In recent years, disputes among shareholders prior to the dissolution of an enterprise have become increasingly common, primarily arising from conflicts of interest, unclear asset distribution, or unresolved financial obligations. A thorough understanding of the applicable legal framework, dispute resolution mechanisms, and the involvement of legal counsel is therefore essential.

I. Current situation of shareholder disputes prior to dissolution

Current practice indicates that shareholder disputes prior to dissolution occur with notable frequency, particularly in joint stock companies and limited liability companies. These disputes typically stem from disagreements over asset allocation, debt settlement, voting rights, unequal distribution of benefits, or conflicts in corporate governance.

Such disputes not only delay the dissolution process but also lead to prolonged potential litigation, resulting in significant losses in time, cost, and corporate reputation. Accordingly, a clear understanding of the governing legal provisions and dispute resolution mechanisms is of critical importance.

II. What are shareholder disputes prior to dissolution?

1. Definition of shareholder disputes prior to dissolution

Shareholder disputes prior to dissolution refer to conflicts or disagreements arising among shareholders during the process of terminating the business operation of an enterprise. These disputes commonly relate to the determination of shareholders’ rights and obligations, allocation of benefits, handling of assets and liabilities, or the legal responsibilities of the company prior to dissolution.

Such a type of dispute constitutes an internal corporate dispute governed directly by the Law on Enterprise 2020, its implementing regulations, and the company’s charter.

2. Common circumstances leading to shareholder disputes prior to dissolution

In practice, when an enterprise is approaching dissolution, conflicts among shareholders often become more pronounced due to the direct impact on each party’s interests and responsibilities. Common causes include:

  • Disagreements over the proportion, valuation, or method of asset and profit distribution;
  • Handling of outstanding debts and financial obligations, particularly where certain shareholders deny liability;
  • Voting rights and decisions on dissolution, especially where some shareholders oppose resolutions of the General Meeting of Shareholders;
  • Breaches of the company charter or capital contribution agreements, leading to disputes over legal rights and obligations.

3. Methods for resolving shareholder disputes prior to dissolution

Disputes may originate from asset distribution, debt settlement, or disagreements regarding dissolution decisions. If not addressed promptly, such disputes may be longer, causing damage to both time and corporate reputation.

In such cases, negotiation and internal mediation should be prioritized. Shareholders are encouraged to engage in transparency and goodwill, based on the company charter and applicable laws, to reach a mutual consensus. Where mediation fails, disputes may be referred to commercial arbitration or courts to safeguard the lawful rights and interests of the parties.

III. legal framework governing shareholder disputes prior to dissolution

1. Main legal provisions applicable to dispute resolution

Main legal provisions relevant to resolving shareholder disputes prior to dissolution under the Law on Enterprise 2020 and guiding instruments include:

  • Right to receive remaining assets upon dissolution: Pursuant to Point g, Clause 1, Article 115 of the Law on Enterprise 2020, shareholders are entitled to receive the remaining assets in proportion to their shareholding upon dissolution;
  • Right to access information and documents: Shareholders are entitled to review and extract documents relating to meetings of the General Meeting of Shareholders, including those concerning dissolution, in accordance with Article 139;
  • Right to initiate legal action against unlawful decisions: Where resolutions or decisions of the General Meeting of Shareholders or the Board of Directors violate the law or the company charter and cause damage, shareholders (without being restricted by shareholding duration) may request the court to suspend or invalidate such decisions under the Law on Enterprise 2020.

2. Authorities competent to resolve shareholder disputes

During the dissolution, disputes among shareholders are often unavoidable. The law provides for the following competent authorities:

  • General Meeting of Shareholders: Internal disputes may first be addressed through meetings of the General Meeting of Shareholders in accordance with the Law on Enterprise 2020 and the company charter;
  • Mediators at Commercial Mediation Centers: Where internal mediation fails, disputes may be submitted to commercial mediation centers pursuant to Decree No. 22/2017/ND-CP;
  • Arbitrators: Where there is an arbitration agreement in the company charter or capital contribution agreement, disputes shall be resolved by commercial arbitration, and arbitral awards shall be final and binding;
  • People’s Court: If a mediation or arbitration fails, disputes fall under the jurisdiction of the competent court according to Article 30 of the Civil Procedure Code 2015.

Accordingly, jurisdiction over such disputes is determined in a manner from internal corporate mechanisms, to mediation and arbitration, and ultimately to the courts; it depends on the company charter, agreements among shareholders, and the complexity of the dispute.

3. Consequences of unresolved shareholder disputes prior to dissolution

In practice, not all shareholder disputes are resolved prior to dissolution. Failure to address such disputes in a timely and definitive manner may lead to the following consequences:

  • Suspension of the dissolution process: The company cannot complete dissolution procedures under Articles 207 and 208 of the Law on Enterprise 2020 due to unresolved disputes;
  • Legal risks: Disputes may be brought before courts or arbitration, resulting in prolonged proceedings and increased legal costs;
  • Impact on shareholder rights: Delays in asset distribution, debt settlement, or capital reimbursement may directly harm shareholders;
  • Reputational damage: Public internal disputes may adversely affect the company’s image and its relationships with partners and clients.

Thus, unresolved disputes not only delay dissolution procedures but also create significant legal and financial risks for the enterprise.

IV. Questions regarding shareholder disputes prior to dissolution

1. What are the rights and obligations of shareholders in resolving disputes prior to dissolution?

Rights of shareholders:

  • To attend and vote at the General Meeting of Shareholders, where decisions on dissolution or dispute resolution may be made (Point a, Clause 1, Article 115);
  • To review, inspect, extract, or copy company documents, including the company charter, minutes, and resolutions (Point e, Clause 1, Article 115);
  • To receive remaining assets upon dissolution in proportion to their shareholding (Point g, Clause 1, Article 115).

Obligations of shareholders:

  • Not to unlawfully withdraw contributed capital; shareholders must fully and timely contribute committed capital, and takes joint liability for the company’s debts within the withdrawn amount for any unlawful withdrawal (Clause 1, Article 119);
  • To comply with the company charter and resolutions of the General Meeting of Shareholders and the Board of Directors (Clause 3, Article 119);
  • To maintain confidentiality of company information and use such information solely for legitimate purposes (Clause 5, Article 119).

2. Which clauses in a capital contribution agreement help prevent disputes?

To minimize disputes, a well-drafted capital contribution agreement should include:

  • Clear provisions on capital contribution ratios, voting rights, and corresponding rights and obligations (Article 47);
  • Profit distribution and loss allocation mechanisms;
  • Rules governing transfer of capital contributions/shares, including pre-emptive rights and restrictions (Article 51);
  • Dispute resolution mechanisms (mediation, arbitration, or court jurisdiction);
  • Provisions on dissolution and asset liquidation procedures.

3. Can the dissolution process be suspended due to shareholder disputes?

Under Clause 2, Article 207 of the Law on Enterprise 2020, an enterprise may only be dissolved if it is not involved in any dispute being resolved by a court or arbitration. Accordingly, the dissolution process must be suspended until all disputes are fully resolved.

4. When may a shareholder initiate legal action against other shareholders?

A shareholder may initiate legal action to request the annulment of a resolution of the General Meeting of Shareholders where:

  • The procedures for convening meetings or adopting resolutions seriously violate the Law on Enterprise or the company charter (Clause 1, Article 151);
  • The content of the resolution is contrary to law or the company charter (Clause 2, Article 151).

Such rights apply to shareholders or groups of shareholders holding at least 5% of the total ordinary shares, or a lower percentage as stipulated in the company charter. The limitation period for filing a claim is 90 days from receipt of the resolution or meeting minutes.

5. What measures can be taken if disputes cannot be resolved?

Under Article 207 of the Law on Enterprise 2020, an enterprise may only be dissolved after all debts and obligations have been settled and no disputes are pending before courts or arbitration. If disputes remain unresolved, the dissolution process is suspended.

To expedite resolution, enterprises should prioritize internal mediation, followed by commercial arbitration (if agreed), or court proceedings as a last resort.

V. Why seek legal counsel for shareholder disputes prior to dissolution?

During the dissolution process, shareholder disputes are often complex, involving rights, assets, and mandatory legal procedures. Attempting to resolve such disputes without professional assistance may prolong the process or even result in suspension of dissolution.

Engaging legal counsel is therefore essential to assess risks, propose appropriate negotiation or litigation strategies, and ensure full compliance with applicable laws.

NPLaw, with its team of experienced lawyers, is committed to assisting enterprises in resolving disputes efficiently, safely, and in accordance with the law.