Legal grounds and dispute resolution mechanisms concerning shareholder representation rights

In the course of governance of a joint stock company, disputes concerning shareholder representation rights frequently arise from improper authorization, incorrect establishment of representative capacity, or the exercise of voting rights in violation of applicable regulations. Such disputes may directly affect shareholders’ lawful rights and interests, as well as the legality and validity of corporate decisions. A clear understanding of the nature of these issues and the relevant legal framework is essential to mitigating risks and preventing the occurrence of disputes.

I. Common legal risks relating to disputes over shareholder representation rights

In the practice of joint stock company governance, disputes over shareholder representation rights give rise to numerous legal risks, particularly where the authorization, establishment, or exercise of representative rights fails to comply with the Law on Enterprises and the company charter. Common legal risks include the following:

• Risk of invalidity or annulment of General Meeting of Shareholders’ resolutions: Where a shareholder’s representation is invalid but such representative nonetheless participates in voting, the resolutions adopted may be declared invalid or annulled by a court or an arbitral tribunal due to violations of meeting procedures.
• Risk of infringement of shareholders’ lawful rights and interests: Incorrect identification of a lawful representative may result in a shareholder being deprived of the right to attend, speak, or vote at meetings, thereby giving rise to complaints or legal actions.
• Risk of legal liability for company managers: The Board of Directors and executive management may bear legal responsibility if they fail to review and verify the validity of powers of attorney or the representative capacity of shareholders in accordance with the law and the company charter.
• Risk of prolonged internal disputes: Disputes over shareholder representation rights often trigger related disputes concerning voting and governance rights, adversely affecting the stability and normal operations of the company.
• Risk of financial loss and reputational damage: Prolonged disputes may disrupt business activities, increase legal costs, and harm the company’s reputation in the market.

Accordingly, early identification and effective control of legal risks associated with disputes over shareholder representation rights are critical for enterprises to proactively prevent disputes and to safeguard the lawful rights and interests of all relevant parties.

II. Understanding disputes concerning shareholder representation rights

In a joint stock company, shareholder representation rights are closely associated with participation in corporate governance and voting. Where the establishment or exercise of such representation rights fails to comply with applicable law or the company charter, disputes concerning shareholder representation rights may arise.

1. What are disputes concerning shareholder representation rights?

Pursuant to Article 115 of the Law on Enterprise 2020, as amended and supplemented in 2025, shareholders have the right to attend, speak, and exercise voting rights at the General Meeting of Shareholders, either directly or through an authorized representative. Such representation must be duly established in accordance with applicable law, the company charter, and a valid power of attorney.

Accordingly, disputes concerning shareholder representation rights are understood as disputes arising from disagreements among relevant parties regarding the status, scope, or validity of shareholder representation rights, including, but not limited to, the following typical cases:

• Disputes over the validity of authorization to attend and vote at the General Meeting of Shareholders (including the form, content, and duration of the authorization);
• Disputes over the determination of who constitutes the lawful representative of a shareholder, particularly where a shareholder has issued multiple powers of attorney or has changed its representative;
• Disputes over the scope of representation, such as where the authorized representative acts beyond the scope or limits of the authorization;
• Disputes over the time at which the representation rights take effect or terminate.

Such disputes commonly arise where the authorization or the exercise of representation rights fails to comply with the Law on Enterprise 2020 (as amended and supplemented in 2025), the company charter, or general principles of legal representation, and may lead to serious legal consequences, including the risk that resolutions of the General Meeting of Shareholders may be declared invalid or annulled, thereby directly affecting shareholders’ lawful rights and interests as well as the stability of corporate governance.

2. What are the common root causes of disputes concerning shareholder representation rights?

Pursuant to the Law on Enterprise 2020, as amended and supplemented in 2025, particularly Article 115 and related provisions governing shareholders’ rights and authorized representatives, disputes concerning shareholder representation rights in practice commonly arise from the following fundamental causes:

• Invalid powers of attorney or non-compliance with legal requirements: Under point (a), Clause 1, Article 115, shareholders may exercise voting rights either directly or through an authorized representative. In practice, however, many powers of attorney are improperly executed, lack mandatory contents, or fail to clearly specify the scope or duration of authorization, thereby giving rise to disputes over the validity of representation rights.
• Conflicts in determining the lawful representative of a shareholder: Disputes arise where a shareholder authorizes multiple persons or changes its representative without timely and clear notification to the company, resulting in disagreement among the company and other shareholders as to who constitutes the lawful representative at the time of the General Meeting of Shareholders.
• Exercise of representation rights beyond the authorized scope: An authorized representative may attend or vote beyond the scope of authorization or contrary to the shareholder’s intent, leading to complaints, objections, and post-meeting disputes that affect the validity of GMS resolutions.
• Unclear or unlawful provisions in the company charter: Where the charter contains vague, inconsistent, or unlawful provisions regarding shareholder representation rights or procedures for verifying representative capacity, differing interpretations may arise and lead to disputes.
• Lack of oversight and verification by corporate management bodies: The Board of Directors or the meeting organizing body may fail to fully discharge their duties to examine and verify the validity of powers of attorney and representative status, resulting in disputes among shareholders over attendance and voting rights.
• Conflicts of interest among shareholder groups: Disputes over shareholder representation rights are often intertwined with disputes over control and voting power, particularly in companies with complex ownership structures or ongoing internal conflicts.

Accordingly, the causes of disputes concerning shareholder representation rights primarily stem from improper authorization and exercise of representation rights in violation of the Law on Enterprise 2020 (as amended and supplemented in 2025), the company charter, and principles of transparent corporate governance. This underscores the need for both enterprises and shareholders to exercise heightened caution in order to prevent legal risks.

III. Legal provisions relevant to disputes concerning shareholder representation rights

Current enterprise law establishes principles and mechanisms for resolving disputes related to shareholder representation rights, while also defining legal responsibilities and consequences arising from untimely resolution of such disputes, in order to safeguard shareholders’ lawful rights and ensure stability in corporate governance.

1. How does the current law on enterprises regulate the resolution of disputes concerning shareholder representation rights?

Under the Law on Enterprise 2020, as amended and supplemented in 2025, although there is no separate provision expressly governing the “resolution of disputes concerning shareholder representation rights”, the legal framework for addressing such disputes is established through the following foundational provisions:

• Resolution in accordance with principles set out in the company charter: Pursuant to point (h), Clause 2, Article 24, the company charter must contain principles for resolving internal disputes between shareholders and the company, among shareholders themselves, and between shareholders and company managers. Accordingly, when disputes concerning shareholder representation rights arise, the parties must first rely on the company charter to determine the method and procedure for resolution.
• Reliance on provisions governing shareholders’ rights and authorized representatives: Under point (a), Clause 1, Article 115, shareholders have the right to attend, speak, and vote at the General Meeting of Shareholders either directly or through an authorized representative. This provision serves as the legal basis for assessing the validity of authorization and representative capacity when resolving disputes.
• Review of the legality of meeting procedures and resolutions: Disputes concerning shareholder representation rights are often closely linked to the convening, conduct, and adoption of resolutions of the General Meeting of Shareholders. Where incorrect determination of representation rights results in violations of meeting procedures, the relevant resolutions may be subject to annulment in accordance with the Law on Enterprise 2020, as amended and supplemented in 2025.
• Resolution by court or arbitration: Where internal resolution under the company charter is not possible, disputes concerning shareholder representation rights may be brought before a court or an arbitral tribunal in accordance with procedural law, upon the request of shareholders or other parties whose lawful rights and interests are infringed.

Accordingly, the Law on Enterprise 2020 (as amended and supplemented in 2025) approaches the resolution of disputes concerning shareholder representation rights through a combination of reliance on the company charter and the general provisions of law, ensuring both respect for internal agreements and effective protection of shareholders’ lawful rights and interests.

2. Does the law prescribe a specific time limit for resolving disputes concerning shareholder representation rights?

Under the Law on Enterprise 2020, as amended and supplemented in 2025, there is no specific provision prescribing a distinct time limit for resolving disputes concerning shareholder representation rights. Instead, the applicable time limits are determined indirectly through related provisions and relevant procedural laws, as follows:

• No statutory time limit for internal dispute resolution: The Law on Enterprise 2020 (as amended and supplemented in 2025) establishes shareholders’ rights, corporate governance principles, and mechanisms for internal dispute resolution under the company charter (point (h), Clause 2, Article 24), but does not set a specific time limit for resolving disputes concerning shareholder representation rights.
• Time limits depending on the dispute resolution method:
  + Internal resolution under the company charter: The time limit is determined by the charter or by agreement among the parties.
  + Resolution by court: The time limit is governed by the Civil Procedure Code 2015, depending on the nature and complexity of the case.
  + Resolution by arbitration: The time limit is governed by the Law on Commercial Arbitration 2010 and the procedural rules of the selected arbitration center.
• Time limit for initiating actions to annul GMS resolutions: Where a dispute concerning shareholder representation rights leads to a request for annulment of a General Meeting of Shareholders’ resolution, Article 151 of the Law on Enterprise 2020 (as amended and supplemented in 2025) provides that, within ninety (90) days from the date of receipt of the resolution, meeting minutes, or vote-counting minutes of the GMS, a shareholder or a group of shareholders as specified in Clause 2, Article 115 has the right to request a court or an arbitral tribunal to review and annul such resolution or part thereof.

Thus, it can be affirmed that the Law on Enterprise 2020 (as amended and supplemented in 2025) does not prescribe a specific time limit for resolving disputes concerning shareholder representation rights; rather, the applicable time limits depend on the chosen dispute resolution mechanism, relevant procedural laws, and agreements set out in the company charter.

3. What are the consequences if disputes concerning shareholder representation rights are not resolved?

Pursuant to the Law on Enterprise 2020, as amended and supplemented in 2025, failure to promptly resolve disputes concerning shareholder representation rights may result in the following direct and indirect legal consequences:

• Risk of annulment or non-recognition of General Meeting of Shareholders’ resolutions: Under Article 151, shareholders or groups of shareholders are entitled to request a court or arbitral tribunal to annul GMS resolutions where meeting procedures violate the law or the company charter. Disputes concerning shareholder representation rights are among the most common causes of procedural violations in voting.
• Infringement of shareholders’ rights to attend and vote: Pursuant to point (a), Clause 1, Article 115, shareholders have the right to attend, speak, and vote directly or through an authorized representative. Where disputes remain unresolved, shareholders may be unlawfully deprived of or restricted in exercising these rights, seriously affecting their lawful governance rights.
• Disruption or paralysis of corporate governance activities: GMS resolutions form the legal basis for the Board of Directors and executive management to perform management functions. Where resolutions are disputed, the company may lack sufficient legal grounds to implement key decisions, creating operational and managerial risks.
• Escalation of internal disputes and litigation risks: Pursuant to point (h), Clause 2, Article 24 of the Law on Enterprises 2020 (as amended and supplemented in 2025), the company charter must provide principles for resolving internal disputes. Failure to resolve disputes in accordance with the charter may lead parties to initiate court or arbitration proceedings, increasing costs and prolonging resolution.
• Adverse impact on corporate reputation and the interests of other shareholders: Prolonged disputes may undermine internal stability, erode the confidence of shareholders and investors, and negatively affect the company’s business operations.

In conclusion, unresolved disputes concerning shareholder representation rights may result in violations of meeting procedures, annulment of General Meeting of Shareholders’ resolutions under Article 151 of the Law on Enterprise 2020 (as amended and supplemented in 2025), and infringement of shareholders’ rights protected under Article 115. Accordingly, enterprises should clearly regulate dispute resolution principles in their company charters pursuant to point (h), Clause 2, Article 24, and strictly comply with applicable law to prevent and mitigate such disputes.

IV. Questions regarding disputes concerning shareholder representation rights

In the practical operation of joint stock companies, disputes concerning shareholder representation rights often give rise to various legal issues relating to liability for damages, information disclosure obligations, the validity of authorizations, and measures for protecting shareholders’ rights and interests. A clear understanding of the most frequently raised questions enables both shareholders and enterprises to proactively prevent and properly resolve disputes in compliance with applicable law.

1. Who takes liability for compensation when the company suffers damage due to a dispute over shareholder representation rights?

Under the Law on Enterprise 2020, as amended and supplemented in 2025, liability for damages arising from disputes over shareholder representation rights does not automatically rest with the company. Instead, it depends on the party whose wrongful conduct and fault caused the damage, specifically as follows:

• Liability of company managers: Pursuant to point (b), Clause 1, Article 165, members of the Board of Directors, the Director/General Director, and other enterprise managers are required to exercise their rights and perform their duties honestly, prudently, and in the best interests of the company. Where a manager fails to examine or verify the validity of shareholder representation rights, resulting in disputes and causing damage, such manager shall, under Clause 2, Article 165, bear personal or joint liability for full compensation for the damage suffered by the company and any third parties (if any).
• Liability of shareholders or authorized representatives committing violations: Where damage arises from a shareholder or an authorized representative providing false or misleading information, using an invalid power of attorney, or exercising representation rights beyond the authorized scope, the violating party shall bear liability for compensation in accordance with civil law and other relevant legal provisions.

Accordingly, not all damage must be borne by the company. Rather, the party at fault whose unlawful conduct causes damage in a dispute over shareholder representation rights shall be liable for compensation, based on a clear determination of the wrongful act, causation, and the extent of damage in accordance with applicable law.

2. When a dispute arises over shareholder representation rights, is the company obliged to disclose information to other shareholders? Why?

It is only within the scope and under the conditions prescribed by law; not all disputes are required to be publicly disclosed.

The obligation to disclose or provide information is determined on the following legal grounds:

• Obligation to safeguard shareholders’ right of access to information: Pursuant to points (d) and (e), Clause 1, Article 115 of the Law on Enterprise 2020, as amended and supplemented in 2025, shareholders have the right to review and access the company charter, minutes of meetings, and resolutions of the General Meeting of Shareholders (“GMS”). Where a dispute over shareholder representation rights affects eligibility to attend or vote, or the validity of GMS resolutions, the company must provide and clarify relevant information to ensure the exercise of shareholders’ lawful rights.
• Information obligations associated with convening and organizing meetings: Under Article 140, the company is required to prepare the list of shareholders entitled to attend meetings, send meeting notices, and provide meeting materials. If a dispute results in changes to the list of eligible shareholders or lawful representatives, the company must timely inform relevant shareholders in order to avoid procedural violations in convening or conducting meetings (and the attendant risk of annulment of resolutions under Article 151).
• Principles for internal dispute resolution under the company charter: Pursuant to point (h), Clause 2, Article 24, the company charter must prescribe principles for resolving internal disputes. Where the charter requires notification to shareholders upon the occurrence of disputes that affect shareholders’ rights, the company is obliged to comply with such charter provisions.
• Distinction by type of company:
  + Non-public companies: The Law on Enterprise 2020 (as amended and supplemented in 2025) does not require broad disclosure of all disputes. Information obligations arise only where the dispute directly affects shareholders’ rights, meetings, or the validity of resolutions.
  + Public companies: In addition to the Law on Enterprise 2020 (as amended and supplemented in 2025), public companies are subject to securities laws, which may impose additional information disclosure obligations under specialized regulations.

In summary, where a dispute over shareholder representation rights arises, the company is obliged to provide or disclose information to other shareholders to the extent necessary if such dispute affects shareholders’ rights, the list of meeting participants, meeting procedures, or the validity of resolutions.

3. In which cases does shareholder representation lose its validity and give rise to disputes?

Pursuant to the Law on Enterprise 2020, as amended and supplemented in 2025, shareholder representation rights may lose their validity and lead to disputes in the following cases:

• Invalid power of attorney in terms of form or content: where the authorization fails to satisfy statutory requirements for exercising rights through an authorized representative under point (a), Clause 1, Article 115.
• Expiry or termination of authorization: where the authorization period has expired or the authorization has been terminated or revoked, but the company has not been timely notified.
• Exercise of rights beyond the authorized scope: where the authorized representative acts beyond the scope of authorization, rendering the excess acts legally ineffective.
• Existence of multiple concurrent powers of attorney: where a shareholder issues multiple authorizations simultaneously, creating uncertainty as to the lawful representative at the time of the General Meeting of Shareholders.
• Improper verification of representative capacity in meeting organization: where the examination and verification of representative status are not conducted in accordance with the prescribed procedures when organizing the General Meeting of Shareholders under Articles 138 and 140.

The above circumstances are common causes leading to the loss of validity of shareholder representation rights, thereby giving rise to disputes concerning shareholder representation and legal risks for enterprises.

4. What can a shareholder do if they believe their representation rights have been infringed in a dispute?

Pursuant to the Law on Enterprise 2020, as amended and supplemented in 2025, where a shareholder considers that their representation rights have been infringed, the shareholder may take the following legal measures:

• Request the company to review, verify, and remedy the violation: Under point (a), Clause 1, Article 115, shareholders have the right to attend, speak, and vote at the General Meeting of Shareholders either directly or through an authorized representative. Where this right is infringed, the shareholder may request the Board of Directors or the meeting organizing body to re-examine representative status, powers of attorney, and the procedures for convening and conducting the meeting.
• Request the Supervisory Board to conduct an examination: Pursuant to point (c), Clause 2, Article 115, a shareholder or a qualifying group of shareholders has the right to request the Supervisory Board to examine matters relating to management and administration, including the verification of shareholder representation rights.
• Request annulment of General Meeting of Shareholders’ resolutions: Where infringement of representation rights results in violations of meeting procedures or voting processes, the shareholder may request a court or an arbitral tribunal to annul the resolutions of the General Meeting of Shareholders in accordance with Article 151.
• Initiate legal action against company managers to claim damages: Where damage arises due to the fault of company managers, a shareholder or a qualifying group of shareholders may, on behalf of the company, initiate legal proceedings under Article 166, based on breaches of managers’ duties prescribed in Article 165.
• Exercise the right to initiate proceedings under procedural law: Where the dispute cannot be resolved internally in accordance with the company charter (point (h), Clause 2, Article 24), the shareholder has the right to initiate proceedings before a court or an arbitral tribunal to protect their lawful rights and interests.

In summary, where shareholder representation rights are infringed, shareholders are afforded multiple specific legal remedies ranging from internal corrective requests to litigation and applications for annulment of resolutions based on the Law on Enterprise 2020 (as amended and supplemented in 2025) and other relevant laws.

5. What preventive measures can be applied to avoid disputes concerning shareholder representation rights?

To minimize disputes concerning shareholder representation rights, both the company and shareholders may adopt the following measures:

• Clearly stipulate in the company charter the form, scope, duration, and termination of authorization for shareholder representation.
• Prepare valid and legally compliant powers of attorney that are clear and comprehensive, properly identifying the authorized representative and specifying the scope of authority and voting rights.
• Maintain and promptly update the register of shareholders and information relating to authorized representatives.
• Ensure transparent disclosure of information prior to each General Meeting of Shareholders in order to avoid confusion regarding eligibility to attend and vote.
• Review and standardize internal procedures for receiving, examining, and verifying powers of attorney and shareholder status before conducting meetings.

These measures help ensure that shareholder representation rights are exercised in compliance with applicable law, while significantly reducing the risk of disputes in practice.

V. Are you looking for a reputable legal expert to assist with disputes concerning shareholder representation rights?

In the course of corporate governance, particularly when disputes arise concerning shareholder representation rights, timely legal advice from NPLAW lawyers can assist in:

• Clarifying shareholders’ representation rights, including the scope, conditions, and validity of authorization, in accordance with the Law on Enterprises and the company charter.
• Determining the legal liabilities of authorized representatives, the Board of Directors, and the Supervisory Board where the recognition or exercise of representation rights fails to comply with applicable regulations.
• Reviewing and improving the company charter, resolutions, and internal regulations to mitigate disputes and legal risks.
• Supporting the resolution of disputes relating to representative status, voting rights, and the validity of resolutions of the General Meeting of Shareholders.

The above information is provided for reference purposes only. Should you require detailed advice tailored to your specific circumstances, please contact NPLAW for timely and accurate legal support.