Failure to pay for subscribed shares on time: legal consequences and remedies under applicable law

In the process of contributing capital to a joint stock company, failure to pay for subscribed shares on time is a relatively common situation and may entail significant legal risks. A shareholder’s failure to properly perform the payment obligation not only affects that shareholder’s own rights and interests but also directly impacts the charter capital, corporate governance activities, and the rights of other shareholders. The following article analyzes the relevant legal regulations, legal consequences, and handling mechanisms for cases where payment for subscribed shares is not made within the prescribed time.

I. Current situation relating to failure to pay for subscribed shares on time

In practice, the failure to pay for subscribed shares on time occurs quite frequently in joint stock companies, particularly during the stage of enterprise establishment or when the company conducts share offerings or increases its charter capital. Many shareholders register to purchase shares but fail to contribute capital in full or within the committed time limit, resulting in the actual paid-up charter capital being lower than the registered charter capital.

Such situations not only affect the financial capacity and reputation of the enterprise but also create difficulties in corporate governance, the allocation of rights and benefits among shareholders, and increases the potential risk of disputes and legal liabilities for the company.

II. Concept of failure to pay for subscribed shares on time

Failure to pay for subscribed shares on time refers to a situation where a shareholder fails to perform or does not fully perform the obligation to pay for the subscribed shares within the statutory time limit or within the time agreed upon by the parties. Such conduct may directly affect the charter capital, shareholders’ rights, and the stable operation of a joint stock company.

1. What is failure to pay for subscribed shares on time?

Failure to pay for subscribed shares on time refers to a situation in which a shareholder fails to make payment or only partially pays for the shares that he or she has registered to purchase after the expiry of the payment deadline as prescribed by law, the company’s charter, or the share subscription agreement.

According to Clause 1 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the payment period for subscribed shares is 90 days from the date the company is issued the Enterprise Registration Certificate, unless the company’s charter or the share subscription agreement stipulates a shorter time. If the shareholder fails to perform the payment obligation within this period, such conduct is deemed failure to pay for subscribed shares on time.

2. On what basis is the payment deadline for shares determined?

The payment deadline for shares is determined based on the provisions of the Law on Enterprise 2020 and lawful agreements within the company, specifically as follows:

• Law on Enterprise 2020 (as amended and supplemented in 2025): Pursuant to Clause 1 Article 113, shareholders must fully pay for the number of shares they have registered to purchase within 90 days from the date of issuance of the Enterprise Registration Certificate, unless a shorter time limit is stipulated.
• Company’s charter: The charter may stipulate a payment deadline shorter than the statutory time limit, in which case shareholders must comply with the provisions of the charter.
• Share subscription agreement (if any): Where a separate agreement on the payment deadline exists, shareholders must comply with the agreed terms.
• Role of the Board of Directors: The Board of Directors is responsible for supervising and urging shareholders to make full and timely payment for the subscribed shares.

Accordingly, the deadline for payment of shares is determined on the basis of legal provisions combined with the company’s charter and lawful agreements between the parties.

3. What should enterprises do to minimize risks arising from shareholders’ failure to pay for subscribed shares on time?

To limit risks arising from shareholders’ failure to make timely payment for subscribed shares, enterprises should proactively apply the following measures in a coordinated manner:

• Establishing strict provisions in the company’s charter: Clearly specifying the payment deadline for shares and the legal consequences of non-payment or insufficient payment (such as loss of shareholder status or handling of unpaid shares).
• Executing clear share subscription agreements: Specifying the payment deadline, payment methods, sanctions for breach, and liability for damages in case shareholders fail to fulfill their commitments.
• Timely monitoring and supervision: The Board of Directors should closely monitor the payment progress, issue written reminders, and prepare minutes to serve as legal evidence in case of violations.
• Handling unpaid shares in accordance with the law: Upon the expiry of the payment period, the company must promptly handle unpaid shares in accordance with Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025) and implement procedures for adjusting charter capital if necessary.
• Restricting the rights of shareholders who have not made payment: The company should not recognize shareholder status, voting rights, or other related rights in respect of shares that have not been lawfully paid for.

Proactive risk management from the stage of share subscription will help enterprises ensure transparency of charter capital, maintain a stable shareholder structure, and reduce the likelihood of legal disputes.

III. Legal regulations relating to failure to pay for subscribed shares on time

Enterprise law clearly prescribes the payment deadline for subscribed shares, the obligations of shareholders, and the legal consequences arising where shareholders fail to make timely payment, in order to ensure transparency and stability of the charter capital of joint stock companies.

1. What do current laws provide regarding the payment deadline for subscribed shares?

Pursuant to Clause 1 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the payment deadline for subscribed shares is regulated as follows:

• Shareholders must fully pay for the shares they have registered to purchase within 90 days from the date of issuance of the Enterprise Registration Certificate, unless the company’s charter or the share subscription agreement provides for a shorter period. Where shareholders contribute capital in the form of assets, the time required for transportation, import procedures, and administrative procedures for transferring ownership of such assets shall not be included in this time limit. The Board of Directors shall be responsible for supervising and urging shareholders to make full and timely payment for the subscribed shares.

2. Is failure to pay for subscribed shares on time considered a breach of shareholder obligations?

Pursuant to Clause 1 Article 119 of the Law on Enterprise 2020 (as amended and supplemented in 2025), making full and timely payment for subscribed shares is a fundamental obligation of shareholders.

Where a shareholder fails to pay or fails to pay on time, such conduct is deemed a breach of shareholder obligations and the shareholder must take corresponding legal consequences in accordance with Clauses 3 and 4 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025), including the restriction or termination of shareholder rights in respect of unpaid shares.

3. Is failure to pay for subscribed shares on time considered a violation of capital contribution obligations?

Failure to fully and timely pay for the shares that have been committed to purchase is considered a violation of the shareholder’s capital contribution obligation. Pursuant to Clause 1 Article 119 of the Law on Enterprise 2020 (as amended and supplemented in 2025), shareholders are obligated to fully and timely pay for the shares they have committed to purchase. If a shareholder fails to perform or improperly performs such a obligation, such shareholder is deemed to have violated shareholder obligations and may be subject to liability in accordance with the law and the company’s charter, including the loss of rights corresponding to unpaid shares and liability for damages (if any).

4. What are the legal consequences of failure to pay for subscribed shares on time?

Pursuant to Clauses 3 and 4 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025), where a shareholder fails to pay or only partially pays for the subscribed shares after the prescribed deadline, the following legal consequences may arise:

• The shareholder will no longer retain shareholder status if no payment has been made for any of the subscribed shares and may not transfer the right to purchase such shares to another person.
• Where only partial payment has been made, the shareholder is entitled only to rights and benefits corresponding to the number of shares already paid for and may not transfer the unpaid shares.
• Unpaid shares shall be deemed unsold shares, and the Board of Directors has the right to sell such shares in accordance with the law.
• The company must register an adjustment of its charter capital and changes to founding shareholders within the statutory time limit, unless all unpaid shares have been sold.
• The breaching shareholder must still take financial liability corresponding to the total par value of the subscribed shares in respect of the company’s obligations arising prior to the adjustment of charter capital.
• Members of the Board of Directors and the legal representative may take joint liability if they fail to properly perform their duties of supervision, urging payment, and implementing procedures for capital adjustment in accordance with the law.

IV. Questions regarding failure to pay for subscribed shares on time

1. How are shares handled if a shareholder fails to pay for subscribed shares on time?

Pursuant to Points a and c Clause 3 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025):

• The shareholder automatically holds shareholder status with respect to the unpaid shares and may not transfer the right to purchase such shares to another person.
• Unpaid shares shall be deemed unsold shares, and the Board of Directors has the authority to offer them for sale again in accordance with the law and the company’s charter.

Accordingly, when shareholders fail to pay for subscribed shares on time, the law does not preserve ownership rights over such shares but instead removes them from the company’s actual contributed capital. Treating unpaid shares as unsold shares and allowing the Board of Directors to offer them for sale again ensures transparency of charter capital and reduces risks for the company and other shareholders.

2. Does the company have the right to recall shares in case of failure to pay for subscribed shares on time?

Pursuant to Clause 3 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025), where a shareholder fails to pay or fails to fully pay for the subscribed shares, the unpaid shares are deemed unsold shares rather than issued shares subject to recall. Accordingly:

• The shareholder loses rights in respect of the unpaid shares.
• The Board of Directors has the authority to sell such unpaid shares to other persons in accordance with the law.

3. Does failure to pay for subscribed shares on time affect the company’s charter capital?

It may affect the charter capital. Pursuant to Point d Clause 3 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025), if unpaid shares are not fully sold after the payment deadline, the company must register an adjustment of its charter capital equal to the total par value of the shares that have been fully paid.

Conversely, if all unpaid shares are sold by the Board of Directors within the prescribed time limit, the charter capital remains unchanged.

Therefore, failure to pay for subscribed shares on time may lead to a reduction in charter capital unless the company promptly sells all unpaid shares in accordance with the law.

4. Can a shareholder request an extension of the payment deadline for subscribed shares?

It may be possible, but only within the limits permitted by law. According to Clause 1 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the payment period for subscribed shares is 90 days from the date of issuance of the Enterprise Registration Certificate, unless the company’s charter or the share subscription agreement stipulates a shorter period.

The law does not provide for an automatic extension mechanism. Therefore:

• An extension may only be accepted if it is provided for in the company’s charter or the share subscription agreement; or
• It is approved by the General Meeting of Shareholders or the Board of Directors (within their authority) and does not violate legal provisions.

Shareholders do not have the unilateral right to extend the payment deadline; any extension is lawful only if it is properly stipulated or approved within the company.

5. How is the situation handled where a shareholder has partially paid but fails to pay the remaining amount on time?

Pursuant to Points b and c Clause 3 Article 113 of the Law on Enterprise 2020 (as amended and supplemented in 2025):

• The shareholder is entitled only to voting rights, dividend rights, and other rights corresponding to the number of shares that have already been paid for.
• The shareholder may not transfer the right to purchase the unpaid shares.
• The unpaid shares shall be deemed unsold shares, and the Board of Directors has the authority to offer them for sale in accordance with legal regulations.

The law recognizes shareholder status only with respect to the portion of capital actually contributed. The shares that have not been paid for within the prescribed time will be excluded from the shareholder’s ownership and handled by the company as unsold shares.

V. Why should you seek legal advice from NPLaw when facing issues related to failure to pay for subscribed shares on time

When disputes or risks arise in connection with failure to pay for subscribed shares on time, seeking legal advice from lawyers at NPLaw can assist enterprises and shareholders in:

• Accurately assessing the legal status of shares, shareholder obligations, and related liabilities in accordance with the Law on Enterprises.
• Proposing appropriate handling solutions (such as adjusting charter capital, offering unpaid shares for sale, or addressing the liability of breaching shareholders).
• Minimizing the risks of disputes, administrative penalties, and joint liability for enterprise managers.
• Saving time and costs while ensuring compliance with legal procedures and requirements.

The above information is provided for reference regarding counterfeit share sales. For detailed advice tailored to specific circumstances, please contact NPLaw Law Firm for prompt assistance.