Causes, legal risks, and remedial measures where shareholders do not receive bonus shares

In the practice of joint-stock companies, the issuance of bonus shares is a common mechanism to acknowledge shareholders’ contributions and safeguard their lawful interests. However, in many cases, shareholders do not receive bonus shares in accordance with the adopted resolution, leading to complaints, disputes, and legal risks for enterprises. This reality necessitates clarification of the causes, shareholders’ rights, and relevant legal provisions in order to adopt appropriate solutions and minimize disputes in corporate governance.

I. Current situation of shareholders not receiving bonus shares

In recent times, cases where shareholders do not receive bonus shares have become relatively common in many joint-stock companies, particularly in capital increases sourced from after-tax profits or share premium.

Although resolutions of the General Meeting of Shareholders or the Board of Directors have been duly adopted, errors still arise in implementation due to delays in completing statutory procedures, inaccurate maintenance of the register of shareholders, or internal disputes. Such a situation not only directly affects shareholders’ lawful rights and interests but also entails risks of complaints and litigation, undermining stability in corporate governance and business operations.

II. Understanding cases where shareholders do not receive bonus shares

The failure of shareholders to receive bonus shares reflects shortcomings in corporate governance and legal compliance. Identifying the causes, legal risks, and shareholders’ rights serves as the basis for assessment and resolution of disputes.

1. What complications may arise for the company when shareholders do not receive bonus shares?

Failure to allocate bonus shares to shareholders may entail serious legal and governance consequences, including:

• Internal complaints and disputes: Shareholders are entitled to request explanations and remedies from the company or to initiate legal proceedings if they consider that their lawful rights have been infringed, thereby escalating disputes between shareholders and the company.
• Risk of legal liability: Where the failure to allocate bonus shares contravenes resolutions of the General Meeting of Shareholders or violates the Law on Enterprises, the company and its managers may incur civil liability and may even be required to compensate for damages.
• Adverse impact on reputation and investment climate: Failure to safeguard shareholders’ interests undermines investor confidence, adversely affecting the company’s ability to raise capital and its market image.
• Disruption to corporate governance: Protracted disputes may paralyze management activities and hinder the adoption of important corporate decisions.

It is evident that shareholders’ failure to receive bonus shares not only directly infringes their interests but also exposes enterprises to substantial legal, governance, and reputational risks. Accordingly, companies must strictly comply with adopted resolutions and applicable laws and ensure transparency in the issuance of bonus shares in order to minimize disputes.

2. What reasons may cause shareholders not to receive bonus shares as prescribed?

Shareholders’ failure to receive bonus shares may stem from various legal and practical corporate governance causes, including:

• Invalid resolution on the issuance of bonus shares: Pursuant to Clause 2 Article 138 and Clause 2 Article 153 of the Law on Enterprise 2020, resolutions of the General Meeting of Shareholders or the Board of Directors adopted without proper authority, order, or procedures may be annulled, resulting in non-implementation of bonus share allocation.
• Failure to complete issuance procedures and registration of charter capital increase: Pursuant to Clause 1 Article 135 and Article 123 of the Law on Enterprise 2020, payment of dividends in shares or issuance of bonus shares must be accompanied by procedures for registration of changes to charter capital and updating shareholder information in accordance with law.
• Inaccurate information in the register of shareholders: As stipulated in Article 122 of the Law on Enterprise 2020, the register of shareholders constitutes the legal basis for establishing shareholder status and rights. Failure to update share transfers, or shares being under dispute or subject to attachment may result in shareholders not receiving bonus shares.
• Failure to satisfy conditions as of the record date: Only shareholders whose names appear on the list as of the record date determined under the issuance resolution are entitled to receive bonus shares. Where shares have been transferred or shareholder rights are restricted as of such date, allocation will not be made.
• Breach of the company’s obligation to safeguard shareholders’ rights: Under Article 115 of the Law on Enterprise 2020, ordinary shareholders are entitled to equal treatment. Allocation of bonus shares to incorrect beneficiaries, at incorrect ratios, or deliberate delays constitute direct causes of disputes.

These causes indicate that shareholders’ failure to receive bonus shares typically originates from legal non-compliance and internal governance shortcomings. Reviewing resolutions, issuance procedures, and the register of shareholders is therefore necessary to safeguard shareholders’ lawful rights and mitigate dispute risks for enterprises.

3. What rights do shareholders have if their lawful interests are infringed due to failure to receive bonus shares?

Where shareholders do not receive bonus shares in contravention of duly adopted resolutions or legal provisions, they have the following legal rights:

• Requesting the company to provide relevant information and documents: Pursuant to Clause 1 Article 115 of the Law on Enterprise 2020, shareholders are entitled to access information regarding the resolution on issuance of bonus shares, the shareholder list as of the record date, the allocation plan, and implementation status.
• Requesting the company to duly implement the resolution and remedy violations: Under Article 115 and Clause 5 Article 122 of the Law on Enterprise 2020, shareholders may request the company to update the register of shareholders and allocate bonus shares in the correct ratios and to eligible recipients in accordance with a lawful resolution.
• Requesting annulment of resolutions that violate the law or the company charter: Pursuant to Article 151 of the Law on Enterprise 2020, eligible shareholders or shareholder groups may petition the court or arbitration to annul resolutions of the General Meeting of Shareholders where the bonus share issuance resolution violates the law or the company charter.
• Initiating legal action for damages: As provided in Article 170 of the Civil Code 2015, shareholders, as holders of property rights in their shares, may claim damages against the company or infringing persons where unlawful non-allocation of bonus shares causes actual losses.
• Requesting competent authorities to resolve disputes: Under Articles 30 and 37 of the Civil Procedure Code 2015, disputes between shareholders and the company fall within the jurisdiction of the courts; where there is a valid arbitration agreement, disputes may be resolved by commercial arbitration.

The current legal framework establishes comprehensive mechanisms to protect shareholders’ rights. Accordingly, where bonus shares are not allocated in breach of the law, shareholders are entitled to request remedial measures, seek annulment of unlawful resolutions, or initiate claims for damages to protect their lawful rights and interests.

4. Common scenarios leading to shareholders not receiving bonus shares

In practice, shareholders’ failure to receive bonus shares often arises from the following common situations:

• Errors in fixing the shareholder record date: Inaccurate shareholder information in the register of shareholders, failure to timely update share transfers, changes in personal details, or ownership ratios as of the record date.
• Shares subject to legal encumbrances: Shares restricted from transfer, pledged, mortgaged, or otherwise bound by contracts, resulting in delayed or suspended exercise of the right to receive bonus shares.
• Failure to complete capital contribution obligations: Shareholders who have not fully paid for subscribed shares may be ineligible to receive bonus shares.
• Errors in issuance and distribution procedures: The company fails to comply with issuance procedures, delays registration of charter capital changes, or allocates shares inconsistently with the approved plan.
• Ongoing disputes or complaints: Where ownership of shares is under dispute, the exercise of rights may be suspended pending a legally effective decision.

These scenarios represent the most common practical causes of shareholders not receiving bonus shares.

III. Relevant legal provisions concerning shareholders not receiving bonus shares

Where shareholders do not receive bonus shares, not only are their lawful rights and interests directly affected, but disputes and legal liabilities for the company and its managers may also arise. The following main legal issues should be noted:

1. How does Vietnamese enterprise law regulate cases where shareholders do not receive bonus shares?

The Law on Enterprise 2020 does not contain a provision specifically governing cases where shareholders do not receive bonus shares. However, shareholders’ entitlement to bonus shares is governed through general provisions on shareholder rights, payment of dividends in shares, issuance of shares, and corporate governance, including:

• Rights of ordinary shareholders: Under Article 115 of the Law on Enterprise 2020, ordinary shareholders are entitled to equal treatment and to benefits proportionate to their shareholding. Failure to allocate bonus shares to eligible shareholders constitutes an infringement of shareholder rights.
• Provisions on payment of dividends in shares and issuance of shares: Under Clause 1 Article 135 of the Law on Enterprise 2020, a joint-stock company may pay dividends in shares. Failure to implement a lawful resolution on payment of dividends in shares or issuance of bonus shares constitutes a breach of the obligation to implement resolutions.
• The register of shareholders as the basis for establishing rights: Under Article 122 of the Law on Enterprise 2020, the register of shareholders is the legal basis for determining shareholder status and rights. Failure to record or incorrect recording of shareholder information may result in shareholders not receiving bonus shares.
• Right to request annulment of unlawful resolutions: Under Article 151 of the Law on Enterprise 2020, shareholders may request the court or arbitration to annul resolutions of the General Meeting of Shareholders where the bonus share issuance resolution violates the law or the company charter.

Although the Law on Enterprise 2020 does not provide a specific provision on shareholders not receiving bonus shares, the system of rules on shareholder rights, share issuance, and the register of shareholders provides a sufficient legal basis to protect shareholders in such cases.

2. Which authorities have jurisdiction to resolve disputes where shareholders do not receive bonus shares?

Where shareholders do not receive bonus shares and disputes arise with the company, Vietnamese law confers jurisdiction on the following bodies:

• Competent People’s Courts: Under Articles 30 and 37 of the Civil Procedure Code 2015, disputes between shareholders and the company concerning rights and obligations arising from the operations of a joint-stock company fall within the jurisdiction of the competent courts. Shareholders may initiate proceedings to request the company to implement resolutions, ensure allocation of bonus shares, or compensate for damages.
• Commercial arbitration: Pursuant to Clause 1 Article 5 of the Law on Commercial Arbitration 2010, disputes may be resolved by arbitration only where the parties have a valid arbitration agreement set out in the company charter or a separate agreement between the shareholder and the company. Arbitral awards are final and binding, not subject to appeal as court judgments.
• Company charter: Under Point (h) Clause 2 Article 24 of the Law on Enterprise 2020, the company charter must prescribe principles for resolving internal disputes between the company and shareholders or among shareholders.

In practice, prior to initiating court or arbitral proceedings, shareholders often prioritize internal negotiation or mediation in accordance with the company charter or resolutions of the General Meeting of Shareholders, as such an approach helps reduce costs, save time, and minimize adverse impacts on corporate governance and business operations.

Accordingly, disputes arising from shareholders not receiving bonus shares may be resolved by courts or commercial arbitration, depending on the applicable agreements and the company charter. Selecting the appropriate forum is essential to effectively protect shareholders’ lawful rights and interests.

3. Consequences if cases of shareholders not receiving bonus shares are not resolved

Failure to timely resolve cases where shareholders do not receive bonus shares may lead to serious legal and practical consequences, including:

• Protracted disputes and increased litigation: Unresolved disputes may escalate to court or arbitration proceedings, entailing significant time and costs and exacerbating internal tensions.
• Infringement of shareholders’ lawful rights and interests: Under Article 115 of the Law on Enterprise 2020, shareholders are entitled to equal treatment and benefits proportionate to their ownership. Failure to remedy infringements diminishes the value of shareholders’ investments.
• Risk of compensation liability: Under Article 170 of the Civil Code 2015, unlawful non-allocation of bonus shares causing losses may give rise to compensation liability for the company or its managers.
• Adverse impact on corporate reputation and governance: Protracted disputes erode investor confidence, damage corporate reputation, and may disrupt the adoption of key corporate decisions.
• Personal liability of company managers: Under Articles 165 and 166 of the Law on Enterprise 2020, managers may incur personal liability for breaches of duties of honesty and due care that cause losses to shareholders.

If not timely addressed, cases where shareholders do not receive bonus shares may harm both shareholders and enterprises and expose companies to substantial legal and governance risks. Proactive remedial action is therefore essential to safeguard shareholder rights and ensure corporate stability. 

IV. Questions on shareholders not receiving bonus shares

1. How should the issuance of bonus shares be conducted to avoid shareholders not receiving bonus shares?

To avoid cases where shareholders do not receive bonus shares, the issuance process must strictly comply with statutory procedures under the Law on Enterprise 2020, including:

Step 1: Adoption of a lawful resolution on issuance of bonus shares

• Pursuant to Articles 138 and 153 of the Law on Enterprise 2020, the General Meeting of Shareholders or the Board of Directors (if duly authorized) must adopt a resolution specifying the funding source, issuance ratio, and eligible recipients.

Step 2: Fixing the list of shareholders entitled to receive bonus shares

• Under Article 122 of the Law on Enterprise 2020, the company must rely on the register of shareholders to fix the shareholder list as of the record date. Accurate and up-to-date shareholder information is critical to safeguarding entitlements.

Step 3: Completion of issuance procedures and registration of charter capital increase

• Under Clause 1 Article 135 of the Law on Enterprise 2020, the company must complete issuance procedures and register changes to charter capital before allocating shares.

Step 4: Updating the register of shareholders and delivering bonus shares

• Upon completion of issuance, the company must update the register of shareholders and record the increased number of shares for each shareholder in accordance with the approved ratio.

Strict compliance with all steps from adoption of resolutions, fixing the shareholder record date, completion of issuance procedures, to updating the register of shareholders is decisive in preventing cases where shareholders do not receive bonus shares and in minimizing disputes.

2. Are there documentation requirements to evidence entitlement to bonus shares?

To avoid cases where shareholders do not receive bonus shares, the law and corporate governance practice require certain documents evidencing entitlement, including:

• Resolution of the General Meeting of Shareholders: A resolution approving the bonus share issuance plan, clearly specifying eligible recipients, issuance ratio, and the shareholder record date, pursuant to Article 138 of the Law on Enterprise 2020.
• Shareholder list as of the record date: The company must prepare and update the register of shareholders as the basis for determining entitlement, according to Article 122 of the Law on Enterprise 2020.
• Company notice of bonus share issuance: A written notice to shareholders (or disclosure as required) confirming entitlements and guiding procedures for receiving bonus shares.

While the law does not require a separate “certificate” to receive bonus shares, resolutions of the General Meeting of Shareholders, the register of shareholders, and issuance notices constitute the mandatory legal bases to ensure shareholders receive bonus shares in accordance with their entitlements.

3. May shareholders initiate legal proceedings if bonus shares are not allocated within the statutory timeframe?

Shareholders are entitled to initiate legal proceedings where the company has adopted a lawful resolution on issuance of bonus shares but fails to implement or delays implementation, thereby affecting shareholders’ lawful rights and interests.

Under Article 186 of the Civil Procedure Code 2015, individuals and organizations may initiate court proceedings to request protection of their lawful rights and interests where such rights are infringed. Failure to receive bonus shares within the timeframe prescribed by a lawful resolution constitutes an infringement of shareholders’ rights.

In addition, under Clause 1 Article 166 of the Law on Enterprise 2020, shareholders or shareholder groups holding at least 1% of ordinary shares may initiate actions against members of the Board of Directors, the Director, or the General Director where such persons fail to implement or timely implement the bonus share issuance resolution, causing losses.

Accordingly, where a company fails to allocate bonus shares in accordance with the lawful resolution or within the prescribed timeframe, shareholders may initiate proceedings before the competent court and, in cases involving managerial misconduct, seek personal liability of company managers.

4. How are bonus shares handled if the company goes bankrupt?

Where a company is declared bankrupt, shareholders’ interests in relation to unissued bonus shares are addressed as follows:

• No entitlement to receive unissued bonus shares: Under Articles 121 and 122 of the Law on Enterprise 2020, ownership of shares arises only upon issuance and recording in the register of shareholders. Bonus shares that have not been issued and recorded do not give rise to ownership rights.
• No priority in bankruptcy distribution: Under Articles 54 and 101 of the Law on Bankruptcy 2014, shareholders are not creditors and are not entitled to priority payment in the order of distribution of bankruptcy assets.
• Right to claim personal liability of managers (if there are violations): Where failure to issue bonus shares results from breaches of managerial duties, shareholders may consider initiating claims against managers for personal civil liability under Article 166 of the Law on Enterprise 2020.

In bankruptcy, shareholders are not entitled to receive unissued bonus shares, and such claims are not addressed in bankruptcy proceedings. Only where managerial misconduct causes losses may shareholders pursue separate civil liability claims.

V. Are you seeking reliable legal expertise for issues related to shareholders not receiving bonus shares?

In corporate governance, particularly in decisions on bonus share issuance and safeguarding shareholder rights, timely advice from legal counsel at Ngoc Phu Law Company Limited can help:

• Clarifying shareholders’ rights and obligations concerning conditions, timing, and ratios of bonus share entitlements under applicable law.
• Determining the legal liabilities of the company and its managers in cases where shareholders do not receive bonus shares, including obligations to remedy and compensate (if any).
• Reviewing and completing internal documents such as the charter, resolutions, and issuance regulations to prevent disputes and legal risks.

The above information is provided for general reference only.