Guidelines for handling disputes over rights arising from bonus shares under the law

In today’s corporate environment, disputes over rights arising from bonus shares have increasingly become a matter of concern for shareholders and employees alike. Such disagreements not only affect individual interests but also directly impact corporate governance, corporate reputation, and the company’s sustainable development. A clear understanding of the concept of bonus shares, the relevant legal framework, and dispute resolution mechanisms is essential for enterprises and shareholders to effectively safeguard their legitimate interests and minimize unnecessary legal risks.

I. Impact of disputes over rights arising from bonus shares on enterprises

Disputes over rights arising from bonus shares have a direct impact on shareholders’ interests, corporate governance, and corporate reputation.

• Delay in governance decisions: Decisions relating to the issuance and allocation of bonus shares may be postponed or suspended.
• Legal risks: Under the Law on Enterprise 2020 (as amended and supplemented in 2025), unlawful acts of the Board of Directors, the Director, or the General Director in the issuance of bonus shares may lead to liability for damages.
• Impact on shareholders and employees: Prolonged disputes diminish shareholders’ interests and weaken the motivation of employees whose benefits are connected to bonus shares.

A proper understanding of the legal provisions and mechanisms for the allocation of bonus shares is necessary to mitigate risks and protect shareholders’ legitimate interests.

II. Overview of disputes over rights arising from bonus shares

Disputes over rights arising from bonus shares occur when entitlements attached to bonus shares are not fully performed, not performed in accordance with the agreement, or are implemented in violation of the law. Such disputes are significant as they directly affect shareholders’ and employees’ lawful interests, corporate governance, and corporate reputation, and may lead to legal liability under the Law on Enterprise 2020 (as amended and supplemented in 2025) and the Civil Code 2015.

1. What are disputes over rights arising from bonus shares and why are they important?

Bonus shares are shares issued by a company as rewards to shareholders or employees based on business performance, work performance, or under labor contracts, the company charter, and resolutions of the General Meeting of Shareholders, for which the recipients are not required to make additional payments.

Disputes over rights arising from bonus shares arise where the entitlements attached to such shares are not honored as committed, are delivered late, or are implemented in contravention of the law, leading to conflicts among shareholders, employees, and the company.

The significance of such disputes lies in:

• Direct impacts on the economic interests of shareholders and employees.
• Implications for corporate governance, particularly the transparency of decisions on the issuance and allocation of bonus shares.

Potential liability for damages pursuant to:

• Article 166 of the Law on Enterprise 2020 (as amended and supplemented in 2025) on shareholders’ right to initiate legal proceedings against members of the Board of Directors, the Director, or the General Director;
• Article 584 of the Civil Code 2015 on the grounds for civil liability for damages. Adverse effects on the motivation and trust of shareholders and employees, thereby affecting operational efficiency and corporate reputation.

A clear understanding of bonus shares and related disputes enables enterprises and shareholders to identify their rights and obligations and appropriate dispute resolution mechanisms, thereby mitigating legal risks and protracted disputes.

2. Who may be involved in disputes over rights arising from bonus shares within a company?

Parties that may be involved in disputes over bonus shares include:

• Shareholders entitled to receive bonus shares: These are shareholders recorded in the shareholders’ register as at the record date, who have the right to require the company to properly implement resolutions of the General Meeting of Shareholders on the issuance of bonus shares. Such entitlements are established on the basis of shareholders’ statutory rights and the company’s obligations to distribute benefits to shareholders under Article 115 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Other shareholders whose interests are affected: Including shareholders who do not directly receive bonus shares but whose ownership ratios, voting rights, or economic interests are diluted as a result of unlawful issuance, issuance to improper beneficiaries, or incorrect allocation ratios.
• Employees entitled to receive bonus shares in the course of employment: Such rights are protected on the basis of labor contracts, the company charter, and resolutions of the General Meeting of Shareholders.
• Company management (Board of Directors, Director, General Director): If disputes relate to decisions on the issuance or allocation of bonus shares or to governance responsibilities, management members are relevant parties under Article 166 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• The company: As a legal entity, the company may participate in disputes to protect shareholders’ interests or to perform its statutory obligations in relation to the issuance of bonus shares.

Note: Disputes over bonus shares commonly stem from breaches of issuance obligations, delayed delivery of shares, or unlawful restrictions on rights. Accordingly, any involved party may act as claimant or respondent depending on their role and legal interests, according to Article 584 of the Civil Code 2015 on liability for damages.

Disputes over rights arising from bonus shares directly affect the rights and legitimate interests of shareholders and employees as well as the governance responsibilities of the company. Identifying eligible parties and the legal basis for participation enables the parties to protect their interests and resolve disputes effectively.

3. How are rights arising from bonus shares determined in a labor contract?

Rights arising from bonus shares in a labor contract are determined on the basis of agreement between the employer and the employee and do not automatically arise from the employment relationship. Specifically:

• Pursuant to Clause 1, Article 13 of the Labor Code 2019, a labor contract is an agreement between the employee and the employer on their respective rights and obligations. Accordingly, employees may only claim bonus shares where such entitlement is lawfully agreed upon and recorded in the labor contract, an addendum thereto, or other accompanying agreements.
• Where bonus shares are provided for in bonus schemes, ESOP regulations, or human resource policies promulgated by the employer and accepted by the employee, such instruments form part of the employment agreement and serve as the legal basis for determining entitlements.
• Resolutions of the General Meeting of Shareholders or decisions of the Board of Directors on the issuance of bonus shares merely constitute conditions for performance and do not, in themselves, create independent entitlements for employees in the absence of a prior agreement between the parties.

Accordingly, rights arising from bonus shares under a labor contract are primarily determined by the parties’ agreement; in the absence of a lawful agreement, employees lack a legal basis to claim bonus shares.

4. What conditions must be satisfied for shareholders to claim rights arising from bonus shares?

Shareholders may request the performance of rights arising from bonus shares upon satisfying the following conditions:

Status as lawful shareholders of the company:

• They must hold ordinary shares or dividend-preferred shares in accordance with Articles 114, 115, and 117 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Their ownership must be recorded in the shareholders’ register as at the time the company resolves to issue bonus shares.

Compliance with the company’s conditions:

• Entitlements to bonus shares must be determined in accordance with resolutions of the General Meeting of Shareholders, the company charter, or labor contracts (where bonus shares are issued to employees).
• Shareholders must not be in breach of regulations on share transfers, capital contribution obligations, or other conditions imposed by the company.

Timely and proper request: Claims must be made within the prescribed time and in the form and procedures stipulated by the company or required by law in order for such rights to be recognized and protected.

Shareholders are entitled to claim bonus shares only where they are lawful shareholders, satisfy the conditions set out in the charter, resolutions of the General Meeting of Shareholders, or labor contracts, and comply with the prescribed procedures under company rules and the law.

III. Legal framework governing disputes over rights arising from bonus shares

1. Which laws govern rights arising from bonus shares and related disputes within companies?

Currently, there is no statutory instrument that directly defines or specifically regulates “bonus shares”. Accordingly, rights arising from bonus shares and related disputes are indirectly governed by the laws on enterprises, labor, and civil matters, including:

Law on Enterprise 2020 (as amended and supplemented in 2025):

• Article 121 governs shares as certificates or electronic data evidencing ownership of shares in a joint stock company.

This provision forms the legal basis for determining the legal validity of shares, including shares issued as bonus shares, and the lawful rights and interests of share owners in the event of disputes.

Labor Code 2019 (where bonus shares are linked to employment relationships):

• Pursuant to Clause 1, Article 13, bonus shares only constitute lawful entitlements where agreed upon and lawfully recorded in labor contracts, addenda, collective agreements, or internal regulations accepted by employees.
• Clause 1, Article 179 defines labor disputes as disputes arising from rights and interests in the course of employment, including disputes over bonus share entitlements where such entitlements are stipulated in employment instruments.
• Article 180 sets out principles for labor dispute resolution, prioritizing negotiation and mediation and safeguarding the lawful rights and interests of the parties.

Civil Code 2015: Article 584 provides the grounds for civil liability for damages in cases where the lawful rights and interests of shareholders or bonus share beneficiaries are infringed, causing actual damage.

Rights arising from bonus shares and related disputes are primarily governed by the Law on Enterprise 2020, the Labor Code 2019, and the Civil Code 2015, depending on the subject matter and the nature of the dispute.

2. What is the procedure for resolving disputes over rights arising from bonus shares?

Pursuant to Article 317 of the Commercial Law 2005, disputes may be resolved through negotiation, mediation by a third party, arbitration, or court proceedings. Depending on the nature of the legal relationship leading to bonus shares, disputes are generally addressed as follows:

Step 1: Internal negotiation

• The parties (company and shareholders/employees) negotiate and review the company charter, resolutions of the General Meeting of Shareholders, labor contracts, or bonus share agreements.

Step 2: Mediation

• For disputes arising from employment relationships: Mediation in accordance with Articles 179 and 180 of the Labor Code 2019.
• For disputes between shareholders and the company: Mediation under internal mechanisms or civil mediation where agreed.

Step 3: Arbitration or court proceedings

• Where there is an arbitration agreement: Resolution by commercial arbitration under the Law on Commercial Arbitration.
• Where there is no arbitration agreement or mediation fails: Initiation of proceedings before a competent court in accordance with civil or labor procedure.

Step 4: Enforcement of awards or judgments

• The parties are obliged to comply with arbitral awards or legally effective court judgments or decisions.
• Where voluntary compliance is not forthcoming, enforcement shall be executed by competent enforcement authorities in accordance with the law.

Note: Selecting the appropriate dispute resolution mechanism is essential for effectively protecting rights arising from bonus shares and minimizing legal risks and costs for enterprises and stakeholders.

Disputes over rights arising from bonus shares should be prioritized for resolution through negotiation and mediation, with recourse to arbitration or court proceedings only where amicable settlement fails, in accordance with Article 317 of the Commercial Law 2005. Proper identification of the underlying legal relationship is fundamental to selecting an appropriate dispute resolution mechanism.

3. What violations commonly lead to disputes over rights arising from bonus shares between shareholders and companies?

In practice, due to the absence of specific statutory regulations on bonus shares, issuance and allocation are primarily based on the company charter, resolutions of the General Meeting of Shareholders, and internal governance decisions. Failure to properly implement such commitments frequently gives rise to disputes. Common violations include:

• Failure to implement, or incomplete implementation of, resolutions of the General Meeting of Shareholders or the Board of Directors on the issuance and allocation of bonus shares.
• Delayed delivery or non-delivery of bonus shares to shareholders who have fully satisfied the prescribed conditions.
• Issuance of bonus shares without proper authority or in breach of the procedures prescribed by the Law on Enterprise 2020 (as amended and supplemented in 2025) and the company charter.
• Allocation of bonus shares in incorrect ratios or in a manner that fails to ensure equal treatment of shareholders holding the same class of shares.
• Unilateral modification of eligibility conditions for bonus shares after lawful resolutions or commitments have been adopted.
• Failure to record or update ownership of bonus shares in the shareholders’ register, thereby restricting or infringing shareholders’ rights.
• Infringement of shareholders’ lawful rights and interests causing damage and leading to liability for damages under Article 584 of the Civil Code 2015.

These are common causes of disputes over rights arising from bonus shares between shareholders and companies in practice.

IV. Questions on disputes over rights arising from bonus shares

1. Is a company legally required to notify shareholders of rights arising from bonus shares?

Currently, there is no specific statutory provision imposing a direct obligation to notify shareholders of “bonus shares”. However, such obligation is indirectly established through the following provisions:

• Under the Law on Enterprise 2020, the General Meeting of Shareholders has the authority to decide on classes and quantities of shares to be issued and the rights attached thereto (Clause 2, Article 138). Resolutions of the General Meeting of Shareholders must be notified to shareholders in accordance with the procedures prescribed by law and the company charter. Accordingly, where bonus shares are approved by such resolutions, the company is obliged to notify shareholders thereof.
• Under regulations on shares and the shareholders’ register: issued shares must be recorded with full information pursuant to Articles 121 and 122 of the Law on Enterprise 2020. The issuance of bonus shares results in corresponding obligations to record and transparently disclose share ownership information to shareholders.
• Under principles of corporate governance: companies are required to ensure transparency and protect shareholders’ lawful rights and interests, particularly in respect of decisions directly affecting shareholders’ property rights. Failure to notify, or inadequate notification, of bonus shares may be deemed an infringement of shareholders’ rights and constitute grounds for disputes.

Although there is no standalone statutory provision on bonus shares, once bonus shares are approved by lawful resolutions or agreements, the company remains obliged to provide full and timely notification to shareholders. Failure to properly discharge this obligation is a common source of disputes over rights arising from bonus shares.

2. How does labor law affect rights arising from bonus shares in the event of disputes?

Labor law directly affects rights arising from bonus shares where such shares are established on the basis of employment relationships:

• Basis for the establishment of entitlements: Under Clause 1, Article 13 of the Labor Code 2019, bonus shares constitute lawful entitlements only where they are agreed upon and lawfully recorded in labor contracts, addenda, bonus agreements, or internal regulations accepted by employees.
• Binding effect: Where bonus shares have been lawfully committed, employers are obliged to perform in accordance with such commitments. Failure to issue, delayed issuance, or unilateral modification of eligibility conditions may constitute a breach of obligations under employment relationships. 
• Dispute resolution mechanism: Disputes over bonus shares arising from labor contracts constitute labor disputes under Article 179 of the Labor Code 2019 and are resolved in accordance with the principles set out in Article 180 thereof, prioritizing negotiation and mediation prior to recourse to competent authorities.

The Labor Code 2019 plays a main role in determining the legality, binding force, and protection mechanisms for rights arising from bonus shares where such rights are linked to employment relationships. Proper characterization of the labor nature of bonus share arrangements is crucial for applying the correct procedures and protecting employees’ lawful interests.

3. Are shareholders entitled to claim damages in disputes over rights arising from bonus shares?

Shareholders are entitled to claim damages where their rights arising from bonus shares are infringed, on the following grounds:

• Right to claim damages: Under Article 170 of the Civil Code 2015, holders of property rights may require persons who infringe such rights to compensate for damage. Shares, including bonus shares, constitute property, and shareholders’ lawful interests are protected.
• Grounds for civil liability: Under Article 584 of the Civil Code 2015, where a company or its managers infringe shareholders’ lawful rights and interests relating to bonus shares and cause actual damage, they must compensate for such damage, except in cases of force majeure or where the damage is entirely attributable to the fault of the shareholder.
• Principles of compensation: Compensation is governed by Article 585 of the Civil Code 2015, ensuring full and timely compensation for actual damage. The amount, form, and method of compensation may be agreed by the parties or determined by a court in the absence of agreement.

Where disputes over rights arising from bonus shares cause damage, shareholders are entitled to claim compensation in accordance with the Civil Code, provided that they can establish the infringing act, actual damage, and a causal link between the act and the damage.

4. Who is competent to resolve disputes over rights arising from bonus shares where multiple parties are involved?

Depending on the nature of the dispute and the parties involved, resolution may be undertaken by the following:

• The disputing parties: Priority is given to negotiation on the basis of the company charter, resolutions of the General Meeting of Shareholders, labor contracts, or bonus share agreements, in accordance with the principle of party autonomy.
• Mediators or mediation bodies: Where negotiation fails, mediation may be selected. For labor disputes, mediation is conducted in accordance with Articles 179 and 180 of the Labor Code 2019. For disputes between shareholders and companies, mediation may be conducted as agreed or under civil mediation procedures.
• Commercial arbitration: Where the parties have an arbitration agreement, disputes may be resolved by commercial arbitration in accordance with the Law on Commercial Arbitration and Clause 3, Article 317 of the Commercial Law 2005.
• Competent courts: In the absence of an arbitration agreement or where mediation fails, competent courts constitute the final forum for dispute resolution in accordance with civil or labor procedural law.

Where multiple parties are involved, disputes over rights arising from bonus shares are addressed sequentially through negotiation and mediation, with recourse to arbitration or the courts, and courts serve as the ultimate authority where other mechanisms fail.

5. How can companies prevent disputes over rights arising from bonus shares?

To mitigate and prevent disputes over rights arising from bonus shares, companies should adopt the following measures:

• Clearly and comprehensively stipulating eligibility criteria, beneficiaries, allocation ratios, and issuance timing in the company charter and in resolutions of the General Meeting of Shareholders or the Board of Directors, within their respective competences.
• Ensuring full, timely, and transparent disclosure to shareholders regarding bonus share issuance plans, enabling shareholders to access information prior to implementation.
• Strictly complying with the procedures for issuing bonus shares under the Law on Enterprise 2020 and securities laws (for public companies).
• Maintaining comprehensive records and documentation relating to the issuance and allocation of bonus shares for reference in the event of complaints.
• Proactively seeking legal advice prior to approving and implementing bonus share schemes to ensure legality and mitigate dispute risks.

Establishing transparent rules, complying with applicable laws, and proactively managing legal risks from the outset are key to protecting shareholders’ lawful interests and preventing disputes over bonus shares during corporate operations.

V. Are you seeking reputable legal expertise to support issues relating to disputes over rights arising from bonus shares?

In corporate governance, particularly in decisions relating to the issuance and allocation of bonus shares that directly affect shareholders’ interests, timely advice from the lawyers of NPLAW can assist enterprises and shareholders in:

• Clarifying the rights and obligations of parties in relation to bonus shares, including eligibility conditions, allocation ratios, timing of entitlement recognition, and post-issuance rights, thereby minimizing risks and disputes arising from misapplication of legal provisions or inappropriate governance decisions.
• Identifying legal responsibilities and compensation obligations where companies or managers infringe shareholders’ rights in relation to bonus shares, in accordance with the Law on Enterprise 2020 (as amended and supplemented in 2025) and relevant legal instruments.
• Drafting and reviewing internal documents, including company charters, resolutions of the General Meeting of Shareholders or the Board of Directors, and bonus share issuance regulations, to ensure transparency, legal compliance, and effective dispute prevention in practice.

The foregoing provides general reference information on disputes over rights arising from bonus shares.