In practice, many enterprises face situations where shareholders are recorded as holding more shares than those actually and lawfully paid for, leading to serious legal consequences, ranging from internal disputes to the risk of invalidation of resolutions and transactions, as well as legal liability of corporate managers. The following article by NPLaw provides a comprehensive analysis of the situation of shareholders holding shares in excess of their actual lawful contribution from the perspective of Vietnamese corporate law.
In practice, many enterprises face situations where shareholders are recorded as holding more shares than those actually and lawfully paid for, leading to serious legal consequences, ranging from internal disputes to the risk of invalidation of resolutions and transactions, as well as legal liability of corporate managers. The following article by NPLaw provides a comprehensive analysis of the situation of shareholders holding shares in excess of their actual lawful contribution from the perspective of Vietnamese corporate law.
I. Current situation relating to shareholdings exceeding actual capital contribution
In recent years, shareholder disputes in Vietnam have increased significantly, particularly cases concerning the recording, establishment, and exercise of share ownership rights that are inconsistent with actual capital contributions. Situations in which shareholders are recorded as holding shares exceeding their actual paid-in capital commonly arise in unlisted joint stock companies, family-owned businesses, or enterprises with complex ownership structures.
In practice, many individuals are recorded in the shareholders’ register as holding a substantial percentage of shares, despite not having fully contributed the committed capital or lacking lawful documentation evidencing valid payment. It leads to an imbalance of voting rights and directly affects the lawful rights and interests of other shareholders. It can be affirmed that this is one of the most common causes of internal corporate disputes today.
II. Concept of shareholdings exceeding actual capital contribution
Although not expressly defined in statutory instruments, the concept of shareholdings exceeding actual capital contribution has become an important term referring to the inconsistency between recorded entitlements and the shareholder’s actual financial obligations.
1. What does shareholdings exceeding actual capital contribution mean?
From a legal perspective, Vietnamese law does not employ an official term for such a situation. However, in practice, it is understood as a circumstance in which an individual or organization is recorded as owning shares exceeding the number of shares that have been lawfully paid for or legally owned in accordance with law.
Share ownership is only established when shares have been fully paid in accordance with Clause 1 Article 119 of the Law on Enterprise 2020 (as amended in 2025) and lawfully recorded in the shareholders’ register under Article 122 of the Law on Enterprise 2020 (as amended in 2025). Accordingly, any recordation beyond this scope does not reflect the true legal nature of share ownership. It may therefore be concluded that holding shares in excess of actual capital contribution constitutes a discrepancy between formal recordation and the substantive legal status of share ownership.
2. Common causes leading to shareholdings exceeding actual capital contribution
Shareholdings exceeding actual capital contribution may arise from various causes. The most common cause is the failure to fully contribute charter capital while still being recorded as holding the full number of subscribed shares, in violation of Clause 1 Article 113 of the Law on Enterprise 2020 (as amended in 2025). In addition, such situations may arise from nominee shareholding arrangements, fictitious share entries, or share transfers implemented in contravention of statutory procedures.
Furthermore, many enterprises maintain inadequate control over the shareholders’ register, fail to monitor capital contribution flows, or unlawfully legitimize internal arrangements that contravene the law. These causes result in the establishment of share ownership that does not reflect reality, thereby increasing legal risks for both enterprises and shareholders. It can be affirmed that the primary causes stem from violations of regulations on capital contribution and corporate governance.
3. Does shareholdings exceeding actual capital contribution affect the principle of equality among shareholders?
Pursuant to Clause 4 Article 114 of the Law on Enterprise 2020, each share of the same class confers equal rights, obligations, and benefits upon its holder. When a shareholder is recorded as holding more shares than actually and lawfully paid for, such a principle is seriously infringed, distorting ownership ratios, voting rights, dividend entitlements, and other associated rights.
Specifically, inaccurate recording of shareholdings leads to distorted capital ownership ratios, thereby altering voting ratios at the General Meeting of Shareholders, dividend distributions, and other rights attached to shares, such as pre-emptive rights to subscribe for newly issued shares, rights to access information, and rights to transfer shares. At the same time, it correspondingly diminishes the lawful rights and interests of other shareholders, undermining fairness and transparency in corporate governance as core principles protected under corporate law. Accordingly, it may be concluded that such a situation undermines the principles of equality and transparency in joint stock companies.
III. Legal regulations governing shareholdings exceeding actual capital contribution
From a legal perspective, situations where shareholdings exceed actual capital contribution are assessed based on regulations on capital contribution timelines and the legal validity of the shareholders’ register.
1. How does current law regulate the establishment and recording of share ownership?
Pursuant to Article 122 of the Law on Enterprise 2020 (as amended in 2025), a joint stock company is required to establish and maintain a shareholders’ register specifying the number of shares held by each shareholder. However, such recordation only has legal effect when the shareholder has fully paid for the subscribed shares in accordance with Clause 1 Article 113 of the Law on Enterprise 2020 (as amended in 2025). In addition, Article 127 of the Law on Enterprises 2020 requires that the transfer of shares strictly comply with statutory procedures and conditions. Accordingly, share ownership is only established when all conditions relating to capital contribution, lawful recordation, and lawful transfer are satisfied. It constitutes the core principle for determining the legality of share ownership.
2. Does shareholdings exceeding actual capital contribution constitute a legal violation?
Depending on the specific circumstances, such conduct may constitute a violation of law. Where fraudulent elements exist with the intent to misappropriate property or manipulate voting rights, such conduct may give rise to criminal liability for the offence of fraud under Article 174 of the Penal Code 2015 (as amended in 2017) or misappropriation by abuse of trust under Article 175 of the Penal Code 2015 as amended by Clause 35 Article 1 of the Law Amending the Penal Code 2017. It can therefore be affirmed that this situation is not merely a breach of corporate governance obligations but may also entail serious legal liability.
3. What is the company’s liability when shareholdings exceeding actual capital contribution occurs?
Pursuant to Clause 1 Article 122 of the Law on Enterprise 2020 (as amended in 2025), a company must establish and maintain the shareholders’ register from the date of issuance of its Enterprise Registration Certificate. Concurrently, Clause 5 Article 122 of the Law on Enterprise 2020 (as amended in 2025) imposes on the company the obligation to promptly update and rectify changes relating to shareholders and their shareholdings. Accordingly, upon discovering inaccurate recording of shareholdings, the company is obliged to proactively review and correct the shareholders’ register to ensure accuracy, transparency, and legality.
Where inaccurate recording occurs, the company may be subject to administrative sanctions under Decree No. 122/2021/ND-CP on administrative sanctions in the sectors of planning and investment.
In addition, the company may be liable to compensate affected shareholders if a causal relationship between the violation and the damage can be established, under Clause 1 Article 584 of the Civil Code 2015 as guided by Article 2 of Resolution No. 02/2022/NQ-HDTP. Accordingly, the company’s liability in such circumstances is undeniable.
4. Do corporate managers take legal liability in such cases?
Corporate managers may take legal liability where shareholdings are recorded in excess of actual capital contribution if fault exists in the performance of their managerial duties. Specifically, pursuant to Clause 1 Article 165 of the Law on Enterprise 2020 (as amended in 2025), managers are required to act honestly, prudently, and in the lawful interests of the company and its shareholders. Where managers know or ought to have known that shareholdings were inaccurately recorded but nonetheless sign, approve documentation, or negligently fail to supervise, such conduct constitutes a breach of duty. Where damage is caused, pursuant to Clause 2 Article 165 of the Law on Enterprise 2020 (as amended in 2025), managers must take civil liability and compensate the company or shareholders for the losses incurred.
Furthermore, where managers directly engage in or direct false declarations regarding charter capital or shareholding structure, they may be subject to administrative sanctions under Clause 2 Article 52 of Decree No. 122/2021/ND-CP. In cases involving intentional fault for illicit gain or causing serious damage, managers may also take criminal liability under the relevant provisions of the Penal Code 2015 (as amended in 2017).
Accordingly, the liability of corporate managers is a decisive factor in determining and addressing such situations, assessed on the basis of fault, role, and specific consequences.
IV. Questions relating to shareholdings exceeding actual capital contribution
This section consolidates and addresses the most frequently asked questions to assist shareholders and enterprises in identifying risks and handling situations arising in practice.
1. Does this situation invalidate share transactions already performed?
Holding shares in excess of actual capital contribution may invalidate share transactions where statutory grounds for invalidity under civil and corporate law are satisfied.
- Invalidity due to violation of prohibitions of law: Pursuant to Article 123 of the Civil Code 2015, a civil transaction is invalid if its contents violate prohibitions of law. Where a share transfer is conducted in respect of non-existent shares, unlawfully issued shares, or shares exceeding the number lawfully in existence, such transaction violates regulations on issuance and establishment of share ownership and may therefore be declared invalid.
- Invalidity due to sham transactions or fraud: Pursuant to Article 124 of the Civil Code 2015, sham civil transactions intended to conceal another transaction or to evade obligations are invalid. Where inaccurate recording of shareholdings serves as a façade for capital raising or fictitious share transfers, the related transactions may be declared invalid.
In addition, pursuant to Article 127 of the Civil Code 2015, a transaction established as a result of deception may be declared invalid where one party intentionally provides false information regarding the number of shares to induce the other party to enter into the transaction. Accordingly, where share transactions are established on the basis of unlawful shares, the likelihood of invalidation is high, and the parties are required to restore to each other what they have received.
2. Does shareholdings exceeding actual capital contribution affect the validity of resolutions of the general meeting of shareholders?
Such situations may affect the validity of resolutions of the General Meeting of Shareholders but do not automatically render them invalid. Pursuant to Article 145 of the Law on Enterprise 2020 (as amended in 2025), a General Meeting of Shareholders is deemed valid only where attending shareholders represent the statutory voting share ratio as prescribed by law and the company’s charter. Concurrently, pursuant to Article 148 of the Law on Enterprise 2020 (as amended in 2025), resolutions of the General Meeting of Shareholders are adopted only when the statutory approval thresholds are met.
Accordingly, where inaccurate recording of shareholdings distorts attendance or voting ratios, resulting in the meeting failing to meet statutory conditions or the resolution failing to meet approval thresholds, shareholders or groups of shareholders are entitled to request the court or arbitration to annul such resolutions pursuant to Article 151 of the Law on Enterprise 2020 (as amended in 2025). Conversely, where inaccurate recording does not affect meeting conditions or voting outcomes, the resolutions remain legally valid, although the company remains obliged to rectify the inaccuracies and take related legal liabilities.
3. Do shareholdings exceeding actual capital contribution alter dividend distribution ratios?
Pursuant to Article 135 of the Law on Enterprise 2020 (as amended in 2025), dividends are distributed in proportion to lawfully held shares. Accordingly, inaccurate recording of shareholdings distorts dividend distribution ratios and may require restitution of improperly received dividends, directly affecting the financial interests of other shareholders.
4. Does shareholdings exceeding actual capital contribution affect the right to transfer shares?
Pursuant to Clause 1 Article 127 of the Law on Enterprise 2020 (as amended in 2025), shares are freely transferable. This right arises only in respect of shares that lawfully exist and whose ownership has been lawfully established in the shareholders’ register. Shares lacking a lawful basis are not eligible for transfer, resulting in the risk of invalid transactions and prolonged disputes, an inevitable legal consequence that should be carefully noted.
5. When rectifying shareholdings exceeding actual capital contribution, how are the rights of other shareholders protected?
When rectifying situations where shareholdings exceed actual capital contribution, the rights of other shareholders are protected through restoration of the lawful shareholding structure and imposition of liability on parties at fault, specifically:
First, unlawfully recorded shares must be cancelled or adjusted, and the shareholders’ register must be updated to reflect only shares that have been lawfully issued and fully paid in accordance with Clause 1 Article 113 of the Law on Enterprise 2020 (as amended in 2025). This ensures that voting rights, dividend entitlements, and governance rights of other shareholders are not infringed by fictitious shares.
Second, resolutions and decisions of the General Meeting of Shareholders adopted on the basis of distorted voting ratios due to unlawful shares may be subject to annulment or invalidation pursuant to Article 151 of the Law on Enterprise 2020 (as amended in 2025) where such distortion affects voting outcomes, thereby safeguarding the governance participation rights of other shareholders.
Third, shareholders and managers at fault in creating or maintaining shareholdings exceeding actual capital contribution must compensate the company and other shareholders for losses incurred pursuant to Clause 2 Article 165 of the Law on Enterprise 2020 (as amended in 2025). Affected shareholders are entitled to initiate legal proceedings to protect their lawful rights and interests in accordance with law.
Accordingly, rectifying such situations does not prejudice the lawful rights of other shareholders; on the contrary, it serves to restore the principle of shareholder equality and safeguard their property rights, voting rights, and governance rights in accordance with law.
V. Why seek legal advice from NPLaw when facing shareholdings exceeding actual capital contribution?
Issues relating to shareholders holding shares in excess of their actual lawful contribution are often complex. With a team of experienced lawyers in corporate law and shareholder disputes, NPLaw assists clients in reviewing documentation, assessing legal risks, and developing optimal response strategies. Timely and appropriate legal advice not only safeguards clients’ lawful interests but also minimizes potential legal risks going forward.
The above information is provided for reference purposes only. For case-specific advice, clients are encouraged to contact NPLaw for prompt consultation.
