Tiếng Việt
中文 (中国)Shareholders holding dividend-preference shares in a joint-stock company have rights — This is legal content and readers should carefully verify before taking any action. The following is an editorial draft translation prepared to present the main points clearly for individuals and businesses; it is a draft for staging and not legal advice or approved for publication.
What are dividend-preference shares?
Dividend-preference shares are defined in Article 117(1) of the 2020 Enterprise Law as follows:
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Dividend-preference shares and the rights of shareholders holding dividend-preference shares
1. Dividend-preference shares are shares that pay dividends at a higher rate than ordinary shares or pay dividends at a stable annual rate. Annual dividends include fixed dividends and bonus (residual) dividends. Fixed dividends do not depend on the company’s operating performance. The specific level of fixed dividends and the method of determining bonus dividends are stated in the terms of the dividend-preference shares.
2. Shareholders holding dividend-preference shares enjoy the following rights:
a) To receive dividends in accordance with paragraph 1 of this Article;
b) After the company has paid all its debts, to receive the remaining assets in proportion to their shareholding; preference shares are refundable upon the company’s dissolution or bankruptcy;
c) Other rights as ordinary shareholders, except as provided in paragraph 3 of this Article.
Therefore, under the provisions, dividend-preference shares are understood as shares that pay dividends at a higher rate than ordinary shares or pay dividends at a stable annual rate.
Annual dividends include fixed dividends and bonus dividends.
Fixed dividends do not depend on the company’s operating performance. The specific level of fixed dividends and the method of determining bonus dividends are set out in the terms of the dividend-preference shares.
Do shareholders holding dividend-preference shares in a joint-stock company have voting rights and the right to attend general meetings?
The rights of shareholders holding dividend-preference shares are set out in Article 117(3) of the 2020 Enterprise Law as follows:
Dividend-preference shares and the rights of shareholders holding dividend-preference shares
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3. Shareholders holding dividend-preference shares do not have voting rights, do not have the right to attend shareholders’ meetings, and do not have the right to nominate members of the Board of Directors or the Supervisory Board, except in the cases provided for in Clause 6, Article 148 of this Law.
At the same time, Clause 6, Article 148 of the 2020 Enterprise Law provides:
Conditions for passing resolutions of the shareholders’ meeting
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5. Resolutions of the shareholders’ meeting must be notified to the shareholders entitled to attend the shareholders’ meeting within 15 days from the date of adoption; if the company has a website, publication on the company’s website may substitute for sending the resolution.
6. A resolution of the shareholders’ meeting that contains content adverse to the rights and obligations of preference shareholders shall only be passed if it is agreed by shareholders holding more than 75% of the total number of that class of preference shares present at the meeting, or if adopted by written solicitation of opinion, it must be agreed by shareholders holding more than 75% of the total number of that class of preference shares.
Therefore, under the provisions, shareholders holding dividend-preference shares in a joint-stock company do not have voting rights or the right to attend shareholders’ meetings.
However, this does not apply when a shareholders’ meeting resolution contains content that adversely changes the rights and obligations of preference shareholders.
In that case, the shareholders’ meeting resolution must be approved by shareholders holding more than 75% of the total number of that same class of preference shares present at the meeting, or must be approved in writing by shareholders holding more than 75% of the total number of that class of preference shares.
Who has the right to purchase dividend-preference shares of a joint-stock company?
Who may purchase dividend-preference shares is provided in Article 114(3) of the 2020 Enterprise Law as follows:
Types of shares
1. A joint-stock company must have ordinary shares. Holders of ordinary shares are ordinary shareholders.
2. In addition to ordinary shares, a joint-stock company may have preference shares. Holders of preference shares are preference shareholders. Preference shares include the following types:
a) Dividend-preference shares;
b) Redeemable preference shares;
c) Voting preference shares;
d) Other preference shares provided for in the company charter and the securities law.
3. Persons entitled to purchase dividend-preference shares, redeemable preference shares, and other preference shares as provided in the company charter or as decided by the shareholders’ meeting.
4. Each share of the same type grants its holder equal rights, obligations and benefits.
5. Ordinary shares may not be converted into preference shares. Preference shares may be converted into ordinary shares by resolution of the shareholders’ meeting.
Therefore, under the provisions, persons entitled to purchase dividend-preference shares of a joint-stock company are those specified in the company charter or as decided by the shareholders’ meeting.
Notes on applying current legal provisions
This article belongs to the M&A/并购 category and is provided for reference to help readers understand related legal issues at a high level when preparing application materials or conducting transactions.
Legal provisions may vary by time, locality, type of application materials and specific circumstances. To accurately confirm the legal basis applicable to a specific case or document, it is recommended that you contact ANT Legal for review and consultation at 0966.475.966 before taking action.
Common legal risk reminders
- Misuse of legal documents that have been amended, supplemented, or replaced.
- Incomplete preparation of application materials, documents or necessary evidence.
- Inaccurate understanding of conditions, procedures, deadlines, or competent authorities.
- Signing documents, submitting materials, or implementing transactions without fully assessing legal risks.
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