by the General Meeting of Shareholders. In this case, the founding shareholders intending to transfer common shares do not have the right to vote on the transfer of those shares.”

Accordingly, if it has been 3 years since the date the company was granted the Business Registration Certificate, founding shareholders can transfer shares to other founding shareholders or people who are not founding shareholders without the approval of the General Meeting of Shareholders.