Disputes over assets among shareholders

Disputes over assets among shareholders have become increasingly common, directly affecting the operation and stability of enterprises. These disputes typically arise when shareholders disagree over the ownership, division, or disposal of assets, and may lead to serious consequences if they aren’t addressed in a timely and transparent manner.

Disputes over assets among shareholders have become increasingly common, directly affecting the operation and stability of enterprises. These disputes typically arise when shareholders disagree over the ownership, division, or disposal of assets, and may lead to serious consequences if they aren’t addressed in a timely and transparent manner.

I. Current situation of disputes over assets among shareholders

At present, disputes over assets among shareholders are relatively widespread and are becoming increasingly complex. The primary causes arise from a lack of transparency in management, profit distribution, share transfers, or decisions on the disposal of common company assets. Such disputes not only affect the rights and interests of shareholders but also have negative impacts on the company’s reputation, business operations, and sustainable development. In fact, many companies have become stagnant, or even dissolved, due to prolonged disputes.

II. Understanding of disputes over assets among shareholders

1. Definition

Disputes over assets among shareholders refer to conflicts and disagreements arising in connection with the ownership, management, disposal, or distribution of benefits derived from company assets or contributed capital.

These disputes may involve capital contributions, share transfers, profit distribution, asset valuation, or the use of shared assets. They are common in joint stock companies and have a direct impact on shareholders’ rights and the enterprise’s stability and growth.

2. Common cases of disputes over assets among shareholders

Asset disputes among shareholders do not arise spontaneously but usually arise from specific conflicts during capital contribution, management, or benefit distribution. Common cases include:

Capital contribution disputes: When shareholders contribute insufficient capital, delay their contributions, or contribute assets different from their original commitments.
Disputes over profit or dividend distribution: There is non-transparency in financial or disagreements in determining rights and benefits.
Disputes over share transfers: When shareholders are restricted or have opposition from other shareholders.
Disputes over asset management and use: When the use of company assets is alleged to cause losses or deviate from intended purposes.
Disputes arising from capital withdrawal or divestment: When shareholders’ withdrawal requests are not approved by the company or other shareholders.

If these conflicts are not handled transparently and promptly, they may damage the company’s reputation, stability, and long-term development.

3. Methods of resolving asset disputes among shareholders

To effectively address disputes, companies and involved parties should follow these basic steps:

Internal negotiation and mediation: It is the preferred solution, allowing shareholders to openly discuss issues and find common solutions, thereby avoiding complicated legal procedures.
Commercial arbitration: If the parties have agreed on arbitration in the charter or contract, the dispute will be executed by arbitration to complete a faster, confidential, and more specialized resolution.
Professional legal consultation: Lawyers often shall help shareholders understand their rights and obligations and choose the most appropriate legal strategy, minimizing legal risks.
Litigation: If negotiation or arbitration fails, or if no arbitration agreement exists, shareholders may file a lawsuit for the Court. Court judgments are legally binding and enforceable.

Timely and appropriate dispute resolution not only promptly ends the conflict but also maintains stability, reinforces trust among shareholders, and safeguards the company’s sustainable development.

III. Legal provisions governing disputes over assets among shareholders

1. Relevant legal provisions

When disputes arise, legal regulations serve as a critical foundation for fair and proper resolution. Notable provisions include:

Rights and obligations of shareholders

Point b, Clause 1, Article 115 of the Law on Enterprise 2020: Shareholders are entitled to receive profits in proportion to their capital contribution after the company has fulfilled its financial obligations.
Point g, Clause 1, Article 115 of the Law on Enterprise 2020: Shareholders are entitled to receive their share of remaining assets upon dissolution or bankruptcy.
Point c, Clause 1, Article 11 of the Law on Enterprise 2020: Shareholders are only liable within the scope of their contributed capital.

Right to access information and initiate legal action

Clause 1, Article 115 and Clause 4, Article 114 of the Law on Enterprise 2020: Shareholders may attend and vote at the General Meeting of Shareholders (GMS) and must be treated equally. In addition, shareholders owning at least 5% of ordinary shares have the right to inspect and copy financial statements, the charter, and resolutions.
Article 166 of the Law on Enterprise 2020: Shareholders may initiate civil actions against managers for violations under the name of the company.

Right to object resolutions and decisions of the company:

Article 151 of the Law on Enterprise 2020: Shareholders may request a Court or Arbitral Tribunal to suspend or annul resolutions or decisions of the Board of Directors or the General Meeting of Shareholders if such decisions are unlawful, contrary to the company’s charter, or detrimental to the company.

These legal provisions not only protect shareholders’ lawful rights and interests but also promote transparency, stability, and fairness in corporate governance. A solid understanding of these rules helps shareholders handle disputes effectively and minimize legal risks.

2. Competent authorities for handling asset disputes among shareholders

Identifying the competent authority is crucial to ensure effective legal resolution:

People’s Courts: According to Clause 4, Article 30 of the Civil Procedure Code 2015, provincial-level People’s Courts have jurisdiction over disputes between companies and shareholders regarding establishment, operation, dissolution, mergers, division, asset transfers, or conversion of the corporate form. In addition, Article 37 also confirms the court’s competence to resolve disputes initiated by company or shareholders.
Commercial Arbitration Centers (if agreed): Under Article 6 of the Law on Commercial Arbitration 2010, where a valid arbitration agreement exists, Courts must refuse jurisdiction unless the agreement is invalid or unenforceable. Arbitration is preferred for its confidentiality, prompt, and professionalism.

3. Consequences of unresolved disputes

Failure to resolve asset disputes may lead to serious consequences:

Operational disruption: Prolonged disputes hinder decision-making and delay business plans.
Internal division: Conflicts affect internal connection and undermine management structures.
Reputation and trust damage: Partners, customers, and investors may lose confidence, leading to lost contracts, reduced revenue, or missed investment opportunities.
Risk of dissolution or bankruptcy: In severe cases, unresolved disputes may result in dissolution or bankruptcy.

Thus, resolving shareholder asset disputes protects individual rights and is essential for corporate survival and sustainable growth.

IV. Questions on disputes over assets among shareholders

1. What is the typical procedure for resolving asset disputes among shareholders?

Direct discussions among shareholders: To clarify the dispute and verify documents, contracts, and the company charter.
The General Meeting of Shareholders or Board of Directors meeting: To discuss and issue a resolution if the dispute affects company operations.
Record of resolutions or agreements in writing: To provide a legal basis and prevent future conflicts.
Third-party mediators, such as lawyers or mediation organizations: If internal resolution fails, shareholders may seek legal support from professional third parties.
Arbitration (if agreed) or Courts under the Civil Procedure Code 2015: When internal measures are ineffective, disputes are handled at arbitration or Courts.

Such a process prioritizes negotiation and mediation before resorting to legal proceedings.

2. What should companies do if multiple shareholder asset disputes arise?

Companies should strengthen internal mechanmeeting reviewing and supplementing charters and governance regulations to clearly define rights, obligations, and profit distribution mechanisms; convening The General Meeting of Shareholders or Board of Directors meeting promptly to adopt resolutions; and establishing internal mediation mechanisms or engaging lawyers and independent experts to harmonize interests.

3. What impacts can shareholder asset disputes have on business operations?

Management disruption due to prolonged deadlock in decision-making.
Reduced internal connection and cooperation among shareholders and staff.
Damage to corporate reputation in the business market, specifically stakeholders.
Financial risks including losses and possible dissolution.

4. What are the consequences if the company fails to intervene in asset disputes among shareholders?

Paralysis of governance, delaying important strategic and financial decisions.
Reputational damage among partners, investors, and customers.
Increase in legal costs and risks due to prolonged litigation or arbitration.
Potential dissolution or collapse due to unresolved internal matters.

5. What is the maximum time for resolving asset disputes among shareholders?

Arbitration: Under Article 33 of the Law on Commercial Arbitration 2010, the statute of limitations is two years from the date the legal rights and interests were infringed.
Court proceedings: According to Article 37 of the Civil Procedure Code 2015, provincial Courts have jurisdiction. Although some sources indicate approximately two months, complex cases often take longer in practice.

Including negotiation and internal mediation, the entire process typically ranges from several months to over a year.

V. Why companies should seek legal counsel in asset disputes among shareholders

Disputes over assets among shareholders are often complex, involving both economic interests and corporate governance. Legal counsel helps companies assess risks accurately, select appropriate solutions, and minimize damages. If you are facing such issues, contact NPLaw for timely support.