Within the organizational and operational structure of an enterprise, particularly a joint stock company, the right to vote is one of the main rights attached to the contributed capital or shares owned by an investor. Such a right not only reflects the ownership ratio but also determines the investor's ability to participate in the decision-making process on fundamental corporate matters, such as electing or dismissing leaders, approving development strategies, or amending the company’s charter. In this article, NPLaw provides an analysis of the current legal provisions relating to voting capital.
I. Understanding voting capital
Voting capital refers to the portion of contributed capital or shares in a company which entitles its owner to exercise voting rights at meetings of the General Meeting of Shareholders, Members’ Council, or other corresponding management bodies of the enterprise.
Voting rights serve as a legal mechanism through which owners participate in corporate governance, oversight, and decision-making. Depending on the type of enterprise and the nature of the capital contribution or share class, voting rights may differ in terms of scope and conditions of exercise.
II. Legal regulations on voting capital
1. What Is voting capital?
Voting capital is defined under Article 4 of the Law on Enterprise 2020, as follows:
- Voting capital means the portion of contributed capital or shares that entitles the holder to vote on matters within the competence of the Members’ Council or the General Meeting of Shareholders.
- Charter capital refers to the total value of assets contributed or committed to be contributed by the members or owner of a limited liability company or partnership upon its establishment. In the case of a joint stock company, it is the total par value of shares that have been sold or registered for subscription upon its establishment.
Accordingly, voting capital is the portion of contributed capital or shares that entitles the holder to vote on matters falling within the competence of the Members’ Council or the General Meeting of Shareholders.
2. Is there a minimum requirement for voting capital?
Currently, Vietnamese law does not prescribe a fixed minimum threshold of voting capital. Instead, voting rights are proportional to the ownership ratio in the company, and the entitlement varies depending on the type of enterprise:
- In a multi-member limited liability company : Voting rights are directly proportional to the contributed capital. No minimum threshold is required to exercise voting rights, any member contributing capital is entitled to vote in proportion to their ownership.
Example: a member holds 5% capital contribution, such a member will obtain 5% of the voting rights.
- In a joint stock company (JSC): Only holders of ordinary shares or voting preference shares have voting rights. Holders of dividend preference shares are not entitled to vote or attend the General Meeting of Shareholders.
3. What decisions can voting capital holders vote on?
Voting capital holders are entitled to vote on matters that fall within the decision-making authority of either the Members’ Council or the General Meeting of Shareholders.
Specifically:
- According to Clause 2, Article 138 of the Law on Enterprise 2020, the General Meeting of Shareholders has the authority to:
+ Approve the company’s development orientation;
+ Decide on share classes and the total number of shares of each class to be offered; determine annual dividends for each class of shares;
+ Elect, dismiss, and remove members of the Board of Directors and Supervisory Board;
+ Approve investments or disposals of assets valued at 35% or more of the company’s total assets as stated in the most recent financial statements (unless otherwise provided in the charter);
+ Amend and supplement the company’s charter;
+ Approve the annual financial statements;
+ Approve repurchases of more than 10% of total issued shares of each class;
+ Handle violations by directors or supervisors causing damage to the company or shareholders;
+ Decide on corporate reorganization or dissolution;
+ Approve budgets or total remuneration, bonuses, and other benefits for the Board of Directors and Supervisory Board;
+ Approve internal governance regulations, operating regulations of the Board of Directors and Supervisory Board;
+ Approve the list of independent auditors; decide on hiring auditors to conduct corporate audits and dismiss them when necessary;
+ Exercise other rights and obligations as provided by law or the company charter.
- Pursuant to Clause 1, Article 55 of the Law on Enterprises 2020, the Members’ Council shall:
+ Decide on business strategies and annual plans;
+ Decide to increase or decrease charter capital, determine the timing and method of capital mobilization; decide on bond issuance;
+ Approve investment projects and market development plans, marketing, and technology transfer solutions;
+ Approve loan agreements, asset sales, and other contracts as stipulated in the company charter with values of 50% or more of total assets (based on the most recent financial statements), or a lower threshold as specified by the charter;
+ Elect, dismiss, and remove the Chairperson of the Members’ Council; appoint or dismiss the Director/General Director, Chief Accountant, Supervisors, and other managers as defined in the company charter;
+ Determine salaries, remuneration, bonuses, and other benefits for the Chairperson, Director/General Director, Chief Accountant, and other managers in accordance with the company charter.
III. Questions on voting capital
1. Can voting capital be transferred?
Voting capital may be transferred, except in the case stipulated in Clause 3, Article 116 of the Law on Enterprise 2020, which states that holders of voting preference shares are not permitted to transfer such shares to others, except where the transfer is executed under a legally effective court judgment/decision or by inheritance.
2. What role does voting equity play in the adoption of corporate resolutions/decisions?
Possession of voting capital is pivotal in the adoption or rejection of significant company resolutions or decisions. The more voting rights one holds, the greater the influence over corporate decisions. However, even minority shareholders can protect their interests by holding a sufficient percentage to block certain decisions. Voting capital is therefore an expression of governance power and a safeguard for contributors’ interests.
3. How is voting capital different from non-voting capital?
- Voting capital enables the holder to vote on matters such as electing company leaders, conducting profit distributions, amending the charter, etc.
- Non-voting capital does not entitle the holder to participate in voting. Such a type of capital often comes in the form of dividend preference shares or other non-voting shares, used as a tool for capital mobilization without transferring management control.
4. How does voting capital affect shareholders’ rights?
Voting capital grants shareholders the right to decide on important corporate matters, including profit allocation, leadership selection, and changes to the charter. It allows shareholders to protect their interests, mitigate risks, and influence the strategic direction of the business.
5. Are there specific voting capital thresholds required for special corporate decisions?
Under Article 148 of the Law on Enterprise 2020, a resolution is deemed passed if more than 50% of the total votes of shareholders present at the meeting approve, except for certain matters which require approval by at least 65% of the total voting rights, such as:
- Share classes and the total number of each class;
- Changes to the business lines and sectors;
- Changes to the management structure;
- Investment projects or disposal of assets valued at 35% or more of the company’s total assets (as per the latest financial statement), unless otherwise specified in the charter;
- Corporate reorganization or dissolution.
IV. Legal advisory services on voting capital
Should you require legal consultation or assistance in procedures related to voting capital, please contact NPLaw for direct support and guidance from our team.
