Causes, legal grounds, and methods for resolving disputes over dividend distribution

In joint-stock companies, dividend distribution is directly connected to the economic interests of shareholders. In practice, disputes over dividend distribution often arise from disagreements over resolutions of the General Meeting of Shareholders, the company charter, or the use of profits. Such disputes not only affect shareholders’ interests, particularly those of minority shareholders, but also entail legal risks and intensify internal corporate conflicts.

I. Current situation regarding disputes over dividend distribution

In practice, disputes over dividend distribution are increasingly common in joint-stock companies, particularly in enterprises with dispersed ownership structures or the presence of controlling shareholders. In many cases, companies generate profits but fail to distribute dividends, delay dividend payments, or distribute dividends in a manner inconsistent with the resolutions of the General Meeting of Shareholders and the company charter, whether in terms of ratios or forms of payment.

In addition, lack of transparency in financial statements, improper use of after-tax profits, or the Board of Directors’ unilateral decisions on dividend distribution beyond its authority also contribute to an increase in disputes. Such a situation directly affects the lawful rights and interests of shareholders, especially minority shareholders, and poses risks of prolonged complaints and litigation, thereby undermining corporate governance stability and corporate reputation.

II. Concept of disputes over dividend distribution

To properly identify the rights and obligations of the parties and select appropriate dispute resolution methods, it is first necessary to clarify the concept of disputes over dividend distribution, the legal nature of such disputes, and the common causes leading to their occurrence in corporate practice.

1. What is a dispute over dividend distribution?

Pursuant to Clause 5, Article 4 of the Law on Enterprise 2020 (as amended and supplemented in 2025), dividends are post-tax profits distributed per share in cash or in other forms of assets.

Accordingly, a dispute over dividend distribution is a dispute arising between the company and shareholders or among shareholders concerning the decision-making, determination, and implementation of dividend payments, including the rate, timing, form of payment, or the failure or delay in performing dividend payment obligations in accordance with law, the company charter, and resolutions of the General Meeting of Shareholders.

Such disputes typically arise where the company generates profits but does not distribute dividends, distributes dividends inconsistently with resolutions of the General Meeting of Shareholders, distributes dividends not in proportion to shareholdings or share classes, or unlawfully delays or refuses dividend payments in contravention of law and the company charter.

2. Are disputes over dividend distribution considered internal corporate disputes?

Disputes over dividend distribution are considered internal corporate disputes. Pursuant to Clause 4, Article 30 of the Civil Procedure Code 2015, disputes arising between a company and its shareholders or among shareholders relating to the operation and management of the company fall within the category of internal corporate disputes. Dividend distribution is directly connected to shareholders’ rights and obligations in the course of corporate operations; therefore, disputes over dividend distribution fall within this category and are resolved under civil procedure.

3. Common causes leading to disputes over dividend distribution

Disputes over dividend distribution typically arise from multiple factors relating to corporate governance, finance, and conflicts of interest among shareholders. Identifying common causes enables shareholders to assess legal risks and take timely measures to protect their interests. Common causes include:

• The company generates profits but does not distribute dividends or delays dividend distribution without clear legal grounds.
• Dividend distribution is inconsistent with resolutions of the General Meeting of Shareholders or the company charter.
• Dividends are distributed in incorrect proportions or contrary to the class of shares held by shareholders.
• Lack of transparency in financial statements, incorrect determination or concealment of after-tax profits serving as the basis for dividend distribution.
• Abuse of authority by the Board of Directors or managers, who unilaterally decide on dividend distribution or non-distribution beyond their authority.
• Conflicts of interest between controlling shareholders and minority shareholders, resulting in restriction or infringement of minority shareholders’ lawful dividend rights.

It can be seen that disputes over dividend distribution primarily stem from violations of law, the company charter, or deficiencies in corporate governance transparency. Understanding these causes not only helps shareholders proactively protect their rights but also provides a basis for enterprises to establish transparent governance mechanisms to mitigate disputes in practice.

III. Relevant legal provisions governing disputes over dividend distribution

To effectively resolve disputes over dividend distribution, it is essential to understand the legal provisions on conditions, authority, principles of payment, procedures, and limitation periods for initiating legal actions. It enables shareholders and enterprises to proactively manage disputes, mitigate legal risks, and ensure transparency in corporate governance.

1. In which circumstances do disputes over dividend distribution arise?

Disputes over dividend distribution arise where dividend payments fail to comply with corporate law, specifically under Article 135 of the Law on Enterprise 2020 (as amended and supplemented in 2025), in the following circumstances:

• The company fails to distribute or delays dividend payments despite satisfying all conditions for distribution of dividends on ordinary shares under Clause 2, Article 135 (including fulfillment of tax obligations, appropriation of funds, offsetting of accumulated losses, and ensuring solvency of due debts).
• The company fails to implement or improperly implements resolutions of the General Meeting of Shareholders on dividend distribution, including unlawful changes to rates, forms, or timing of payment.
• Dividends are distributed inconsistently with the class of shares or at incorrect rates applicable to ordinary shares and dividend-preferred shares under Clauses 1 and 2, Article 135 and Article 117 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Dividend payments are made in improper forms, currencies, or outside the statutory time limit under Clauses 3 and 4, Article 135 (i.e., failure to complete payment within six months from the end of the annual General Meeting of Shareholders).
• The Board of Directors exceeds its authority by unilaterally deciding to distribute, suspend, or withhold dividends in contravention of the Law on Enterprise 2020 (as amended and supplemented in 2025) and the company charter.
• Incorrect identification of dividend beneficiaries, particularly in cases of share transfers under Clause 5, Article 135, thereby infringing shareholders’ lawful dividend rights.

Disputes over dividend distribution arise where acts violate Article 135 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the company charter, or resolutions of the General Meeting of Shareholders concerning conditions, authority, forms, and deadlines for dividend payments.

2. On what legal grounds are disputes over dividend distribution resolved?

To lawfully resolve disputes over dividend distribution, it is necessary to determine the applicable legal grounds in order to clarify the rights and obligations of the parties and adopt appropriate remedies to protect shareholders’ interests and ensure transparency in corporate governance. Disputes over dividend distribution are resolved primarily on the following legal bases:

• Law on Enterprise 2020 (as amended and supplemented in 2025):
  + Article 135: Conditions, forms, deadlines, and procedures for dividend payments in respect of ordinary shares.
  + Article 117: Rights of holders of dividend-preferred shares, including dividend rates, forms of payment, and related rights.
  + Other provisions on resolutions of the General Meeting of Shareholders, the company charter, and shareholders’ rights and obligations under Chapter V of the Law on Enterprises 2020 (as amended and supplemented in 2025).
• Company Charter: Pursuant to Point (h), Clause 2, Article 24 of the Law on Enterprise 2020 (as amended and supplemented in 2025), internal disputes among members/shareholders shall prioritize application of the company charter where the charter contains relevant provisions not contrary to law.
• Resolutions of the General Meeting of Shareholders: Resolutions on dividend distribution, timing of payment, and forms of payment constitute binding legal grounds on the company and shareholders. Disputes arise where the company fails to implement or acts contrary to such resolutions.
• Other relevant legal provisions:
  + Civil Code 2015: Governing civil transactions, compensation for damages, and property rights.
  + Civil Procedure Code 2015: Governing jurisdiction, procedures, and processes for resolving internal corporate disputes under Clause 4, Article 30, including disputes between the company and shareholders, among shareholders, and between the company and its managers.
  + Commercial Law 2005: Governing commercial dispute resolution methods under Article 317, including direct negotiation, mediation through agreed organizations or individuals, and resolution by arbitration or courts.

Note: Proceedings before arbitration or courts must comply with applicable procedural laws.

Resolution of disputes over dividend distribution is based on the Law on Enterprise 2020 (as amended and supplemented in 2025), the company charter, resolutions of the General Meeting of Shareholders, and other relevant legal provisions, with a view to safeguarding shareholders’ lawful interests and ensuring compliance with legal procedures.

3. Procedures for resolving disputes over dividend distribution

When disputes over dividend distribution arise, shareholders and enterprises must follow lawful procedures to resolve disputes in a manner that safeguards the parties’ rights and mitigates legal risks. Such procedures may be conducted through negotiation, mediation, arbitration, or court proceedings, depending on agreements and applicable law.

- Resolution through negotiation via the General Meeting of Shareholders

One of the fundamental rights of shareholders is to organize and attend meetings for negotiation.

Pursuant to Clause 1, Article 139 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the General Meeting of Shareholders convenes annually and may convene extraordinary meetings as necessary.

Article 145 of the Law on Enterprise 2020 (as amended and supplemented in 2025) provides that a General Meeting of Shareholders is validly convened where attending shareholders represent more than 50% of total voting rights, subject to specific thresholds stipulated in the company charter; except for the third meeting, which is not contingent upon the total voting rights represented.

Dividend-related disputes among shareholders may be negotiated and resolved through such meetings to reach lawful, unified decisions.

- Resolution through mediation

The parties may opt for mediation at a commercial mediation center or through intermediary organizations or individuals as agreed.

Such a method enables swift, cost-effective dispute resolution while preserving cooperative relationships.

However, mediation outcomes lack the coercive enforceability of court judgments or arbitral awards and thus depend on the parties’ voluntary compliance.

- Resolution through litigation before the People’s Court

Pursuant to Article 37 of the Civil Procedure Code 2015, the People’s Court has jurisdiction over:

• Disputes between a company and its shareholders, or among shareholders;
• Disputes between a company and its managers (Board of Directors, Director, General Director);
• Disputes relating to the establishment, operation, dissolution, merger, division, separation, asset transfer, or conversion of corporate form.

Court proceedings are a common method with coercive legal force, suitable where negotiation or mediation fails.

- Resolution through Arbitration Centers

The parties may opt for commercial arbitration where a prior arbitration agreement exists.
Advantages include:

• Arbitral awards are final and binding with immediate effect;
• Shorter resolution timelines compared to court proceedings;
• Confidentiality, minimizing adverse impacts on business operations.

Disputes over dividend distribution may be resolved by negotiation, mediation, courts, or arbitration, depending on agreements and the nature of the dispute. Selecting an appropriate method safeguards shareholders’ rights, ensures legal compliance, and maintains transparency and stability in corporate governance.

4. From when is the limitation period for initiating claims over dividend distribution calculated?

Accurately determining the commencement of the limitation period is critical for shareholders to protect their lawful rights and avoid forfeiture of the right to sue due to expiry. The limitation period is governed by the Civil Code 2015 in conjunction with the Law on Enterprise 2020 (as amended and supplemented in 2025).

• General limitation period: Under Article 429 of the Civil Code 2015, the limitation period for initiating actions in property disputes is three years, unless otherwise provided by law. The limitation period is calculated from the date on which the lawful rights and interests are infringed or from the date the claimant knew or should have known of such infringement.
• Application to dividend disputes: Disputes over dividends arise where the company fails to pay dividends, pays incorrect rates, applies incorrect share classes, or acts contrary to resolutions of the General Meeting of Shareholders.

Accordingly, the limitation period commences from the date the shareholder becomes aware, or should have become aware, that their dividend rights have been infringed (e.g., the date on which the statutory deadline for dividend payment expires under Article 135 of the Law on Enterprise 2020 (as amended and supplemented in 2025)).

The limitation period for initiating claims over dividend distribution is three years, calculated from the date the shareholder knew or should have known that their dividend rights were infringed. Correctly determining this date enables shareholders to timely initiate proceedings to protect their lawful rights.

IV. Responses to frequently asked questions regarding disputes over dividend distribution

In practice, many shareholders and enterprises have concerns regarding rights, obligations, and liabilities in dividend-related disputes. Addressing these questions helps shareholders understand their rights, ensures corporate compliance, and mitigates potential risks. Common issues include:

1. Where a company generates profits but does not distribute dividends, are shareholders entitled to request resolution of dividend distribution disputes?

Under Clause 2, Article 135 of the Law on Enterprise 2020 (as amended and supplemented in 2025), shareholders are entitled to request dividend distribution where the company has satisfied all statutory conditions for dividend payments on ordinary shares, including:

• Fulfillment of tax and other financial obligations;
• Appropriation of funds and offsetting of prior losses as required;
• Continued solvency after dividend payment.

Where the company fails to distribute dividends despite meeting these conditions, shareholders may seek dispute resolution through negotiation, mediation, arbitration, or court proceedings to protect their lawful interests.

2. Do minority shareholders have the right to initiate claims in dividend distribution disputes?

Minority shareholders are entitled to initiate claims where their dividend rights are infringed.

• Under Articles 117 and 135 of the Law on Enterprise 2020 (as amended and supplemented in 2025), holders of ordinary shares or dividend-preferred shares, including minority shareholders, are entitled to protection of dividend rights.
• Additionally, Article 186 of the Civil Procedure Code 2015 entitles shareholders to initiate claims in their own name or through lawful representatives before competent courts to seek protection of lawful rights and interests.

Where the company fails to pay dividends, pays incorrect rates, or acts contrary to resolutions of the General Meeting of Shareholders or the company charter, minority shareholders may seek resolution through negotiation, mediation, arbitration, or courts. The law safeguards minority shareholders’ right to sue even where they do not control corporate decisions.

3. Does the board of directors have authority to decide on dividend distribution during ongoing dividend disputes?

Where a dividend distribution dispute is ongoing, the Board of Directors may not unilaterally decide to distribute or suspend dividends where such actions affect shareholders’ lawful rights.

Article 135 of the Law on Enterprise 2020 (as amended and supplemented in 2025) provides that dividend payments must be based on resolutions of the General Meeting of Shareholders and subject to statutory conditions, including fulfillment of tax obligations, appropriation of funds, offsetting of losses, and ensuring solvency.

The Board of Directors is responsible solely for implementing resolutions of the General Meeting of Shareholders, preparing lists of dividend recipients, and notifying shareholders of payment timelines and forms.

The Board of Directors has no authority to independently decide on dividend distribution during ongoing disputes; all actions must comply with resolutions of the General Meeting of Shareholders and applicable law to safeguard shareholders’ lawful rights.

4. May a company temporarily suspend dividend payments during ongoing dividend distribution disputes?

Under Article 135 of the Law on Enterprise 2020 (as amended and supplemented in 2025), dividend payments must comply with resolutions of the General Meeting of Shareholders and statutory conditions on dividends.

Any temporary suspension must not infringe shareholders’ lawful rights and must be transparently communicated to shareholders.

A company may temporarily suspend dividend payments during disputes, provided it complies with law, ensures transparency, and safeguards shareholders’ interests, thereby enabling reasonable dispute management while protecting lawful rights.

5. What should enterprises do to prevent dividend distribution disputes in practice?

In practice, disputes over dividend distribution are common and often arise from misunderstandings, lack of transparency regarding shareholders’ rights, or violations of law. Understanding shareholders’ and the company’s rights and obligations helps prevent risks, protect lawful interests, and maintain governance stability. To prevent dividend distribution disputes, enterprises should:

• Comply with law and the company charter:
• Paying dividends in strict compliance with Article 135 of the Law on Enterprises 2020 (as amended and supplemented in 2025), ensuring conditions on profits, tax obligations, corporate funds, loss offsetting, and solvency.
• Fulfilling the rights of holders of dividend-preferred shares under Article 117 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Ensure transparency and disclosure of financial information:
• Fully updating financial statements, net profits, and shareholder registers.
• Clearly notifying shareholders of dividend payment timelines, forms, and amounts to avoid misunderstandings.
• Establish clear internal procedures:
• Adopting resolutions of the General Meeting of Shareholders on dividend distribution.
• Clearly defining deadlines, payment methods, and lists of dividend recipients.
• Pre-agree on preferential and ordinary dividends: 
• Clearly specifying fixed dividend rates, bonus dividends, and determination methods in share certificates or the company charter.
• Minimizing conflicts between ordinary and preferred shareholders.
• Establish internal dispute resolution mechanisms:
• Implementing negotiation and mediation mechanisms prior to litigation.
• Facilitating swift, cost-effective resolution while maintaining shareholder–company relationships.

Enterprises that fully comply with law, ensure transparency, implement clear dividend distribution procedures, and establish internal dispute resolution mechanisms can mitigate dispute risks, protect shareholders’ lawful interests, and maintain stable and effective corporate governance.

V. Why seek legal advice from NPLaw for issues relating to dividend distribution disputes?

In corporate governance and dividend distribution, particularly in companies with multiple share classes and diverse shareholder bases where dividends involve complex legal rights, timely advice from NPLaw lawyers can assist enterprises and shareholders to:

• Clearly understand the rights and obligations of the parties in relation to dividends, mitigating risks and disputes arising from incorrect rates, delays, or actions contrary to resolutions of the General Meeting of Shareholders.
• Identify legal liabilities and compensation obligations where violations of dividend rights adversely affect other shareholders’ lawful interests.
• Draft, review, and revise resolutions, the company charter, and dividend-related arrangements in compliance with law, establishing clear provisions on payment deadlines, methods, preferential rights, and remedies for breaches, thereby maximizing protection of rights and minimizing legal risks in all dispute scenarios.

The above information is provided for reference purposes only. For case-specific legal advice, please contact NPLaw for prompt support.