Unsold shares refer to shares that form part of the registered charter capital issuance but have not yet been offered for sale or purchased, and therefore do not give rise to shareholder rights or obligations.
I. Concept and classification of unsold shares
Unsold shares are those belonging to the registered charter capital but not yet subscribed by shareholders or not yet offered by the company. This concept is important in capital management of joint stock companies, as it reflects the potential for capital expansion or future investment attraction.
Pursuant to Clause 4, Article 112 of the Law on Enterprises 2020, unsold shares of a joint stock company are defined as shares authorized for sale but not yet paid to the company. Additionally, at the time of business registration, unsold shares are the total number of shares not subscribed for purchase.
Unsold shares can be classified into:
- Shares authorized for issuance but not yet offered for sale;
- Shares offered but not purchased or rejected.
II. Legal provisions on unsold shares
1. Circumstances giving rise to unsold shares
Common situations include:
- Additional share issuance to increase capital but not fully sold;
- Shares registered by founding shareholders but not fully contributed within 90 days;
- Shares repurchased by the company but not yet resold.
These shares must be handled in accordance with legal provisions to safeguard the rights of current shareholders and the company’s operations.
2. Rights and obligations related to unsold shares
As they have no owner, unsold shares do not create voting rights, dividend entitlements, or rights to attend general meetings. The company is the sole entity with authority over unsold shares, including the right to re-offer them for sale or adjust charter capital by reducing the number of registered issued shares.
3. Options for handling unsold shares
According to Article 122 of the Law on Enterprises 2020, a company may:
- Continue to offer unsold shares in subsequent issuance rounds;
- Reduce charter capital if it determines that the remaining shares cannot or need not be sold;
- Offer preferential sales to existing shareholders (Clause 1, Article 124 of the Law), thereby ensuring their preemptive right to purchase new shares.
The chosen method depends on financial needs, expansion strategy, and market capital absorption capacity.
4. Information disclosure requirements
Under Articles 109 and 135 of the Law on Enterprises 2020, when a joint stock company issues additional shares, information regarding the quantity, class of shares, selling price, payment method, and preemptive rights must be transparently disclosed to shareholders. For public companies, disclosure must also comply with the Law on Securities and Circular 96/2020/TT-BTC.
5. Legal considerations regarding unsold shares
- Issuing new shares must comply with procedures for convening the General Meeting of Shareholders and amending business registration if charter capital is adjusted (Articles 30 and 31 of Decree No. 01/2021/ND-CP).
- Unsold shares must not be recorded as actual contributed capital, to avoid misleading financial statements and misrepresenting the company’s financial capacity.
III. Questions on unsold shares
1. How are unsold shares handled when the company increases charter capital through additional issuance?
According to Clause 2, Article 122 of the Law on Enterprises 2020, if shares are not fully sold, the company may:
- Cancel the unsold shares;
- Continue offering them under revised conditions;
- Re-offer them to existing shareholders or third parties.
Such actions must be approved by the General Meeting of Shareholders, with amendments to charter capital registration if applicable.
2. Pros and cons of continuing to offer unsold shares
Advantages:
- Enhances capital mobilization capacity;
- Broadens shareholder base, increasing public participation;
- Exploits market opportunities under favorable conditions.
Disadvantages:
- Incurs costs and time for re-issuance;
- May dilute the rights of existing shareholders without protective measures;
- Raises concerns about governance effectiveness if shares are unattractive to investors.
3. When is reducing charter capital an appropriate solution?
Reduction of charter capital is only appropriate in specific circumstances, such as when a company has registered an increase in charter capital but fails to distribute all shares. Pursuant to Clause 1, Article 112 of the Law on Enterprises 2020, charter capital equals the total par value of shares paid by shareholders and recorded in the company’s charter.
If the company has registered to increase charter capital in line with total offered shares (e.g., from VND 10 billion to VND 15 billion) but only partially sold them, the unpaid portion corresponding to unsold shares must be adjusted downward. Similarly, if founding shareholders fail to fully pay for subscribed shares within 90 days from the issuance of the Enterprise Registration Certificate, the company must reduce charter capital accordingly (Clause 1, Article 112 and Clause 4, Article 113 of the Law).
However, where the company merely plans to issue more shares but has not yet registered an increase in charter capital, unsold shares do not affect actual charter capital and reduction is unnecessary. Therefore, reducing charter capital should only be considered if the company has registered for an increase but fails to sell all shares, or shareholders fail to fulfill their capital contribution obligations within the statutory period.
IV. Legal advisory services on unsold shares
To ensure compliance with legal regulations and minimize risks when dealing with unsold shares, seeking support from legal advisory services is essential. NPLAW provides professional services, ranging from contract drafting, clarifying legal provisions, to assisting in procedural implementation. This comprehensive support helps save time and ensures successful transactions.
