How is the value of shares determined in accordance with legal regulations?

During operation of a joint stock company, the determination of share value constitutes a main issue that directly affects the lawful rights and interests of shareholders, particularly in circumstances involving share transfers, corporate restructuring, or the emergence of internal disputes. Determining the value of shares carries not only economic significance but is also closely associated with legal regulations, requiring enterprises and shareholders to comply with applicable principles, methods, and procedures in order to minimize potential legal risks.

I. Current issues related to the determination of share value

In practice, the determination of share value in joint stock companies still encounters numerous difficulties due to the absence of uniform criteria and misunderstanding among shareholders.

Many enterprises determine share value primarily on the basis of par value or internal agreements, which often fails to accurately reflect the actual value of the enterprise, particularly the value of intangible assets. Furthermore, in cases involving share transfers, share repurchases, or internal disputes, the absence of a clear mechanism for determining share value frequently leads to disagreements, prolongs dispute resolution, and creates potential legal risks for both the enterprise and its shareholders.

II. The concept of determining share value

Within the operations of a joint stock company, the determination of share value is an important matter closely connected with shareholders’ rights and interests as well as transactions and disputes arising during the company’s operation.

1. What is the determination of share value?

Although the Law on Enterprise 2020 (as amended and supplemented in 2025) does not provide a specific definition of shares, Point a Clause 1 Article 111 of the Law on Enterprise 2020 (as amended and supplemented in 2025) stipulates that Charter capital shall be divided into equal portions called shares. Accordingly, a share represents both the smallest divisible unit of charter capital and the legal basis for establishing shareholder status together with the corresponding rights and obligations of the holder.

On that basis, the determination of share value may be understood as the process of determining the monetary value of one or several shares at a specific point in time, based on the actual value of the enterprise, the rights and interests attached to the shares under the law and/or agreements between the parties, for the purpose of facilitating transactions, corporate governance, or dispute resolution within a joint stock company.

2. What is the purpose of determining share value in a joint stock company?

The determination of share value in a joint stock company serves several main purposes as follows:

• Basis for share transfers: It helps determine a reasonable transfer price when shareholders transfer shares, thereby ensuring the lawful rights and interests of the parties in accordance with Article 127 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Facilitating capital contribution and investment activities: It serves as a basis for investors to evaluate the value of the enterprise and make decisions regarding capital contribution or share acquisition.
• Determining shareholders’ rights and interests: The value of shares is associated with the ownership ratio, thereby affecting voting rights, the right to receive dividends, and the distribution of assets under Article 115 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Resolving internal corporate disputes: It constitutes an important basis when disputes arise relating to share repurchases, corporate division, mergers, or the termination of shareholder status.
• Supporting corporate restructuring activities: It assists in corporate division, separation, consolidation, merger, dissolution, or conversion of the enterprise form in accordance with applicable legal regulations.

In summary, determining the value of shares is an important legal and financial instrument for ensuring transparency, fairness, and stability in the operation of joint stock companies.

3. When determining the value of shares, must intangible assets of the company be taken into account?

When determining the value of shares, the company’s intangible assets must be taken into account if they constitute lawful assets and their value can be determined in monetary terms. The legal basis includes:

• Clause 1 Article 34 of the Law on Enterprise 2020 (as amended and supplemented in 2025): Assets used for capital contribution include intangible assets such as intellectual property rights, technologies, and technical know-how.
• Clause 1 Article 112 of the Law on Enterprise 2020 (as amended and supplemented in 2025): The value of shares is associated with the value of contributed capital and the total value of the enterprise’s assets.

For intellectual property assets, the establishment and exploitation of their value must comply with the Law on Intellectual Property 2005 (as amended and supplemented in 2022), and such assets may only be included in the value of shares where:

• The lawful ownership rights have been duly established (including registration for protection where required by law); and
• They possess identifiable commercial value.

Accordingly, intangible assets constitute a mandatory factor to be considered when determining the value of shares, provided that they fully satisfy legal and valuation conditions.

III. Legal regulations relating to the determination of share value

The determination of share value is an essential requirement in the operation of joint stock companies, ensuring transparency, fairness, and the protection of the lawful rights and interests of shareholders. Law on Enterprise clearly regulates the applicable circumstances, governing principles, methods of determination, and legal consequences where the determination of share value is inconsistent with legal provisions.

1. In which cases must the value of shares be determined within an enterprise?

The determination of share value within an enterprise is mainly performed in the following circumstances:

• Capital contribution by shares or assets: Serving as the basis for determining the value of shareholders’ capital contributions under Article 36 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Share transfers: Facilitating the determination of the transfer price agreed upon between the parties according to Article 127 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Share redeemed by the company: Serving as the basis for determining the repurchase price of shares at the request of shareholders in accordance with Article 132 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Corporate reorganization: Applicable in cases of division, separation, consolidation, or merger of joint stock companies as regulated in Chapter IX of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Resolution of internal corporate disputes: Providing a basis for determining the property rights and obligations of shareholders when disputes arise.

Thus, the determination of share value is conducted in situations involving changes in ownership, corporate restructuring, or the protection of shareholders’ rights and interests in accordance with legal regulations.

2. What principles does the law prescribe for determining the value of shares in a joint stock company?

The determination of share value in a joint stock company must comply with the following principles:

• Honesty, objectivity, and transparency: The value of shares must accurately reflect the actual value of the contributed capital portion and the assets of the enterprise in accordance with Clause 1 Article 36 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Consistency with the company’s asset value: The value of shares is determined based on the total lawful assets of the company, including both tangible and intangible assets as provided under Clause 1 Article 112 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Consensus or professional valuation principle: Assets forming the basis for determining share value must be agreed upon by the founding shareholders or conducted by a professional valuation organization; where a valuation organization is used, the valuation result must be approved by more than 50% of the founding shareholders according to Clause 2 Article 36 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Compliance with the company’s charter and decision-making procedures: The determination of share value must follow the procedures for adopting corporate decisions and the mechanisms for resolving internal disputes as prescribed in the company’s charter pursuant to Point h Clause 2 Article 24 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Association with profit distribution and loss allocation principles: Share value must provide a fair basis for the distribution of after-tax profits and the handling of business losses in accordance with the company’s charter according to Point l Clause 2 Article 24 of the Law on Enterprises 2020 (as amended and supplemented in 2025).
• Protection of the lawful rights and interests of shareholders and third parties: The determination of share value must not be conducted with the purpose of evading financial obligations or causing damage to shareholders, creditors, or other related parties.

Accordingly, the principles governing the determination of share value require accuracy, transparency, lawful approval, and the protection of the lawful rights and interests of relevant parties in accordance with the Law on Enterprise.

3. What are the legal consequences if the value of shares is determined incorrectly?

Where the determination of share value is inaccurate, particularly where contributed assets are intentionally overvalued or undervalued, the following legal consequences may arise:

Administrative sanctions: Pursuant to Point b Clause 3 Article 46 of Decree No. 122/2021/ND-CP, intentionally determining the value of contributed assets incorrectly may result in a fine ranging from 30,000,000 VND to 50,000,000 VND.

Mandatory remedial measures: Under Clause 5 Article 46 of Decree No. 122/2021/ND-CP, the enterprise may be required to:

• Implement procedures for adjusting charter capital or changing members or founding shareholders;
• Change capital contributors or purchasers of shares or capital contributions in cases of incorrect valuation.

Civil liability for damages: According to the general principle on the basis for liability for damages under Article 584 of the Civil Code 2015, where the valuation of shares is conducted unlawfully and causes damage to related parties, the breaching party may be required to compensate for damages.

In cases where investors suffer losses due to misleading information disclosure (particularly in the securities market), compensation liability may also be considered under the relevant securities laws.

Therefore, incorrect determination of share value may result in administrative sanctions, mandatory adjustments to charter capital or shareholder structure, and civil liability for damages under applicable laws.

4. What valuation methods for determining share value are recognized by law?

In determining the value of shares in a joint stock company, the law does not prescribe a single mandatory method but recognizes the application of lawful, objective, and practical valuation methods, including the following commonly used approaches:

• Discounted Cash Flow (DCF) method: The value of shares is determined based on the present value of future cash flows that the enterprise is expected to generate. Such a method is commonly applied to enterprises with stable profitability and predictable cash flows.
• Comparative method: The value of shares is determined by comparing the enterprise with similar companies within the same industry, based on financial indicators such as P/E ratios, P/B ratios, and market transaction prices.
• Asset-based method: The value of shares is calculated on the basis of the enterprise’s net asset value, which equals the total value of lawful assets (including both tangible and intangible assets) minus outstanding liabilities. Such a method is particularly suitable for enterprises possessing substantial fixed assets.

The selection of the valuation method must ensure honesty, transparency, and consistency with the characteristics of the enterprise, and must be approved by the competent entities.

IV. Questions regarding the determination of share value

1. Can the value of shares be determined at different points in time?

The value of shares may be determined at different points in time depending on the purpose and legal basis of each specific situation, for example:

• When establishing an enterprise or issuing shares: It is determined according to the offering price accepted by shareholders or the market under Clause 1 Article 123 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• When transferring shares: It is determined according to the price agreed upon between the parties or the market price at the time of transfer according to Clause 1 Article 127 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• When dividing, separating, consolidating, or merging enterprises: It is determined based on the actual value of the enterprise at the time the decision on reorganization is made under Chapter IX of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• When resolving disputes or enforcing judgments: It is determined according to the value at the time of dispute resolution upon request of the competent authority.

The law does not prescribe a single fixed time; rather, the value of shares is determined flexibly depending on the time when the relevant legal relationship arises.

2. Is it mandatory to hire an independent valuation organization to determine share value?

The law does not mandate the hiring of an independent valuation organization when determining the value of shares.

Pursuant to Clause 2 Article 36 of the Law on Enterprise 2020 (as amended and supplemented in 2025), assets used as the basis for determining share value may be:

• Valued by agreement among shareholders (founding shareholders) based on the principle of consensus; or
• Valued by a professional valuation organization where the parties choose to use such services.

Engaging an independent valuation organization is typically applied in cases where asset values are substantial or complex, or where the parties cannot reach agreement, thereby ensuring objectivity, transparency, and minimizing potential disputes.

Accordingly, determining the value of shares does not necessarily require an independent valuation organization unless otherwise stipulated by the company’s charter or agreed upon by the parties.

3. When determining share value for transfer, are the parties allowed to freely agree on the price?

In share transfer transactions, the parties are entitled to freely negotiate the transfer price.

Pursuant to Clause 1 Article 127 of the Law on Enterprise 2020 (as amended and supplemented in 2025), shares are freely transferable except in cases subject to restrictions under Clause 3 Article 120 of the Law on Enterprise 2020 (as amended and supplemented in 2025) or restrictions specified in the company’s charter (provided that such restrictions are clearly stated on the share certificates).

The transfer price may differ from the book value or internally assessed value of shares but must not:

• Violate prohibitions prescribed by law;
• Be intended to evade financial obligations such as taxes or fees;
• Contradict the provisions of the company’s charter.

Accordingly, the transfer price of shares may be freely agreed upon by the parties provided that it complies with applicable laws and the company’s charter.

4. How should the situation be handled if shareholders cannot reach agreement on the determination of share value?

Where shareholders cannot reach consensus on the determination of share value, the matter may be addressed as follows:

• Engaging an independent valuation organization: Shareholders may agree to appoint a professional valuation organization to determine the value of shares as the basis for resolution according to Clause 2 Article 36 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Applying the company’s charter: Where the company’s charter provides specific provisions on valuation methods, decision-making procedures, or dispute resolution mechanisms, such provisions shall be applied under Point h Clause 2 Article 24 of the Law on Enterprise 2020 (as amended and supplemented in 2025).
• Requesting resolution by a competent authority: If agreement cannot be reached, shareholders may initiate legal proceedings before a court or arbitration institution in accordance with applicable law.

Therefore, where shareholders fail to agree on the value of shares, they may engage a valuation organization, apply the company’s charter, or request resolution by competent authorities.

5. What are the responsibilities of the Board of Directors in determining share value?

Under Article 153 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the Board of Directors takes the following responsibilities in relation to determining share value:

• Deciding issues related to share prices: The Board of Directors has the authority to determine the selling price of shares and the repurchase price of shares by the company in accordance with the law and the company’s charter (Points d and đ Clause 2 Article 153).
• Ensuring compliance with the law in determining share value: The Board of Directors must ensure that the determination of share value is conducted honestly, objectively, and transparently, in compliance with the Law on Enterprise and the company’s charter, and must not cause damage to the company or its shareholders (Clause 1 Article 153).
• Liability for unlawful decisions: Where a resolution or decision concerning share value violates the law or the company’s charter and causes damage to the company, members of the Board of Directors who voted in favor of such decision shall take joint personal liability and be required to compensate for damages; members who opposed the decision shall be exempt from liability (Clause 4 Article 153).

Accordingly, the Board of Directors is responsible for making decisions, supervising, and ensuring the legality of the determination of share value. In cases of violation, members of the Board of Directors may take personal liability under applicable law.

V. Why should you seek legal advice from NPLaw when facing issues related to the determination of share value

In the process of determining the value of shares, particularly in cases involving share transfers, share repurchases, disputes among shareholders, or corporate restructuring, obtaining timely legal advice from lawyers at NPLaw can assist enterprises and shareholders in:

• Clearly understanding the legal rights and obligations of the parties under the Law on Enterprise 2020 (as amended and supplemented in 2025) and the company’s charter, thereby minimizing potential risks and disputes.
• Identifying the appropriate legal liability where share valuation is inaccurate, causes damage, or violates legal provisions.
• Obtaining advice on suitable valuation methods and receiving assistance in working with professional valuation organizations (where necessary) to ensure transparency and legal compliance.
• Drafting and reviewing documents, resolutions, and agreements relating to shares in order to protect lawful interests and minimize risks in all potential dispute scenarios.

The above information is provided for reference regarding disputes concerning rights and interests following the termination of business cooperation. For detailed advice tailored to specific circumstances, please contact NPLaw Law Firm for prompt assistance.