Does Paying for Shares Make You a Shareholder of the Company?

Once the share purchase price has been paid, has the buyer become a shareholder of the company? If not, what conditions must be met?

Under Clauses 6 and 7, Article 127 of the Law on Enterprises 2020 on share transfer:

Share transfer

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6. Individuals and organisations receiving shares in the cases prescribed in this Article shall become shareholders of the company 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.

Also under Clause 2, Article 122 of the Law on Enterprises 2020:

Shareholder register

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2. The shareholder register must contain the following main contents:

a) Name and head office address of the company;

b) Total number of shares authorised to be offered, types of shares authorised to be offered, and the number of shares authorised to be offered of each type;

c) Total number of shares sold of each type and the value of contributed share capital;

d) Full name, contact address, nationality, and legal document number of an individual shareholder; name, enterprise code or legal document number, and head office address of an organisational shareholder;

dd) Number of shares of each type held by each shareholder, and the date of share registration.

Under these provisions, the buyer becomes a shareholder (share owner) of the joint-stock company only from the time the information mentioned in Clause 2, Article 122 of the Law on Enterprises 2020 above is fully recorded in the shareholder register.

Payment of the transfer price under the transfer contract alone, without the information being updated in the shareholder register, does not make the buyer a shareholder; the buyer does not yet own shares of the company.

When is a joint-stock company obliged to update shareholder changes in the shareholder register?

Article 122 of the Law on Enterprises 2020 on the shareholder register provides as follows:

Shareholder register

1. A joint-stock company must establish and maintain a shareholder register from the time it is granted the Enterprise Registration Certificate. The shareholder register may be in paper form or electronic data recording information on the share ownership of the company’s shareholders.

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3. The shareholder register is kept at the company’s head office or at other organisations with the function of keeping the shareholder register. Shareholders have the right to inspect, look up, extract, and copy the names and contact addresses of the company’s shareholders in the shareholder register.

4. Where a shareholder changes contact address, they must promptly notify the company for updating in the shareholder register. The company is not responsible for failure to contact a shareholder due to not being notified of the shareholder’s change of contact address.

5. The company must promptly update shareholder changes in the shareholder register at the request of the relevant shareholder as prescribed in the company charter.

Under this provision, a joint-stock company must promptly update shareholder changes in the shareholder register at the request of the relevant shareholder as prescribed in the company charter.

What are the obligations of shareholders of a joint-stock company?

Shareholders of a joint-stock company have the obligations prescribed in Article 119 of the Law on Enterprises 2020, specifically including:

• Pay in full and on time the number of shares committed to be purchased.
• Not withdraw contributed capital in the form of ordinary shares from the company in any form, except where the company or another person purchases the shares back.
  • Where a shareholder withdraws part or all of the contributed share capital contrary to this clause, that shareholder and persons with related interests in the company shall be jointly liable for the company’s debts and other asset obligations within the value of the withdrawn shares and any damage caused.
• Comply with the company charter and the company’s internal management regulations.
• Abide by resolutions and decisions of the General Meeting of Shareholders and the Board of Directors.
• Keep confidential information provided by the company as prescribed in the company charter and the law; use the provided information only to exercise and protect their lawful rights and interests; strictly prohibited from disseminating or copying or sending information provided by the company to other organisations or individuals.
• Other obligations as prescribed by this Law and the company charter.