Legal issues relating to share ownership rights after capital reduction

Share ownership rights after capital reduction constitute an important legal issue that every shareholder and enterprise should clearly understand. When a company conducts a capital reduction, the shareholding structure and shareholders’ interests may change, leading to various complex legal consequences. The following article provides a detailed analysis of the legal issues arising after capital reduction, guidance on protecting shareholders’ rights and interests, and measures to ensure that enterprises comply with applicable legal regulations. A proper understanding of these regulations helps enterprises effectively manage risks while enabling shareholders to have confidence in their ownership rights.

I. Current situation of share ownership rights after capital reduction

Share ownership rights after capital reduction have become a matter of increasing concern for both shareholders and enterprises. When a company reduces its charter capital, the shareholding structure may change, leading to various questions regarding whether each shareholder’s ownership ratio will be affected, and whether voting rights and rights to receive profits will remain intact. Many shareholders are concerned that capital reduction may diminish their rights and interests or alter their position within the company’s governance structure.

In addition, transparency regarding the capital reduction process has not yet been fully ensured by many enterprises. Numerous shareholders fail to receive timely information concerning capital reduction decisions, resulting in misunderstandings regarding share ownership rights and affecting their investment decisions.

Given these realities, understanding and correctly applying the law relating to share ownership rights after capital reduction has become particularly important. It enables shareholders to protect their lawful rights and interests while assisting enterprises in implementing capital reduction procedures in a transparent and legally compliant manner, thereby minimizing legal risks.

II. What are share ownership rights after capital reduction?

1. Importance of share ownership rights after capital reduction

Share ownership rights after capital reduction are important factors in determining shareholders’ lawful interests, including voting rights, dividend rights, and rights to participate in company management. When a joint-stock company conducts a charter capital reduction under Clause 5, Article 112 (as amended and supplemented by Point b, Clause 17, Article 1 of the amended Law on Enterprise 2025) and Article 134 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the capital structure and shareholders’ ownership ratios will change.

Accordingly, shares repurchased by the company are deemed unsold shares, and the company is obligated to register a corresponding reduction of charter capital upon completion of payment, thereby leading to adjustments in shareholders’ ownership ratios and rights within the company. It may directly affect corporate control rights, voting ratios at the General Meeting of Shareholders, and economic interests arising from share ownership.

In addition, share ownership rights are associated with other legal rights and obligations, such as the right to receive remaining assets upon company dissolution or the right to request annulment of resolutions infringing shareholders’ rights in accordance with the Law on Enterprise. A clear understanding of share ownership rights enables shareholders to assess the impact of capital reduction and protect their lawful interests in all circumstances.

Thus, share ownership rights after capital reduction constitute an important legal basis enabling shareholders to proactively protect their rights relating to management, voting, and profits, while minimizing risks of disputes or economic losses.

2. Matters to note regarding share ownership rights after capital reduction

After a company reduces its charter capital, shareholders should pay attention to several important matters in order to protect their lawful interests:

• Changes in ownership ratios: Capital reduction, such as through company share repurchases, will alter the ownership ratios of the remaining shareholders. Shareholders should review information regarding the number of shares held and voting ratios after completion of the capital reduction, according to Clause 5, Article 112 of the Law on Enterprise 2020.
• Rights to receive dividends and profits: The actual number of shares owned directly affects dividend entitlements. Shareholders should compare the company’s charter and profit distribution resolutions to determine their rights and interests after the capital reduction.
• Voting rights at the General Meeting of Shareholders: Pursuant to Clause 1, Article 138 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the General Meeting of Shareholders consists of all voting shareholders; however, following capital reduction, voting ratios may change. Shareholders should update relevant information to ensure their participation in decisions on important corporate matters.
• Transparency of information from the company: Enterprises must provide full disclosure regarding methods, timing, and impacts of capital reduction under Article 138 of the Law on Enterprise 2020. Understanding such information enables shareholders to proactively protect their rights and avoid legal risks.

III. Legal regulations relating to share ownership rights after capital reduction

1. Important regulations relating to share ownership rights after capital reduction

Share ownership rights after charter capital reduction constitute an important issue for both shareholders and enterprises because they directly affect voting rights, dividend rights, rights to participate in company management, and other interests.

Pursuant to the Law on Enterprise 2020 (as amended and supplemented in 2025), when conducting capital reduction, joint-stock companies must comply with the following requirements:

• Registration of charter capital reduction: Pursuant to Clause 2, Article 134 of the Law on Enterprise 2020 (as amended and supplemented in 2025), where shares are repurchased for the purpose of reducing capital, the enterprise must register the reduction of charter capital with the Business Registration Office to ensure that the ownership ratios and rights of the remaining shareholders are lawfully updated.
• Full notification to shareholders: The company’s obligation to notify shareholders arises when conducting capital reduction through share repurchase. Pursuant to Articles 132 and 133 of the Law on Enterprise 2020 (as amended and supplemented in 2025), share repurchases must be conducted based on resolutions or decisions of the company, and shareholders concerned must be notified of the number of shares to be repurchased, methods of implementation, and relevant timelines. In addition, where capital reduction matters are submitted to the General Meeting of Shareholders, the company must send meeting invitations and related documents to shareholders to ensure that they are fully informed and able to protect their lawful rights and interests.
• Organization of the General Meeting of Shareholders pursuant to Article 139 of the Law on Enterprise 2020 (as amended and supplemented in 2025) to enable shareholders to exercise voting rights and ensure shareholders’ interests relating to charter capital: After capital reduction, shareholders’ voting rights and ownership ratios will change. Shareholders should review and compare such changes with the company charter to ensure their rights relating to dividends and participation in company management.

2. Violations relating to share ownership rights after capital reduction

Common violations relating to share ownership rights after capital reduction may lead to serious legal disputes. The main cases include:

• Failure to provide full notification to shareholders: It constitutes a violation of Clause 3, Article 139 of the Law on Enterprise 2020 (as amended and supplemented in 2025), making it difficult for shareholders to access information and protect their rights and interests, thereby leading to disputes.
• Failure to register capital reduction with State authorities: Pursuant to Clause 2, Article 134 of the Law on Enterprise 2020, where a company reduces its capital without registering such reduction with the Business Registration Office, the capital reduction lacks legal validity and directly affects shareholders’ ownership rights and voting ratios.
• Violations of the rights of remaining shareholders: Where a company manipulates the number of shares repurchased or fails to ensure shareholders’ rights relating to dividends and voting rights according to actual ownership ratios, shareholders have the right to request annulment of resolutions or initiate legal proceedings under Articles 151 and 166 of the Law on Enterprise 2020. 

IV. Questions regarding share ownership rights after capital reduction

1. How is the process for determining share ownership rights after capital reduction carried out?

• Firstly, determination of the method of capital reduction: Pursuant to Clause 5, Article 112 of the Law on Enterprise 2020 (as amended and supplemented by Clause 17, Article 1 of the amended Law on Enterprise 2025), the enterprise may reduce capital through repurchasing shares from shareholders or reducing the par value of shares. The selected method directly affects the number of outstanding shares and shareholders’ ownership ratios.
• Secondly, registration of charter capital reduction with competent State authorities: Pursuant to Article 134 of the Law on Enterprise 2020, the company must register the charter capital reduction with the Business Registration Office to ensure that the new number of shares is legally recognized and shareholders’ ownership ratios are officially confirmed.
• Thirdly, updating shareholder records and the company charter: Following the capital reduction, the enterprise must adjust the shareholder register, voting ratios, dividend entitlements, and rights to participate in company management in order to accurately reflect actual ownership rights.
• Finally, notification to shareholders: The company must transparently notify shareholders of the number of shares remaining under their ownership, voting rights, and dividend rights so that shareholders fully understand their interests and have a basis for exercising their lawful rights.

2. What risks may arise in relation to share ownership rights after capital reduction?

• Risks relating to share ownership ratios: When capital is reduced, the total number of outstanding shares changes, resulting in changes to shareholders’ ownership ratios and voting rights. If the capital reduction is not implemented transparently, shareholders may lose corresponding voting rights or dividend entitlements, directly affecting their interests.
• Risks of disputes between shareholders and the enterprise: If the company fails to provide adequate notification or conducts the capital reduction unlawfully, shareholders may disagree with the company’s decisions, leading to internal disputes. Pursuant to Articles 138 and 166 of the Law on Enterprise 2020, shareholders are entitled to request dispute resolution or initiate legal proceedings to protect their rights and interests.
• Risks relating to the legal validity of shares: If the company fails to register the capital reduction with the Business Registration Office, decisions relating to the number of shares may not be legally recognized, leading to disputes over ownership rights and voting rights.
• Risks relating to share value: If the capital reduction is implemented improperly or share repurchases are manipulated, the value of the remaining shareholders’ shares may decrease, thereby affecting their economic interests.

3. In which cases may share ownership rights change after capital reduction?

Share ownership rights may change when a joint-stock company carries out a charter capital reduction pursuant to Clause 5, Article 112 of the Law on Enterprise 2020 (as amended and supplemented by Point b, Clause 17, Article 1 of the amended Law on Enterprise 2025). Specifically, circumstances leading to changes in ownership rights include:

• Capital reduction through repurchase of shareholders’ shares: When an enterprise repurchases shares to reduce capital, the number of outstanding shares decreases, resulting in changes to the ownership ratios and voting rights of the remaining shareholders. Shareholders who do not sell their shares may hold a higher or lower ownership ratio depending on the capital reduction method.
• Reduction of the par value of shares: If the company reduces the par value of shares, the number of shares held by each shareholder will be adjusted according to the new par value, directly affecting voting rights, dividend rights, and rights to participate in company management.
• Capital restructuring after capital reduction: Where the company issues new shares after the capital reduction in order to supplement charter capital, existing shareholders’ ownership rights will change according to their participation ratio in purchasing new shares. If shareholders do not participate, their ownership ratios may be diluted.
• Other changes according to the company charter: The company charter may provide for pre-emptive rights, internal share transfer restrictions, or certain limitations after capital reduction, thereby affecting shareholders’ actual ownership rights.

4. If share ownership rights are restricted after capital reduction, are shareholders entitled to claim compensation?

Shareholders are entitled to claim compensation if their share ownership rights are restricted due to the enterprise conducting a capital reduction in violation of the law or the company charter.

Pursuant to Clause 2, Article 140 and Clause 3, Article 141 of the Law on Enterprise 2020 (as amended and supplemented by Clauses 20 and 21, Article 1 of the amended Law on Enterprise 2025), shareholders are entitled to initiate legal proceedings or request compensation from the enterprise where:

• The enterprise reduces capital without proper notification or registration procedures, thereby altering voting rights, dividend rights, or rights to participate in company management.
• The enterprise implements the capital reduction unlawfully or manipulates the process in order to restrict the rights of minority shareholders.
• Shareholders are able to prove direct economic losses or impairment of rights and interests arising from the restriction of share ownership rights.

5. What measures may enterprises apply to protect share ownership rights after capital reduction?

• Full compliance with legal procedures: Registering the charter capital reduction with the Business Registration Office according to Article 134 of the Law on Enterprise 2020 to ensure that changes relating to shares are legally recognized.
• Updating and publicly disclosing transparent information: Adjusting the shareholder register, company charter, voting ratios, and dividend rights after the capital reduction; provide notifications to shareholders in order to minimize disputes.
• Supervising the capital reduction process: Establishing a supervisory department or control committee to ensure that the capital reduction process complies with procedures and that share ratios are accurately determined.
• Amending the company charter: Clearly stipulating pre-emptive rights to purchase new shares, restrictions on internal transfers, and rights of minority shareholders in order to prevent disputes following capital reduction.

V. Do you need a legal expert to assist with share ownership rights after capital reduction?

Share ownership rights are among the most important factors determining shareholders’ interests within an enterprise. When a company carries out a capital reduction, understanding the procedures, potential risks, and methods for protecting rights and interests is essential to avoid disputes and economic losses. However, legal procedures relating to capital reduction and determination of share ownership rights are often complex and require specialized legal knowledge and practical experience.

It is where reputable lawyers at NPLaw become reliable partners. With extensive experience in corporate legal consultancy, NPLaw’s team of experts can assist you in:

• Determining and protecting share ownership rights in accordance with current legal regulations.
• Advising on transparent capital reduction procedures that ensure shareholders’ rights and minimize risks of disputes.
• Providing guidance on legal measures to ensure enterprises implement capital reduction lawfully and fairly toward all shareholders.
• Assisting in dispute resolution where share ownership rights are restricted or disputes arise after capital reduction.

Utilizing professional legal consultancy services from NPLaw enables shareholders and enterprises to feel secure in all decisions relating to share ownership rights, protect lawful interests, and maintain stable business operations.

The above information is provided for reference purposes only. Should clients require detailed advice regarding specific cases, please contact NPLaw Firm for immediate consultation.