Common shares in joint stock companies

How are common shares in a joint stock company regulated? What rights do common shareholders have? 

1. What are common shares?

From the provisions of the 2020 Enterprise Law, it can be understood that Common shares are a type of shares required to be in a joint stock company, divided based on the company’s charter capital. In a joint stock company, Common Shares are used as the underlying asset to issue depositary certificates without voting rights called underlying common shares. And common shares cannot be converted into preferred shares. Shareholders who own common shares are called common shareholders.

2. What rights do common shareholders have?

According to Article 115 of the Law on Enterprises 2020 regulating the rights of common shareholders, specifically:

(1) Common shareholders have the following rights:

– Attend and speak at the General Meeting of Shareholders and exercise the right to vote directly or through an authorized representative or other forms prescribed by the company charter and law. Each common share has one vote;

– Receive dividends at the level decided by the General Meeting of Shareholders;

– Priority to buy new shares corresponding to the ownership ratio of common shares of each shareholder in the company;

– Freely transfer your shares to others, except in the case specified in Clause 3, Article 120, Clause 1, Article 127 of this Law and other relevant legal provisions;

– Review, look up and extract information about names and contact addresses in the list of shareholders with voting rights; request to correct your inaccurate information;

– Review, look up, extract or copy the company charter, minutes of the General Meeting of Shareholders and resolutions of the General Meeting of Shareholders;

– When the company dissolves or goes bankrupt, receive a portion of the remaining assets corresponding to the percentage of shares owned in the company.

(2) Shares A shareholder or group of shareholders owning 05% or more of the total number of common shares or a smaller percentage as prescribed in the company’s Charter has the following rights:

– Review, look up, extract minute books and resolutions, decisions of the Board of Directors, mid-year and annual financial reports, reports of the Supervisory Board, contracts, transactions that must be approved by the Board of Directors and other documents, except documents related to commercial secrets and business secrets of the company;

– Request to convene a meeting of the General Meeting of Shareholders in prescribed cases; in Clause 3 of this Article;

– Request the Supervisory Board to examine each specific issue related to the management and operation of the company when deemed necessary. The request must be in writing and must include the following contents: full name, contact address, nationality, legal document number of the individual for individual shareholders; name, business code or legal document number of the organization, head office address for institutional shareholders; number of shares and time of share registration of each shareholder, total number of shares of the entire group of shareholders and ownership ratio of the company’s total shares; issues to be inspected, purpose of inspection;

– Other rights as prescribed by this Law and the Company’s Charter.

(3) Shareholders or groups of shareholders specified in Clause 2 of this Article have the right to request to convene a General Meeting of Shareholders in the following cases:

– The Board of Directors seriously violates the rights of shareholders and the obligations of managers or making decisions beyond assigned authority;

– Other cases as prescribed in the company’s Charter.

(4) The request to convene a meeting of the General Meeting of Shareholders specified in Clause 3 of this Article must be in writing and must include the following contents: full name, contact address, nationality, legal document number of the individual for shareholders who are individuals; name, business code or legal document number of the organization, head office address for institutional shareholders; number of shares and time of share registration of each shareholder, total number of shares of the entire group of shareholders and ownership ratio of the company’s total shares, grounds and reasons for requesting to convene a General Meeting of Shareholders. Accompanying the request to convene a meeting must be documents and evidence of violations by the Board of Directors, the extent of violations or decisions exceeding authority.

(5) Shareholders or groups of shareholders owning 10% or more of the total common shares or a smaller percentage as prescribed in the company’s Charter have the right to nominate people to the Board of Directors and Control Board. In cases where the Company Charter does not have other provisions, the nomination of people to the Board of Directors and the Supervisory Board shall be carried out as follows:

– Common shareholders forming a group to nominate people to the Board of Directors and the Supervisory Board must notify the group meeting to attending shareholders before the opening of the General Meeting of Shareholders;

– Based on the number of members of the Board of Directors and the Supervisory Board, shareholders A shareholder or group of shareholders specified in this Clause has the right to nominate one or more people according to the decision of the General Meeting of Shareholders as candidates for the Board of Directors and Supervisory Board. In case the number of candidates nominated by a shareholder or group of shareholders is lower than the number of candidates they are entitled to nominate according to the decision of the General Meeting of Shareholders, the remaining candidates will be nominated by the Board of Directors, Supervisory Board and other shareholders.

(6) Other rights according to the provisions of this Law and the Company’s Charter.

Thus, shareholders owning common shares will enjoy the above rights such as:

– Attend and speak at the General Meeting of Shareholders and exercise voting rights directly or through an authorized representative or other form

– Receive dividends at the level decided by the General Meeting of Shareholders

– Priority to buy new shares corresponding to the ownership ratio of common shares information

– Freely transfer your shares to others

– When the company dissolves or goes bankrupt, receive a portion of the remaining assets corresponding to the percentage of ownership of shares in the company.

3. What are the regulations on common shares of founding shareholders?

According to Article 120 of the Law on Enterprises 2020, the regulations on common shares of founding shareholders are as follows:

“Article 120. Common shares of founding shareholders

1. A newly established joint stock company must have at least 03 founding shareholders. A joint stock company converted from a state-owned enterprise or a limited liability company or divided, separated, consolidated or merged from another joint stock company does not necessarily have to have founding shareholders; In this case, the company charter in the business registration file must be signed by the legal representative or common shareholders of that company.

2. Founding shareholders must jointly register to buy at least 20% of the total number of common shares authorized to be offered when registering to establish a business.

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.

4. The restrictions specified in Clause 3 of this Article do not apply to the following common shares:

a) Shares that founding shareholders have additional after registering to establish a business;

b) Shares that have been transferred to someone other than a founding shareholder.”

Accordingly, if your company has been established for 2 years from From 2020 to 2022, if you want to transfer common shares that you own to someone other than a founding shareholder in the company, you need to obtain approval from the General Meeting of Shareholders according to Clause 3, Article 120 of the Law on Enterprises 2020.