In the process of business operations, enterprises often face various legal issues, among which disputes of corporate stocks are one of the most common and prevalent types of disputes. Such disputes and conflicts not only affect the rights and interests of shareholders but may also have a significant impact on the organizational structure and operational activities of enterprises. So how are disputes of corporate stocks resolved?

Below, NPLaw provides consultancy on disputes of corporate stocks for our valued clients.

I. Current status of disputes of corporate stocks 

Disputes of corporate stocks are one of the prominent issues in business and corporate governance in Vietnam.

Common causes leading to such disputes include:

  • Disputes over share ownership rights: Disputes arise when parties fail to reach consensus on the number of stocks owned or the rights attached to such stocks. In some cases, shareholders are not accurately recorded in the shareholder register, or transfers are conducted in a non-transparent manner.
  • Conflicts over management and operational control of the enterprise: Major shareholders often seek to control business operations, leading to conflicts with minority shareholders when important decisions are made. The appointment or dismissal of members of the Board of Directors or the Supervisory Board is frequently a concerned issue in internal disputes.
  • Lack of transparency in profit distribution: Unfair or delayed dividend distribution causes dissatisfaction among shareholders. Some enterprises intentionally delay dividend payments to serve the interests of major shareholder groups.
  • Violation of agreements among shareholders: Many enterprises do not have shareholder agreements or fail to comply with them, resulting in one party feeling that its rights and interests have been infringed. Conflicts often arise when a shareholder transfers socks to a third party without complying with the pre-emptive rights of existing shareholders.

II. Overview of disputes of corporate stocks

1. How are disputes of corporate stocks understood?

Pursuant to Clause 1, Article 111 of the Law on Enterprise 2020, in a joint stock company, the charter capital is divided into equal portions called stocks. Stocks in a joint stock company include ordinary stocks and preference stocks. Among these, ordinary stocks are mandatory, while preference stocks may or may not exist.

Accordingly, disputes of corporate stocks may be understood as conflicts, disagreements, or disputes among shareholders or between shareholders and the enterprise regarding the rights and obligations attached to stocks in the enterprise.

2. Common types of disputes of corporate stocks 

Common types of disputes of corporate stocks currently include:

  • Disputes over ownership: Relating to the determination of who is the lawful owner of stocks, especially in cases of non-transparent transfers.
  • Disputes over corporate management and operation rights: Including the right to participate in the Board of Directors and the right to appoint or dismiss corporate executives.
  • Disputes over profit (dividend) distribution: Commonly arising when dividend distribution is not transparent or equitable.
  • Disputes over share transfers: Conflicts arising when a shareholder transfers stocks to a third party without complying with legal regulations or shareholder agreements.

III. Legal regulations on disputes of corporate stocks 

1. Methods for resolving disputes of corporate stocks 

When a dispute of corporate stocks arises, clients may apply the following dispute resolution methods:

  • Resolution through negotiation: Negotiation is the first method applied in dispute resolution, reflected in shareholders or shareholder groups proactively organizing meetings to negotiate and agree on the rights and obligations of the parties. Disputes arising among shareholders during business operations may be resolved through convening a General Meeting of Shareholders.
  • Resolution through mediation: The parties have the right to choose mediation at a commercial mediation center as an option after a dispute arises. Such a method helps resolve disputes quickly, and mediation outcomes may be recognized by the Court in accordance with civil procedure laws.
  • Resolution through commercial arbitration: Dispute resolution by initiating proceedings at an arbitration center may be applied if there is an agreement between the parties. Unless otherwise provided by specialized laws, the statute of limitations for initiating arbitration proceedings is two (02) years from the date on which lawful rights and interests are infringed. Under Article 5 of the Law on Commercial Arbitration 2010, disputes shall be resolved by arbitration if the parties have an arbitration agreement.
  • Resolution through litigation at the People’s Court: Litigation at the People’s Court is a commonly chosen method by many shareholders. Under Article 30 of the Civil Procedure Code 2015, it is one of the business and commercial disputes falling under the jurisdiction of the Court.

2. Procedures for resolving disputes of corporate stocks 

Below are the main steps in the procedures for resolving disputes of corporate stocks: 

- Step 1: Determination of the dispute content

  • Reviewing the nature of the dispute: Whether it concerns share ownership rights, corporate management rights, or economic interests such as dividends.
  • Collecting documents and evidence: Including the enterprise registration certificate, minutes of shareholder meetings, shareholder register, transfer contracts, and other relevant documents.

- Step 2: Negotiation

The disputing parties should conduct negotiations to seek an internal settlement before bringing the case to a dispute resolution authority.

- Step 3: Mediation

If negotiation fails, mediation may be requested at a commercial mediation center.

- Step 4: Initiation of proceedings at the Court or Commercial Arbitration

Selection of the dispute resolution body:

  • Court: Applicable where there is no arbitration agreement.
  • Commercial arbitration: Where the enterprise charter or shareholder agreement provides for arbitration, the parties must comply with such provision.

- Step 5: Enforcement of the judgment or arbitral award

  • Enforcement of court judgments: It is supervised and executed by civil judgment enforcement authorities.
  • Enforcement of arbitral awards: If a party fails to voluntarily comply, a request may be made to the Court for assistance in compulsory enforcement.

3. Dossier for resolving disputes of corporate stocks 

The dossier for resolving such disputes includes:

  • A statement of claim (for Court proceedings) or a request for dispute resolution (for Arbitration);
  • Copies of the enterprise registration certificate, company charter, and other relevant documents;
  • Evidence of prior negotiation or mediation (if any);
  • Documents proving the infringement of lawful rights and interests.

IV. Questions related to disputes of corporate stocks 

1. Which authorities have jurisdiction to resolve disputes of corporate stocks? 

As analyzed above, disputes of corporate stocks may currently be resolved by the following bodies:

  • Mediation Centers;
  • Commercial Arbitration;
  • Courts.

2. In case of initiating proceedings at the Court, what contents must be included in the statement of claim for disputes of corporate stocks?

The litigation dossier includes the following documents:

  • Statement of claim: The content and form of the statement of claim must comply with Clause 4, Article 189 of the Civil Procedure Code 2015. The statement of claim form is Form No. 23–DS issued together with Resolution No. 01/2017/NQ-HĐTP. The statement of claim must clearly present the case details, related individuals and organizations, and the claims requested for the Court’s consideration and resolution.
  • Evidence supporting the claims: Documents and evidence proving the claims must be enclosed with the statement of claim.
  • Power of attorney authorizing another person to implement litigation procedures at the Court.
  • Copies of the enterprise registration certificate, company charter, contracts, and other relevant documents.

V. Should legal counsel be engaged in disputes of corporate stocks? How to make contact?

Engaging a lawyer in disputes of corporate stocks is a necessary and highly important option, as such disputes are often complex and involve economic interests, legal rights, and corporate governance matters.

Clients who require consultation on disputes of corporate stocks are encouraged to contact NPLaw to receive direct advice and guidance on dispute resolution from our team of lawyers.