A joint stock company is a business model that allows investors to easily expand their scale, invest in business activities, increase capital, and transfer shares. Therefore, the share transfer agreement has become a matter of significant interest for many shareholders and investors today.
I. Main information on share transfer agreements in enterprises
Given that most enterprises in Vietnam are small and medium-sized, the transfer of shares is primarily conducted through share transfer agreements.
To meet the growing demand from clients who wish to understand more about share transfer agreements in joint stock companies, NPLaw provides the following main information:
1. What is an agreement?
According to Article 385 of the Civil Code 2015, a contract (agreement) is an agreement between parties on the establishment, modification, or termination of civil rights and obligations.
2. What are shares in the agreement?
Although the Law on Enterprise does not specifically define the term “share,” Clause 34, Article 4 of the Law on Enterprise 2020 stipulates: Charter capital is the total value of assets contributed or committed by members or the owner when establishing a limited liability company or partnership; for a joint stock company, it is the total par value of shares sold or registered for purchase upon establishment. Accordingly, from such a definition of charter capital, a share can be understood as the smallest equal unit of the charter capital in a joint stock company.
For example: Company X, a joint stock company, has a charter capital of 10,000,000,000 VND (ten billion dong). Its capital is divided into 1,000,000 equal parts, each valued at 10,000 VND, which is called one share.
3. What is a share transfer?
Under Article 127 of the Law on Enterprise 2020, the transfer of shares refers to an activity whereby shareholders have the right to freely transfer their shares.
Share transfer can be conducted through two forms:
- Share transfer agreement: It must be signed by the transferor and the transferee or their authorized representatives;
- Transactions on the securities market: The order and procedures for transfer shall comply with the laws on securities.
4. What is a share transfer agreement?
A share transfer agreement is an agreement between parties on the establishment, modification, or termination of the ownership of shares held by shareholders in a joint stock company.
Such a type of agreement is of great importance both economically and legally. The conclusion of share transfer agreements enhances flexibility and capital mobility within the company while ensuring its stability.
Moreover, once a person contributes capital to a company, they cannot withdraw their shareholding except when the company dissolves. Therefore, if a shareholder wishes to withdraw from the company, they must transfer their shares to another party through share transfer agreements. Such a process also facilitates capital circulation and promotes investment fluidity.
4.1. Essential contents of share transfer agreements
Valid share transfer agreements in a joint stock company should include the following clauses:
- Information on the contracting parties;
- Subject matter of the agreement;
- Method and time of payment;
- Rights and obligations of the parties;
- Effectiveness of the agreement;
- Dispute resolution mechanisms;
- Other terms as agreed by the parties.
4.2. Main notes regarding share transfer agreements
4.2.1. Restrictions on share transfers
Shares are freely transferable except in the following cases:
- Within three (03) years from the date the company receives its Enterprise Registration Certificate, founding shareholders may freely transfer their shares to other founding shareholders. However, any transfer of ordinary shares to non-founding shareholders must be approved by the General Meeting of Shareholders.
- The company’s Charter may also stipulate additional restrictions on share transfers.
4.2.2. Legal consequences after a share transfer
- For the transferor: Once the shareholder has transferred all of their shares to another person, they are no longer a shareholder of the company and will be removed from the Shareholder Register.
- For the transferee: Upon completion of the transfer, the transferee will be recorded in the Shareholder Register and officially become a shareholder.
- For the company: The company must update the Shareholder Register within 24 hours from the time it receives a request from the concerned shareholder, as prescribed in the company’s Charter.
- Regarding charter capital: The company’s charter capital remains unchanged, as the total number of shares is preserved the ownership merely changes from one party to another.
The share transfer agreement is a critical civil transaction for shareholders seeking to withdraw capital from a company. Accordingly, the above information aims to help shareholders gain a clearer understanding of share transfer agreements under current legal regulations.
NPLaw is a reputable law firm specializing in legal consultancy, contract drafting, and the execution of share transfer procedures. For more information or detailed advice regarding share transfer agreements and related issues, please contact NPLaw for timely and efficient support.
