Common risks and consequences when shareholders do not receive notice of a new share issuance

In corporate practice, issuing new shares without properly notifying shareholders is a common error that easily leads to disputes. The failure of shareholders to receive notice of a new share issuance not only affects pre-emptive rights and ownership ratios, but also exposes the company to multiple legal risks. The following article clarifies the concept, impacts, the company’s notification obligations, relevant legal provisions, and remedial measures when shareholders’ rights and interests are infringed because shareholders do not receive notice of a new share issuance.

I. Common risks and consequences relating to shareholders not receiving notice of a new share issuance

In practice, many companies assume that adopting a resolution on the issuance of new shares is sufficient, while overlooking the obligation to duly and timely notify shareholders. Another common mistake is sending notices to the wrong recipients, by improper methods prescribed in the company charter, or without evidence proving that shareholders actually received the information.

In addition, confusing notice to existing shareholders with internal information disclosure, or treating shareholders’ “silence” as consent, also readily leads to disputes. These errors may result in complaints, requests for annulment of issuance resolutions, and directly affect the lawful rights and interests of shareholders.

II. Understanding the situation where shareholders do not receive notice of a new share issuance

To clarify shareholders’ lawful rights and interests in such circumstances, it is necessary to properly understand the concept of shareholders not receiving notice, identify the company’s responsibilities, and determine the potential legal consequences arising from non-compliant issuance of new shares.

1. What does it mean when shareholders do not receive notice of a new share issuance?

Shareholders not receiving notice of a new share issuance refers to circumstances where the company fails to send the notice, sends it late, or sends it in an improper form regarding the offering of new shares as required by law and the company charter, resulting in shareholders being unaware of, or unable to exercise, their pre-emptive rights to subscribe for new shares and other related rights.

2. How does a new share issuance affect the rights and interests of shareholders who do not receive notice?

The issuance of new shares may directly affect the lawful rights and interests of shareholders who do not receive notice, particularly their pre-emptive subscription rights, reduction of ownership and voting rights, and potential adverse impacts on economic interests (dividends and share value).

In serious cases, failure to provide notice may also result in resolutions or decisions on the share issuance being considered procedurally unlawful, leading to disputes between shareholders and the company.

3. Who takes responsibility for sending notice of a new share issuance to shareholders?

Pursuant to Article 140 of the Law on Enterprise 2020 (as supplemented by Clause 20, Article 1 of the amended Law on Enterprise 2025), the Board of Directors takes primary responsibility for convening the General Meeting of Shareholders and sending meeting invitations to each shareholder entitled to attend, including matters relating to the issuance of new shares.

If the Board of Directors fails or delays in performing such obligations, the Supervisory Board shall assume responsibility for convening the meeting and sending notices. If the Supervisory Board also fails to act, shareholders or groups of shareholders meeting the conditions prescribed in Clause 2, Article 115 are entitled to represent the company in convening the meeting and performing the notification in accordance with law.

4. What is the minimum time for sending notice of a new share issuance to shareholders?

Pursuant to Clause 1, Article 143 of the Law on Enterprise 2020 (as amended in 2025), notices of invitation to the General Meeting of Shareholders, including matters on new share issuance, must be sent to all shareholders entitled to attend at least 21 days prior to the opening date of the meeting, unless the company charter prescribes a longer period.

Failure to ensure such a minimum time may affect shareholders’ access to information and voting rights and may constitute grounds for reviewing the legality of resolutions on the issuance of new shares.

III. Relevant legal provisions relating to shareholders not receiving notice of a new share issuance

To clarify shareholders’ lawful rights and interests in cases of failure to receive notice of a new share issuance, it is necessary to examine the relevant legal provisions to determine the company’s responsibilities, mandatory procedures, and potential legal consequences.

1. How does the Law on Enterprise regulate notification of new share issuances to shareholders?

Pursuant to the Law on Enterprise 2020 (as amended in 2025), notification of a new share issuance to shareholders is a mandatory obligation of the company and must be implemented in compliance with prescribed procedures and time, specifically:

• First, the Board of Directors is responsible for organizing the notification. If the decision to issue new shares falls within the competence of the General Meeting of Shareholders, the Board of Directors must convene the meeting and send notices to all shareholders entitled to attend in accordance with Article 140.
• Second, the recipients of the notice include all shareholders whose names appear on the list of shareholders entitled to attend, regardless of their ownership ratios. The preparation of the shareholder list and the resolution of complaints relating to such list fall within the responsibility of the convening authority.
• Third, the time for sending notices must be no later than 21 days prior to the opening date of the General Meeting of Shareholders, unless the company charter prescribes a longer period, according to Clause 1, Article 143.
• Fourth, the form and contents of the notice must ensure delivery to shareholders’ contact addresses and must be published on the company’s website (if any). The notice must be accompanied by the meeting agenda, documents relating to the plan for issuance of new shares, and draft resolutions to enable shareholders to consider and vote.

Accordingly, notification of a new share issuance is not merely an administrative formality but a critical legal condition to ensure shareholders’ right of access to information, voting rights, and lawful interests.

2. Which authority has jurisdiction to resolve disputes where shareholders do not receive notice of a new share issuance?

Where shareholders do not receive notice of a new share issuance and the matter cannot be resolved internally, the dispute falls within the jurisdiction of the People’s Courts in accordance with procedural law.

Specifically, disputes between a company and shareholders concerning shareholders’ rights and obligations constitute disputes between a company and its members as prescribed in Article 30 of the Civil Procedure Code 2015, under which the People’s Courts have jurisdiction to adjudicate disputes relating to corporate operations and shareholders’ rights and interests.

If there is an arbitration agreement in the company charter or in agreements between the parties, the dispute may be resolved by commercial arbitration under Clause 1, Article 5 of the Law on Commercial Arbitration 2010. In such cases, arbitration shall have jurisdiction to resolve disputes in accordance with the law and the scope of the agreement.

3. What legal risks may the company face where shareholders complain of not receiving notice?

Where shareholders file complaints due to failure to receive notice of a new share issuance, the company may face serious legal risks, including:

• First, the risk of annulment of resolutions of the General Meeting of Shareholders: Pursuant to Article 151 of the Law on Enterprise 2020 (as amended in 2025), if failure to send notices or improper notification prevents shareholders from attending meetings or voting, the procedures for convening meetings are deemed materially defective. In such cases, shareholders or groups of shareholders meeting the conditions prescribed in Clause 2, Article 115 are entitled to request the court or arbitral tribunal to annul all or part of the resolutions relating to the new share issuance.
• Second, suspension or nullification of the share issuance plan: If resolutions are annulled, the entire plan for issuing new shares may be conducted, directly affecting capital raising, financial restructuring, or the company’s development strategy.
• Third, civil liability for damages: Where it can be established that non-compliant notification causes damage to shareholders (loss of pre-emptive rights, dilution of ownership, etc.), the company or relevant managers may be required to compensate for civil damages in accordance with general legal principles.
• Fourth, liability of the Board of Directors and company managers: The Board of Directors or persons responsible for convening meetings and sending notices may be deemed to have breached their management and governance obligations and may be held personally liable where damage is caused to the company or shareholders.
• Fifth, risks of prolonged disputes and reputational harm: Complaints and litigation relating to issuance procedures not only increase legal costs but also adversely affect the company’s reputation and the confidence of investors and business partners.

In summary, failure to duly and timely notify shareholders of a new share issuance may expose the company to concurrent risks of annulled resolutions, business disruption, compensation liability, and prolonged legal disputes.

IV. Questions relating to shareholders not receiving notice of a new share issuance

In practice, situations where shareholders do not receive notice of a new share issuance lead to many questions regarding shareholders’ rights, the company’s obligations, and mechanisms for protection of shareholders’ rights. Below are the most common issues encountered in such cases.

1. What should shareholders do if they do not receive notice of a new share issuance?

If shareholders do not receive notice of a new share issuance, they should proactively request the company, in writing, to clarify the convening of meetings, the sending of notices, and the conditions of the issuance.

Where violations of procedures prescribed by the Law on Enterprise 2020 (as amended in 2025) or the company charter are identified, shareholders may file internal complaints, request annulment of relevant resolutions, or initiate proceedings before a competent court or arbitral tribunal to protect their pre-emptive subscription rights and other lawful interests. The legal grounds for protection of shareholders’ rights have been clarified above and may be consulted.

2. Are shareholders entitled to sue the company if they do not receive notice of a new share issuance?

Shareholders are entitled to initiate legal proceedings against the company where failure to receive notice of a new share issuance results in infringement of their lawful rights and interests.

Specifically, pursuant to Point (c), Clause 1, Article 115 of the Law on Enterprise 2020 (as amended in 2025), ordinary shareholders have pre-emptive rights to subscribe for new shares in proportion to their ownership ratios. Failure to provide valid notice that prevents shareholders from exercising such rights constitutes an infringement of shareholders’ rights.

In such cases, shareholders may initiate proceedings before a competent People’s Court to seek protection of their pre-emptive rights, claim compensation for damages (if any), or request annulment of resolutions of the General Meeting of Shareholders relating to the share issuance where the procedures for convening and adopting resolutions are unlawful or inconsistent with the company charter, according to Article 151 of the Law on Enterprise 2020 (as amended in 2025).

3. What procedures are prescribed by law to ensure that shareholders receive notice of a new share issuance?

Pursuant to Article 143 of the Law on Enterprise 2020 (as amended in 2025), ensuring that shareholders receive notice of a new share issuance is implemented through the procedures for convening the General Meeting of Shareholders. Accordingly, the convener must send invitations to all shareholders entitled to attend at least 21 days prior to the opening date, unless the company charter prescribes a longer period.

Meeting invitations must be sent by methods ensuring delivery to shareholders’ contact addresses and must be published on the company’s website; where necessary, publication in newspapers may be required in accordance with the company charter. The invitations must be accompanied by the meeting agenda, meeting materials, draft resolutions, and voting ballots, including contents relating to the issuance of new shares. Where documents are posted on the website, the notice must clearly indicate the method of access.

Such a procedure is intended to ensure that shareholders are fully and timely informed and have a basis for exercising their rights and obligations in relation to the new share issuance.

4. Does the company take the burden of proof that shareholders received notice of a new share issuance?

Pursuant to the Law on Enterprise 2020 (as amended in 2025), the company takes the burden of proving that it has duly fulfilled its obligation to notify shareholders of the new share issuance through the procedures for convening the General Meeting of Shareholders. Specifically, the company must prove that meeting invitations were sent to the correct recipients, within the prescribed time limits, and by methods ensuring delivery to shareholders’ contact addresses in accordance with Article 143.

In case of complaints or disputes, documents such as the list of shareholders entitled to attend, evidence of dispatch of notices (postal records, emails, system confirmations), and website postings serve as proof of compliance. Failure to prove compliance may expose the company to the risk of annulment of resolutions of the General Meeting of Shareholders relating to the share issuance pursuant to Article 151 of the Law on Enterprise 2020 (as amended in 2025).

5. Are there legal mechanisms to protect shareholders who do not receive notice of a new share issuance?

Current enterprise law provides multiple mechanisms to protect shareholders’ rights and interests where notice of a new share issuance is not received, including:

• Protection of pre-emptive subscription rights: Ordinary shareholders have pre-emptive rights to subscribe for new shares pursuant to Point (c), Clause 1, Article 115 of the Law on Enterprise 2020 (as amended in 2025). Failure to provide notice that deprives shareholders of such an opportunity constitutes an infringement of shareholders’ rights.
• Right to request annulment of resolutions: If a new share issuance is approved on the basis of improper convening and notification procedures, shareholders are entitled to request the court to annul resolutions of the General Meeting of Shareholders pursuant to Article 151 of the Law on Enterprise 2020 (as amended in 2025).
• Right to request convening of the General Meeting of Shareholders: In cases of serious infringement of shareholders’ rights, shareholders or groups of shareholders meeting the ownership thresholds may request the convening of the General Meeting of Shareholders pursuant to Clause 3, Article 115 of the Law on Enterprise 2020 (as amended in 2025).
• Right to claim compensation for damages: If actual damage arises from failure to receive notice, shareholders may initiate claims against the company or managers for compensation in accordance with general principles of civil and enterprise law.

These mechanisms aim to ensure that shareholders are not deprived of their informational rights and economic rights when the company issues new shares in violation of the law.

V. Are you seeking reputable legal expertise to support matters relating to shareholders not receiving notice of a new share issuance?

Where disputes arise due to shareholders not receiving notice of a new share issuance, engaging legal experts with in-depth knowledge of enterprise law is crucial to protecting lawful rights and interests. With experience in advising on and resolving shareholder–company disputes, NPLaw can assist in accurately assessing legal risks, identifying legal grounds for complaints or litigation, and proposing effective solutions in compliance with the law and the company charter.

The above information is for reference purposes only. For detailed advice on specific cases, please contact Ngoc Phu Law Company Limited for prompt consultation.