Is Transfer of Shares in a Joint Stock Company Required to be Registered with the Department?

This English version is translated from the Vietnamese original. In case of any discrepancy, the Vietnamese version prevails.

Can shares be freely transferred?

Yes, with two exceptions: ordinary shares of founding shareholders within the first 03 years, and shares subject to transfer restrictions in the company charter (such restrictions are only effective when clearly stated in the share certificate).

"Shares may be freely transferred, except in the case provided for in Clause 3 of Article 120 of this Law and where the company charter contains provisions restricting share transfer. Where the company charter contains provisions restricting share transfer, such provisions are only effective when clearly stated in the share certificate of the corresponding shares."

— Clause 1, Article 127 Law on Enterprises 59/2020/QH14

Does a founding shareholder need approval to sell shares to outsiders?

Yes, if within 03 years from the date the company receives the Business Registration Certificate: transfer to a person who is not a founding shareholder must be approved by the General Meeting of Shareholders, and the shareholder intending to transfer has no voting right on this matter (Clause 3, Article 120). Transfer to another founding shareholder is freely permitted.

This restriction does not apply to shares of a founding shareholder acquired after the company's registration, or to shares already transferred to a person who is not a founding shareholder (Clause 4, Article 120).

What are the steps in the share transfer procedure?

For contractual transfer, the transfer document must be signed by the transferor and transferee, or their authorized representatives (Clause 2, Article 127). The shareholder then requests the company to register the change of shareholder in the shareholder register.

1. Execute the share transfer contract.
2. Submit a request to the company to update the shareholder register. The company must register the change within 24 hours from receipt of the request in accordance with the company charter (Clause 7, Article 127).
3. The register must contain complete information of the new shareholder as per Clause 2, Article 122: full name, contact address, nationality, identification document number; number of shares of each type and date of share registration.

For transactions on the securities market, the procedure shall be carried out in accordance with securities laws.

When does the buyer formally become a shareholder?

From the time the information of the transferee is fully recorded in the shareholder register, not from the time of contract execution or payment.

"An individual or organization receiving shares in the cases provided for in this Article becomes a shareholder 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."

— Clause 6, Article 127, Law on Enterprises 59/2020/QH14

What should the buyer pay attention to in order to avoid risks?

The major risk is having paid but the company has not yet registered the name in the register. It is advisable to include in the contract the obligation to cooperate in updating the shareholder register and link the payment timing with such update.

• Foreign investors, public companies, and businesses in regulated sectors may have separate procedures — verification according to current regulations should be made before conducting the transaction.
• Tax obligations upon transfer should be determined in accordance with current tax regulations at the time of the transaction.

This article is for reference only and does not replace legal advice for specific cases. Please contact A&D Law Firm for consultation.