Shareholders are individual or organization that owns at least one share of the joint-stock company and also are owner of the joint-stock company. Along with these roles, their interests are tied to business operations although they may not directly manage the day-to-day company affairs.
What Rights Shareholder Holds in Joint Stock Company?
1. Shareholders are individual or organization that owns at least one share of the joint-stock company
and also are owner of the joint-stock company. Along with these roles, their interests are tied to
business operations although they may not directly manage the day-to-day company affairs. In
order to implement governance, the powers and responsibilities of each interest group such as
shareholders, the board of directors, managerial personnel, etc. should be assigned based on the
statutory principles and procedures.
According to the regulations on shareholders in the Law on Enterprise 2020, the rights of
shareholders can be categorized into the following groups: economic rights, governance rights,
information rights, and litigation rights.
Economic rights
Economic right is the right to gain all pecuniary interest with respect to the shares. The purpose of
starting a business or investing in securities comes mainly from earning income or gaining profits.
Economic rights accordingly include:
-Right to entitlement to dividends
-Right to transfer ownership
-Priority right to acquire the newly issued shares
-Right to entitlement to a portion of the assets after dissolution or bankrupt
-Appraisal Right
Among these above rights, right to entitlement to dividends and right to transfer ownership are the
fundamental economic rights of a shareholder.
2. Dividend of common shares is determined according to the realized net profit and the dividend
payment from the company’s retained earnings. Despite right to entitlement to dividends,
shareholders are still subject to a number of limitations in law and in fact. Dividend entitlement is
determined by the General Meeting of Shareholders based on the recommendation of the Board of
Directors, after the company has fulfilled tax obligations and other financial obligations,
contributed to reserve fund, paid for previous losses and met the solvency for all due debts and
other property obligations. Dividend is not required to be distributed annually. Depending on the
business situation, the General Meeting of Shareholders may decide to retain profits for
reinvestment.
Besides dividend entitlement from the company’s operating results, shareholders can also gain
profits by share transfer. This kind of investment is popular with respect of shares or securities of
public companies, investors do not aim for corporate governance rights as well as dividend, they
intend to earn benefits by the difference of the market values of stocks, especially when the stock
value increases.
Governance rights
Modern corporate governance has two principles, one is to separate ownership and governance
and to separate governance and management. It means that the major shareholders should not hold
senior managerial positions in the company and Chairperson of the Board of Directors should not
be assigned to other senior managerial positions such as General Director and/or Director.
Shareholders may be an individual or organization which they have their own different interests,
goals and abilities. The separation between ownership and management makes the situation of
whom the owner is and how the share get transferred not to affect the business operation. In the
meantime, the separation helps gather professional managers to implement target intended by the
company. According to the laws, members of the Board of Directors of a public company
concurrently holding several executive titles must be reduced to the minimum to ensure the
independence of the Board of Directors, specially the Chairperson of the Board of Directors shall
not be the Director/General Director in a public company as of August 1st, 2020. There are no
similar rules applicable to joint stock companies which are not public company.
Attendance, speaking and voting at General Meeting of Shareholders are fundamental in
governance right of common shareholders, applicable to all shareholders holding at least one share.
ty. In principle, being a shareholder who holds shares of the company regardless of the number
has equal rights to attend and vote at the General Meeting of Shareholders. By the General Meeting
of Shareholders, the shareholders holding a certain number of shares can impact decisions on some
matters such as election, dismissal, and removal of members of the Board of Directors and
Controllers, amendment and supplementation of internal documents, major transactions, and
others as stipulated in law on enterprise or charter. In addition to the above rights, the majority
shareholders also have a number of other rights related to governance as follows:
The shareholder or group of shareholders holding at least 5% of the total number of common shares
(charter may require a smaller percentage) is entitled to:
-Call a General Meeting of Shareholders
3. -Request Board of Controllers to inspect each specific matter relating to management, governance
of company affairs if necessary
-Recommend matters to be included in agenda of General Meeting of Shareholders
-The shareholder or group of shareholders holding at least 10% of the total number of common
shares (charter may require a smaller percentage) is entitled to nominate candidates for the Board
of Directors, Board of Controllers
Information rights
Shareholders have the right to access documents and information of the company. In addition to
the basic documents such as the charter, list of shareholders, meeting minutes and resolutions of
the General Meeting of Shareholders, shareholders have the right to access to reports related to the
business affairs.
However, some information is only reviewed by shareholders who own required percentage of
share:
-Access and extract information on full name and contact address as specified in list of
shareholders having voting right and list of shareholders having right to attend General Meeting
of Shareholder; request to adjust his/her inaccurate information
-Access, extract and scan charter of company, meeting minutes of General Meeting of Shareholder
and its resolution
-Access, extract and copy partial or whole list of involved persons and their contracts, transaction
of which the company is other party, interests of Board of Directors, Controllers, Directors or
General Directors and other managerial positions of company
-Access and extract minutes and resolutions of Board of Directors, annual or mid-year financial
reports, reports of Board of Controllers, contracts and transaction approved by Board of Directors
and other documents, excepting for documents related to company’s know-how and trade secrets
(applicable to shareholder and group of shareholders who own at least 5% of total number of
common shares, the charter may require a smaller percentage)
-Access profit and loss statements, financial reports, governance and management assessment
reports; inspection reports of Board of Controllers (applicable to shareholder who own shares at
least 1 consecutive year, the charter may require a smaller percentage)
Different to common joint stock company, a public company must announce fully, accurately and
promptly the periodic and extraordinary information on business, finance and governance. Other
information must be announced if it influences share price and investment decisions of
shareholders and investors.
Litigation rights
The Law on Enterprises has provided a mechanism to request the Court or Arbitration to rescind
the resolution of the General Meeting of Shareholders or sue the managerial personnels when they
fail to fully and properly implement their tasks, including:
4. The shareholder or group of shareholders holding at least 5% of the total number of common shares
(charter may require a smaller percentage) is entitled to:
-Request to rescind resolutions of the General Meeting of Shareholders when the orders and
procedures of calling the meeting and making resolution of the General Meeting of Shareholders
seriously violate the regulations of the Law on Enterprises and company’s charter
-However, the resolution of the General Meeting of Shareholders adopted by 100% of the total
number of voting shares is legal and effective even when the orders and procedures of calling the
meeting and adopting such resolution violates regulations of the Law on Enterprises and
company’s charter.
-Request to rescind resolutions of the General Meeting of Shareholders when its provisions
violates the laws or company’s charter
-The shareholder, group of shareholders holding at least 1% of the total number of common shares
is entitled to:
-Sue members of Board of Directors, Directors, General Directors separately or jointly under
certain circumstances
The Chairperson of Board of Directors or the Director or General Director usually acts as the legal
representative of the company, representing the company to perform rights and obligations arising
from the company’s transactions, representing the company to take proceedings before the court
or arbitrator. However, when their interests conflict with those of the shareholders, shareholders
have the right to initiate a lawsuit claiming benefits or compensation. The Law on Enterprise also
permits shareholders to sue on behalf of the company when the above managerial personnels
commit violations, causing damage directly to the company and indirectly to shareholders.
Not all shareholders have the right to sue for the above managerial personnels, only those who
own at least 1% of the total number of common shares. This restriction makes sense with respect
of public companies, in order to eliminate unfair competition actions conducted by minority
shareholders who is controlled by the rival companies because amount of 1% in public company
is not a small number.
Similar to a lawsuit against a manager, shareholder or group of shareholders is also required to
own at least 5% of the total number of common shares to request rescission of the resolution of
the General Meeting of Shareholders if there is violation on substantive law and procedural law.
Accordingly, all resolutions of the General Meeting of Shareholders violating the substantive laws
or the company’s charter are rescinded at the request of shareholders, but only serious procedural
violations may be rescinded. There is no specific instructions for serious procedural violations at
this time, the assessment will depend on personal perspective of the court and arbitrator.