Shares unlawfully appropriated: risk identification and safeguards for shareholders’ rights

In the operation of joint-stock companies, safeguarding shareholders’ ownership of shares is of paramount importance. In practice, however, numerous cases arise where shares are unlawfully appropriated through forged documents, transfers conducted against the shareholder’s will, or internal manipulation within the enterprise. Such practices not only directly infringe upon shareholders’ lawful rights and interests, but also lead to complex disputes, adversely affecting corporate governance and the stable operation of the company. Proper identification of the legal nature of these acts and a clear understanding of the statutory protection mechanisms constitute a crucial basis for shareholders to proactively protect their legitimate interests.

I. Current situation concerning the unlawful appropriation of shares

In the practical operation of joint-stock companies, the unlawful appropriation of shares is becoming increasingly sophisticated and complex. Many cases originate from forged shareholder signatures, falsification of the register of shareholders, unauthorized transfers without lawful consent, or abuse of managerial positions to seize or manipulate other persons’ shares.

Notably, in many instances shareholders only discover that their ownership rights have been infringed upon when attempting to exercise voting rights, receive dividends, or access corporate information. The absence of robust internal control mechanisms, lax management of shareholder records, and shareholders’ limited legal awareness create conditions that facilitate unlawful appropriation of shares, leading to protracted disputes and difficulties in dispute resolution.

II. Concept of unlawfully appropriated shares

In practice, shareholders’ ownership of shares may be infringed where shares are transferred, recorded, or utilized unlawfully without the shareholder’s valid consent. The unlawful appropriation of shares not only causes direct damage to shareholders but also leads to disputes and legal risks for enterprises. It is therefore necessary to clarify the concept, the acts constituting unlawful appropriation, and the relevant subjects as a legal basis for protecting rights in accordance with law.

1. What are unlawfully appropriated shares?

Pursuant to Point (a), Clause 1, Article 111 of the Law on Enterprise 2020 (as amended and supplemented in 2025), “Charter capital is divided into equal portions called shares”.

On that basis, unlawfully appropriated shares are understood as portions of charter capital lawfully owned by shareholders but unlawfully possessed, transferred, or exercised by others without legal grounds or the shareholder’s valid consent, thereby directly affecting the shareholder’s lawful rights and interests.

2. Which acts constitute the unlawful appropriation of shares?

Acts constituting the unlawful appropriation of shares are those that transfer, deprive, or restrict shareholders’ lawful ownership of shares without legal grounds or valid consent, including, typically, the following:

• Unauthorized transfer of shares, execution of share transfer agreements, or procedures to change shareholder information without the shareholder’s approval;
• Forgery of signatures, documents, resolutions, or meeting minutes to legitimize the transfer of share ownership;
• Deliberate failure to record or unlawful removal of a shareholder’s name from the register of shareholders in violation of the Law on Enterprise 2020;
• Unlawful possession or use of share certificates (if any) to conduct unauthorized transactions;
• Exercise of voting rights or dividend rights in respect of shares not lawfully owned;
• Abuse of position or authority within the enterprise to manipulate the management or updating of share records, causing damage to shareholders.

Depending on their nature and seriousness, the above acts may lead not only to civil disputes concerning unlawfully appropriated shares, but also to civil, administrative, or criminal liability in accordance with law.

3. Who may commit acts leading to the unlawful appropriation of shares?

In practice, acts leading to the unlawful appropriation of shares may be committed by various subjects, both internal and external to the enterprise, including:

• Members of the Board of Directors, the Director/General Director, and enterprise managers: Abusing their positions or powers in managing the register of shareholders and share records to unlawfully alter shareholder information, transfer shares, or appropriate rights attached to shares;
• The legal representative of the company: Conducting or directing transactions and procedures relating to shares without legal grounds or valid shareholder consent;
• Other shareholders of the company: Engaging in fraudulent acts, forging documents, or colluding with managers to appropriate the shares of other shareholders;
• Authorized persons managing shares: Exceeding the scope of authorization or abusing entrusted management to unlawfully appropriate shares;
• Third parties outside the enterprise: Colluding with internal persons or using fraudulent means to receive transfers, register in their names, or possess shares not lawfully owned.

Correctly identifying the subject committing the unlawful appropriation of shares is an important basis for selecting appropriate remedies, including restoration of shareholder rights, claims for damages, and the pursuit of legal liability in accordance with law.

III. Legal framework governing unlawfully appropriated shares

Current law provides grounds for determining the unlawful appropriation of shares, interim measures to prevent unlawful transactions, liabilities for violations, and limitation periods for claims, thereby protecting shareholders’ lawful rights and interests.

1. How does current law determine the unlawful appropriation of shares?

Current law does not provide a standalone definition of unlawfully appropriated shares. Such determination is made by reference to the consolidated provisions of the Law on Enterprise 2020 (as amended and supplemented in 2025) and the Civil Code 2015, as follows:

Under the Law on Enterprise 2020 (as amended and supplemented in 2025):

• Pursuant to Point (a), Clause 1, Article 111, the charter capital of a joint-stock company is divided into equal portions called shares.
• Pursuant to Article 122, the register of shareholders is the legal basis for determining shareholder status and the number of lawfully owned shares. The recording and amendment of shareholder information are legally valid only when implemented in accordance with statutory procedures.
• Where shares are recorded, transferred, or possessed without a lawful transaction or without the lawful shareholder’s consent, there are grounds to determine that ownership of shares has been infringed.

Under the Civil Code 2015:

• Article 105 recognizes shares as property.
• Article 115 provides that property rights are rights measurable in monetary value and protected by law.
• Articles 166 and 170 recognize the right to reclaim property and to protect ownership and other rights in rem when property is unlawfully possessed or used.

Accordingly, the possession, use, or disposition of shares contrary to the will of the lawful owner constitutes an infringement of property rights.

In summary, shares are deemed unlawfully appropriated where there is a legal basis to conclude that a shareholder’s lawful ownership has been infringed through unlawful possession, transfer, recording, or disposition in violation of the Law on Enterprise 2020 (as amended and supplemented in 2025) and the Civil Code 2015.

2. What provisional urgent measures may be applied to prevent further transactions of unlawfully appropriated shares?

Where disputes arise concerning unlawfully appropriated shares, in order to prevent further transfers or dissipation of shares, shareholders or other persons with related rights and interests may request the court to apply provisional urgent measures pursuant to Article 114 of the Civil Procedure Code 2015, including:

• Seizure of disputed property: Pursuant to Clause 6, Article 114, applicable where shares are the direct subject matter of the dispute and are at risk of unlawful transfer or dissipation;
• Prohibition on the transfer of rights in respect of disputed property: Pursuant to Clause 7, Article 114, the court may prohibit the transfer, donation, mortgage, or pledge of shares during the pendency of proceedings;
• Prohibition on alteration of the status of disputed property: Pursuant to Clause 8, Article 114, to maintain the legal status of the shares (ownership ratio and attached shareholder rights) until a legally effective judgment or decision is issued;
• Freezing of accounts and assets: Pursuant to Clauses 10 and 11, Article 114, applicable where shares have been converted into money or other assets at risk of dissipation;
• Prohibition or compulsion to perform specific acts: Pursuant to Clause 12, Article 114, the court may order the company to temporarily suspend the recording of shareholder changes, suspend dividend payments, or take other measures in relation to the disputed shares.

Note: Provisional urgent measures will be granted only where the applicant demonstrates the risk of irreparable harm if such measures are not immediately applied, and the applicant may be required to provide security pursuant to Article 136 of the Civil Procedure Code 2015.

These provisional urgent measures constitute important legal tools to freeze share transactions and protect shareholders’ rights during the resolution of disputes concerning unlawfully appropriated shares.

3. In which circumstances may the unlawful appropriation of shares give rise to criminal liability?

The unlawful appropriation of shares may lead to criminal liability where the conduct satisfies the constituent elements of an offence under the Penal Code 2015 (as amended and supplemented in 2017). A typical example is the offence of unlawful possession of property under Clause 1, Article 176 of the Penal Code 2015 (as supplemented by Point (d), Clause 1, Article 2 of the amended Penal Code 2017), namely:

Where a person unlawfully possesses shares or documents and property rights related to shares and deliberately refuses to return them to the owner or lawful manager, or fails to surrender them to a competent authority after a lawful request, such person may be subject to criminal prosecution if:

• Under Clause 1, where the unlawfully possessed property is valued at from 10,000,000 VND to under 200,000,000 VND, the offender may be subject to a fine of 10,000,000 VND to 50,000,000 VND, non-custodial reform for up to two (02) years, or imprisonment from three (03) months to two (02) years;
• Under Clause 2, where the unlawfully possessed property is valued at 200,000,000 VND or more, the offender may be sentenced to imprisonment from one (01) year to five (05) years.

Accordingly, where shares or property rights attached to shares are unlawfully possessed and the possessor deliberately refuses to return them upon a lawful request, such conduct may entail not only civil liability but also criminal liability if statutory conditions are satisfied.

4. How is the limitation period for initiating claims in disputes over unlawfully appropriated shares determined?

The limitation period for initiating claims in disputes over unlawfully appropriated shares depends on the nature of the claim:

• First, no limitation period applies to claims for the protection of ownership rights or for the recovery of unlawfully appropriated shares, pursuant to Clause 2, Article 155 of the Civil Code 2015.
• Second, a limitation period of three (03) years applies to contractual disputes related to shares (such as share transfer agreements, capital contribution agreements, or authorization agreements) and to claims for damages arising from the unlawful appropriation of shares. The period is calculated from the date on which the claimant knew or should have known that their lawful rights and interests were infringed, pursuant to Articles 429 and 588 of the Civil Code 2015.
• Third, the application of the limitation period is considered by the court only upon the request of one or more parties and must be raised before the first-instance court issues its judgment or decision, pursuant to Clause 2, Article 149 of the Civil Code 2015.

Accordingly, determining the applicable limitation period in disputes concerning unlawfully appropriated shares requires reference to the specific type of claim asserted by the shareholder or related party.

IV. Questions regarding unlawfully appropriated shares

When shares are unlawfully appropriated, shareholders and enterprises commonly encounter issues concerning shareholder rights, compensation liability, and appropriate remedial measures. This section addresses frequently asked questions under current law.

1. May a company temporarily suspend shareholder rights in respect of unlawfully appropriated shares?

Pursuant to Clause 1, Article 115 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the rights of ordinary shareholders (including voting rights, dividend rights, and share transfer rights) may be restricted only in cases prescribed by law or the company’s charter.

Further, pursuant to Article 122 of the Law on Enterprise 2020 (as amended and supplemented in 2025), the register of shareholders is the legal basis for determining shareholder status and corresponding rights. Where a shareholder remains lawfully recorded in the register of shareholders, the company has no authority to unilaterally suspend that shareholder’s rights.

Where shares are in dispute, unlawfully appropriated, and the lawful owner has not yet been determined, the company may temporarily suspend the exercise of shareholder rights (voting, dividends, transfers) to avoid legal risks. Such suspension is temporary in nature and does not extinguish ownership rights if the shareholder is subsequently determined to be the lawful owner.

The company may not unilaterally deprive shareholder rights in the absence of:

• A legally effective judgment or decision of the court; or
• A decision on the application of provisional urgent measures by a competent authority.

Accordingly, the company may suspend shareholder rights in respect of unlawfully appropriated shares only where there is a legal basis and must await the competent authority’s resolution of the dispute.

2. What should a shareholder do if the company fails to cooperate in resolving the unlawful appropriation of shares?

Where the company fails to cooperate, the shareholder should take the following steps:

First, submit a written request to the company seeking clarification and remediation, requesting verification and reconciliation of the register of shareholders pursuant to Article 122 of the Law on Enterprise 2020, and requiring the full protection of ordinary shareholders’ rights pursuant to Article 115 of the Law on Enterprise 2020.

If the company remains uncooperative or exhibits serious infringement of shareholder rights, the shareholder may initiate proceedings before a competent court to seek protection of ownership of shares and related lawful rights and interests, pursuant to Article 166 of the Civil Code 2015.

To prevent further transfers of disputed shares, the shareholder may request the court to apply provisional urgent measures, such as prohibiting the transfer of rights in rem or seizing disputed property, pursuant to Article 114 of the Civil Procedure Code 2015.

Proactive use of the above legal tools provides an important basis for the timely protection of shareholders’ lawful rights and interests.

3. Are shareholders entitled to claim damages where shares are unlawfully appropriated?

Shareholders are entitled to claim damages where shares are unlawfully appropriated, provided that actual loss and a causal link with the infringing act are established.

Specifically, pursuant to Article 166 of the Civil Code 2015, owners have the right to request court protection of lawful ownership of property, including shares. Further, pursuant to Article 584 of the Civil Code 2015, any person who infringes another’s property and causes damage must compensate for such damage.

The amount of compensation is determined pursuant to Article 589 of the Civil Code 2015 and includes the value of the appropriated shares, actual income lost or reduced, benefits attached to the use of shares (such as dividends and impaired voting rights), and other lawful losses.

Where the unlawful appropriation of shares constitutes a criminal offence and is subject to criminal proceedings, shareholders remain entitled to pursue civil compensation claims within the criminal case in accordance with procedural law.

4. Do unlawfully appropriated shares affect voting rights and dividend entitlements?

Unlawfully appropriated shares may directly affect voting rights and dividend entitlements if shareholder rights are not exercised in accordance with the register of shareholders.

Pursuant to Points (a) and (b), Clause 1, Article 115 of the Law on Enterprise 2020, voting rights and dividend entitlements arise only in respect of shareholders lawfully recorded in the register of shareholders. Where unlawful appropriation leads to unlawful changes in shareholder records, the dispossessed shareholder may be excluded from meetings of the General Meeting of Shareholders and deprived of corresponding dividends in respect of the disputed shares.

However, pursuant to Article 122 of the Law on Enterprise 2020, the register of shareholders is the legal basis for determining shareholder status. Where the unlawful appropriation has not been lawfully recorded in the register, voting and dividend rights remain vested in the lawful shareholder. In the event of a dispute, such rights may be temporarily suspended by court order or provisional urgent measures to ensure lawful resolution.

5. What should enterprises do to prevent risks relating to the unlawful appropriation of shares?

To prevent risks relating to the unlawful appropriation of shares, enterprises should implement the following measures:

• Strict management of the register of shareholders: Pursuant to Article 122 of the Law on Enterprise 2020, the register of shareholders is the legal basis for shareholder status. Enterprises should promptly update shareholder information, including address changes, number of shares, and share transfers, to prevent erroneous records or unlawful appropriation.
• Establishment of internal controls over share transactions: Verifying the legality of share transfers and transactions, ensure compliance with the company charter and applicable law, and mitigate risks of unlawful appropriation.
• Timely application of provisional urgent measures where necessary: Where there is a risk of unlawful appropriation, enterprises may seek prohibitions on transfers or freezing of shares or related accounts pursuant to the Civil Procedure Code 2015 to protect lawful shareholders.
• Training and awareness-raising: Ensuring that personnel responsible for share management, accounting, and legal affairs are familiar with legal requirements on shares and shareholder rights, enabling early detection and prevention of unlawful appropriation.
• Engagement of legal counsel in disputes: Upon detecting risks or disputes relating to shares, enterprises should consult legal counsel to determine appropriate remedial measures, protect shareholders’ rights, and minimize losses.

Proactive management, supervision, and timely application of legal measures enable enterprises to effectively prevent risks relating to unlawfully appropriated shares, protect shareholders’ lawful interests, and ensure transparent and stable corporate operations.

V. Why seek legal advice from NPLaw in matters relating to unlawfully appropriated shares

In shareholder governance and the exercise of voting rights, particularly in companies with multiple classes of shares and diverse shareholder structures, timely legal advice from NPLaw enables enterprises and shareholders to:

• Clearly understand the rights and obligations of parties in relation to shares, thereby mitigating risks and disputes arising from unlawful appropriation, unauthorized transfers, or infringements of shareholder rights under the company charter and applicable law;
• Identify legal liability and compensation obligations, including the right to claim damages and appropriate remedies where unlawful appropriation of shares occurs;
• Draft, review, and amend the company charter, resolutions, and agreements relating to shares, with clear provisions on voting rights, transfer restrictions, and breach handling, thereby maximizing shareholder protection and minimizing legal risks in disputes.

The above is provided for reference purposes only. For tailored advice on specific circumstances, please contact: