Protecting assets in disputes over the timing of share transfers

A share transfer may appear as simple as “payment made, ownership delivered”, but at which exact moment is ownership truly determined? Is it the moment the contract is signed, when full payment is received, or when the transferee’s name is recorded in the shareholders’ register? Ambiguity surrounding the timing of transfer is precisely the spark that ignites complex disputes over the timing of share transfers, potentially causing the loss of both rights and financial interests. Together with NPLaw, let us examine the nature, contributing factors, and effective solutions to disputes over the timing of share transfers in order to safeguard your legitimate rights and interests.

I. Current situation of disputes over the timing of share transfers in the present context

In the context of an increasingly dynamic securities market and vibrant mergers and acquisitions (M&A) activities, share transfer transactions have become more prevalent. However, along with the growing volume of transactions, disputes over the timing of share transfers have also become more complex. Many enterprises and investors remain negligent or insufficiently aware of the relevant legal provisions, leading to errors in determining and recording the timing of the transfer of share ownership.

In practice, disputes frequently arise when share prices fluctuate sharply or when significant corporate events occur (e.g., dividend distributions, additional share issuances, or changes in management) during the transitional period of share transfers. At such times, determining who the lawful owner of the shares is at a specific point in time will decide who is entitled to benefits or bears losses arising from such events.

Accordingly, identifying the current situation, gaining an in-depth understanding of the legal framework, and adopting preventive and dispute resolution measures regarding the timing of share transfers constitute an urgent requirement for all investors and enterprises.

II. Understanding disputes over the timing of share transfers

NPLaw recognizes that in order to resolve an issue, its nature must first be clearly understood. This section examines the fundamental concepts and root causes of such a type of dispute.

1. What is a dispute over the timing of share transfers?

A dispute over the timing of a share transfer refers to disagreements or conflicts among the transferor, the transferee, and in some cases the issuing company, regarding the precise moment at which ownership of the shares and the related rights and obligations (such as the right to receive dividends and voting rights) are transferred from one party to another.

In essence, it is a dispute over the point in time at which a person officially becomes a shareholder of the company from both a legal and practical perspective.

2. What factors may lead to disputes over the timing of share transfers?

Based on advisory practice, NPLaw observes that such disputes commonly arise from the following factors:

• Ambiguous contractual provisions: Clauses on the timing of ownership transfer are drafted in general terms and subject to multiple interpretations.
• Unclear payment arrangements: Prolonged payment schedules make it unclear whether the transfer occurs upon the first installment or upon full settlement of the purchase price.
• Lack of cooperation by the company: The company deliberately delays or refuses to record the new shareholder in the shareholders’ register.
• Conditions precedent: The contract contains conditions (e.g., approval by a state authority) and the parties differ in their interpretation of when such conditions are deemed fulfilled.

Accordingly, ambiguity in contractual arrangements and inconsistency in implementation are the primary causes of disputes.

3. Why is it necessary to pay attention to the timing of share transfers?

The timing of a share transfer is not merely a formal matter; it is directly connected to the material rights and obligations of shareholders, including:

• Rights attached to shares: The lawful timing of transfer determines who is entitled to rights arising from the shares, such as the right to receive dividends, the right to subscribe for newly issued shares, voting rights at the General Meeting of Shareholders, and the right to residual assets upon dissolution or bankruptcy of the company.
• Obligations of the parties: Clear determination of tax obligations on income from securities transfers and responsibilities related to any liabilities attached to the shares.
• Legal validity of the transaction: Proper timing ensures legal recognition of the transaction and prevents ownership disputes.
• Stability of the company’s ownership structure: Clear determination of the transfer timing enables the company to accurately update the shareholders’ register, ensuring transparency and stability in ownership and corporate governance.

In summary, the timing of share transfers is not merely a chronological milestone but a core legal factor determining all rights and obligations attached to the shares, directly affecting the interests of the parties and the operations of the enterprise.

4. Common situations arising in disputes over the timing of share transfers

In practice, disputes over the timing of share transfers frequently arise in the following situations:

• Disputes over dividends: The transferor has signed the transfer contract, but the company announces a dividend distribution before the transferee completes the registration procedures in the shareholders’ register. The transferor claims entitlement to the dividends, whereas the transferee argues that they are the owner being entitled to receive them.
• Disputes over subscription rights in additional share issuances: The company issues new shares at a preferential price, and such subscription rights arise during the interval between contract execution and completion of registration.
• Disputes over voting and management rights: During the transitional period, an important meeting of the General Meeting of Shareholders or the Board of Directors is convened. The parties dispute who is entitled to attend and vote in respect of the shares under transfer.
• Disputes arising from sharp fluctuations in share prices: After contract execution, the share price rises or falls sharply, prompting one party to seek amendment or termination of the transaction by invoking ambiguity in the timing of transfer.
• Disputes related to conditions precedent: Where the contract is subject to conditions precedent (e.g., approvals by state authorities or third parties), the parties fail to agree on when such conditions are satisfied, thereby affecting the official timing of transfer.

III. Relevant legal provisions governing disputes over the timing of share transfers

This section states the main legal provisions governing disputes over the timing of share transfers.

1. How does the law regulate disputes over the timing of share transfers?

To resolve disputes over timing, Vietnamese law distinguishes between the effective date of the contract and the time at which shareholder status is legally established. Pursuant to the Law on Enterprise 2020, the following principles apply:

• First, principles and forms of transfer: Under Clauses 1 and 2, Article 127, shares are freely transferable, except for restrictions applicable to founding shareholders within the first three years under Clause 3, Article 120 of the same Law or restrictions stipulated in the company charter. Transfers may be conducted by contract or via transactions on the securities market. However, the execution of the contract does not automatically render the transferee a shareholder.
• Second, the time at which shareholder status is established: Clause 6, Article 127 of the Law on Enterprise 2020 provides that the transferee becomes a shareholder of the company from the time their information prescribed in Clause 2, Article 122 of this Law is fully recorded in the shareholders’ register.

In disputes, courts will rely on the shareholders’ register and the time of entry therein to determine the actual owner of the shares at a given point in time.

2. Which authority has jurisdiction to resolve disputes over the timing of share transfers?

Where disputes over the timing of share transfers arise, the competent authorities include:

• People’s Courts: Jurisdiction is determined under the Civil Procedure Code 2015, including:
  + Article 30 on disputes over property ownership and civil, business, and commercial contracts;
  + Article 35 (as amended in 2025) on the jurisdiction of regional People’s Courts over civil and commercial disputes;
  + Article 37 (as amended in 2025) on the jurisdiction of provincial People’s Courts over requests to set aside arbitral awards and register arbitral awards;
  + Article 39 on territorial jurisdiction.
• Commercial Arbitration: Where the share transfer contract contains an arbitration agreement, commercial arbitration has jurisdiction pursuant to the Law on Commercial Arbitration 2010. Arbitration is often faster and more flexible than court proceedings.

In summary, People’s Courts have default jurisdiction, while commercial arbitration is competent where the parties have entered into a valid arbitration agreement in relation to disputes over the timing of share transfers.

3. Consequences of failing to resolve disputes over the timing of share transfers

If disputes over the timing of share transfers are not promptly and conclusively resolved, significant adverse consequences may arise for both the parties and the company, including:

For the disputing parties (transferor and transferee):

• Financial losses: Loss of dividend entitlements, preferential subscription rights, or losses arising from fluctuations in share prices during the dispute period.
• Loss of opportunities: Missed opportunities to sell shares at favorable prices or to participate in main corporate decisions.
• Costs and time burdens: Legal fees, court fees, and prolonged litigation efforts.
• Reputational and relational damage: Deterioration of business relationships and adverse impact on market reputation.

For the company whose shares are under dispute:

• Instability in ownership structure: Inability to accurately identify lawful shareholders, affecting the convening and validity of resolutions of the General Meeting of Shareholders.
• Governance difficulties: Uncertainty regarding voting rights, complicating managerial decision-making.
• Adverse impact on business operations: Delays in important decisions, affecting business plans and investment attraction.
• Legal risks: Potential claims by third parties where corporate decisions are challenged due to uncertainty over shareholder status.

Failure to conclusively resolve disputes over the timing of share transfers results in serious and wide-ranging consequences, not only for the directly involved parties but also for the stability and development of the enterprise.

IV. Questions regarding disputes over the timing of share transfers

NPLaw regularly receives practical inquiries from Clients. Below are responses to the most common questions to help clients proactively manage their transactions.

1. Can the timing of share transfers be changed, and if so, How?

The parties may agree to amend the timing of the share transfer based on the principle of contractual freedom under Article 421 of the Civil Code 2015 on contract amendment. To effect such amendment, the parties should execute a contract addendum or a new agreement adjusting the previously agreed timeline.

However, a clear distinction must be made between the date of agreement/execution and the time at which ownership is legally transferred. Regardless of any agreed changes to the signing or payment dates, the legal time at which shareholder status is established must strictly comply with Clause 6, Article 127 of the Law on Enterprise 2020, under which the transferee becomes a shareholder only when their information is duly recorded in the shareholders’ register.

Accordingly, for any change in the timing of transfer to have full legal effect, the parties must notify the company to update the shareholders’ register. Only upon such recording is the transfer legally completed.

2. What should the parties pay attention to when executing contracts to avoid disputes over the timing of share transfers?

To prevent disputes, when drafting contracts, the parties should clearly distinguish between two time points in accordance with the Law on Enterprise 2020.

• First, the contract should expressly provide that ownership of shares and the related rights (voting rights, dividend entitlements) are transferred only when the transferee’s information is recorded in the shareholders’ register under Clause 6, Article 127 of the Law on Enterprise 2020, rather than upon contract execution or payment. It prevents disputes over entitlement to dividends where the record date falls within the interim period.
• Second, the contract should impose clear obligations and deadlines for notifying the company and updating the shareholders’ register under Article 127 of the Law on Enterprise 2020. Given that ownership depends on the company’s administrative action, the contract should specify which party takes responsibility for submitting the required notification and within what timeframe.
• Finally, the contract should include remedies for delayed recording. Where the company or a party deliberately delays updating the shareholders’ register, causing the transferee to be unable to establish shareholder status in due time, the breaching party should be subject to contractual sanctions or damages as agreed. Detailed drafting of these matters provides maximum protection for both parties.

3. Is the consent of all shareholders required to change the timing of share transfers, and why?

Amendment of the timing or terms of a share transfer transaction is a matter of contractual freedom between the transferor and transferee and does not require the consent of other shareholders.

Pursuant to Clause 1, Article 127 of the Law on Enterprise 2020, shares are freely transferable, except where restricted by the company charter or by law. Amending the timing of transfer constitutes an amendment of a civil contract and falls within the parties’ autonomy under Article 421 of the Civil Code 2015.

However, an important exception applies under Clause 3, Article 120 of the Law on Enterprise 2020 with respect to ordinary shares of founding shareholders within the first three years from the issuance of the enterprise registration certificate. In such cases, transfers to non-founding shareholders require approval by the General Meeting of Shareholders. Where changes to the timing of transfer materially alter the terms previously approved, renewed notification or approval by the General Meeting of Shareholders may be required.

Accordingly, as a general rule, changing the timing of share transfers is a matter between the transferor and transferee and does not require the consent of all other shareholders, except where statutory or charter-based transfer restrictions apply.

4. Can disputes over the timing of share transfers arise in the absence of a written contract?

Disputes over the timing of share transfers may indeed arise and are particularly disadvantageous where no written contract exists, given the strict legal requirements governing the form of such transactions.

• First, as to form of transaction: Under Clause 2, Article 127 of the Law on Enterprise 2020, share transfers must be effected by contract or via securities market transactions. Where affected by contract, the transfer document must be signed by the transferor and transferee or their authorized representatives. A written instrument is therefore mandatory.
• Second, as to legal risks: In the absence of a written contract, the transaction may be declared invalid by the court for non-compliance with formal requirements under Article 129 of the Civil Code 2015, unless it can be proven that at least two-thirds of the contractual obligations have been performed.
• Third, as to evidentiary basis for determining timing: Under Clause 6, Article 127 of the Law on Enterprise 2020, shareholder status is established upon recording in the shareholders’ register. Without a written contract serving as the basis for requesting such recording, disputes may arise between the transferee (who has paid the price) and the transferor (whose name remains in the register) as to who is entitled to dividends and voting rights at the relevant time.

Accordingly, although disputes over the timing of share transfers may still arise, the absence of a written contract exposes the transaction to a high risk of invalidity and creates substantial evidentiary difficulties for the parties.

5. What measures may be applied to effectively resolve disputes over the timing of share transfers?

Pursuant to Article 317 of the Commercial Law 2005, four dispute resolution methods are recognized. For disputes over the timing of share transfers, the parties should consider the following order of priority to ensure effectiveness and resource efficiency:

• First, negotiation: It is encouraged as the primary method, allowing the parties to reach a mutually agreed solution without third-party intervention, preserving confidentiality and business relationships.
• Second, commercial mediation: If negotiation fails, the parties may engage a mediator. A successful mediation agreement may be recognized by the court under the Civil Procedure Code 2015.
• Third, commercial arbitration: Such a method is available only where the parties have entered into an arbitration agreement under the Law on Commercial Arbitration 2010. The arbitral award is final and binding, offering a swift and confidential resolution.
• Fourth, court proceedings: It is the last resort where no valid arbitration agreement exists. Disputes over share transfers between a company and its shareholders or among shareholders fall within the jurisdiction of the courts under the Civil Procedure Code 2015. Court proceedings are often lengthy and public.

In summary, negotiation and mediation should be prioritized for confidentiality and cost efficiency. Where adjudication is required, commercial arbitration offers advantages in speed and finality, while court proceedings remain the ultimate legal safeguard for the protection of lawful rights and interests.

V. Are you seeking a reputable legal expert to assist with disputes over the timing of share transfers?

Strict compliance with regulations on the timing of share transfers not only ensures smooth transactions but also safeguards the lawful rights and interests of the parties. However, once disputes arise, self-handling may involve significant risks and difficulties.

If you require assistance in drafting share transfer agreements, advice on rights and obligations, or legal representation in resolving disputes over the timing of share transfers, please contact NPLaw for timely support.

The above information is for reference purposes only. For case-specific legal advice, please contact NPLaw directly.