Understanding shareholder equity disputes in the case of bankruptcy

Shareholder equity disputes in bankruptcy cases are a common issue in joint-stock companies. The article below outlines the legal regulations governing shareholder equity disputes in bankruptcy proceedings and addresses several related questions to help individuals and organizations protect their lawful rights and interests.

I. Current situation of shareholder equity disputes in bankruptcy cases

At present, shareholder equity disputes arising from corporate bankruptcy have become increasingly complex due to the interaction between existing legal regulations and ongoing legislative reforms aimed at strengthening investor protection. Under current laws, shareholders rank last in the order of payment priority after a company has fulfilled all other financial obligations.

These disputes often arise when shareholders and the company, or the asset management and liquidation entity, cannot reach an agreement regarding the valuation of the company's remaining assets to maximize the amount distributable to shareholders, or regarding other shareholder rights and interests following the company’s bankruptcy.

II. Understanding shareholder equity disputes in bankruptcy cases

1. What is a shareholder equity dispute in the event of bankruptcy?

Pursuant to Point a, Clause 1, Article 111 of the Law on Enterprise 2020 (as amended in 2025), charter capital is divided into equal portions known as shares. Based on this provision:

• A share is the smallest unit into which a company’s charter capital is divided.
• A share serves as legal evidence of an individual's status as a shareholder in a joint-stock company. Each class of shares grants its holder specific legal rights and obligations.

According to Clause 2, Article 4 of the Bankruptcy Law 2014, bankruptcy refers to the condition in which an enterprise or cooperative becomes insolvent and is declared bankrupt by a competent People’s Court.

Accordingly, a shareholder equity dispute in a bankruptcy case is a legal conflict concerning the allocation of the company’s remaining asset value (represented through share ownership interests) among shareholders after bankruptcy proceedings.

2. What are the common causes of shareholder equity disputes in bankruptcy cases?

Shareholder equity disputes during bankruptcy commonly arise from various factors that lead to conflicts among shareholders regarding their rights and interests, including:

• Disputes over asset valuation and distribution: The valuation of remaining assets and the method of distribution often create significant disagreements due to a lack of transparency, management conflicts, or inequitable profit allocation.
• Conflicts between majority and minority shareholders: Controlling shareholders may dominate decision-making processes and exclude minority shareholders from receiving benefits, making it difficult for minority shareholders to protect their interests during bankruptcy proceedings.
• Unclear company charter provisions: The company charter may lack specific regulations governing bankruptcy scenarios and the distribution of residual shareholder interests.
• Lack of financial transparency and information disclosure: Shareholders may not have adequate access to the company's financial information, leading to suspicions regarding asset misuse or concealment of assets, which subsequently leads to disputes over the distribution of residual shareholder value.

3. How is share value determined in shareholder equity disputes when a company becomes bankrupt?

- Under Article 51 of the Bankruptcy Law 2014, the value of asset-related obligations is determined as follows:

• Obligations established before the People’s Court issues a decision commencing bankruptcy proceedings are valued as of the date of such decision.
• Obligations established after the commencement of bankruptcy proceedings are valued as of the date the bankruptcy declaration is issued.
• Where an obligation is not denominated in money, the Court shall determine its monetary value.

- Pursuant to Clause 1, Article 122 of the Bankruptcy Law 2014, upon enforcement of a bankruptcy declaration, the Bankruptcy Trustee or the asset management and liquidation enterprise must conduct an asset valuation within ten working days from the date the bankruptcy declaration is issued.

- According to Clause 1, Article 54 of the Bankruptcy Law 2014, assets are distributed in the following order of priority:

• Bankruptcy expenses;
• Outstanding wages, severance allowances, social insurance, health insurance, and other employee benefits under labor contracts and collective labor agreements;
• Debts incurred after the commencement of bankruptcy proceedings for business rehabilitation purposes;
• Financial obligations to the State, unsecured debts, and the unpaid portions of secured debts where collateral value is insufficient.

- If assets remain after satisfying all obligations above, the remaining assets shall be distributed to:

• Cooperative members and member cooperatives;
• Sole proprietors;
• Owners of single-member limited liability companies;
• Members of multi-member limited liability companies and shareholders of joint-stock companies;
• Partners of partnerships.

III. Legal regulations governing shareholder equity disputes in bankruptcy cases

1. How does the Law on Enterprise regulate shareholder equity rights in bankruptcy cases?

• Pursuant to Point g, Clause 1, Article 115 of the Law on Enterprise 2020 (as amended in 2025), ordinary shareholders are entitled to receive a portion of the company’s remaining assets in proportion to their shareholding ratio when the company is declared bankrupt.
• Pursuant to Point b, Clause 2, Article 117 of the Law on Enterprise 2020 (as amended in 2025), holders of dividend preference shares are entitled to receive a portion of the remaining assets corresponding to their ownership ratio after the company has fully paid its debts and redeemed redeemable preference shares upon bankruptcy.
• In addition, Article 214 of the Law on Enterprise 2020 (as amended in 2025) provides that enterprise bankruptcy procedures shall be governed by bankruptcy legislation.

2. Which authority has jurisdiction to resolve shareholder equity disputes in bankruptcy cases?

Pursuant to Articles 114 and 115 of the Bankruptcy Law 2014:

• If a property dispute arises before a bankruptcy declaration is issued, the People’s Court handling the bankruptcy matter must consider separating the disputed property for resolution through a separate civil lawsuit in accordance with civil procedure laws.
• If a dispute arises during asset liquidation after the bankruptcy declaration or if enforcement cannot be carried out, the Enforcement Officer, Bankruptcy Trustee, asset management and liquidation enterprise, or other participants in the bankruptcy proceedings may request the People’s Court that handled the bankruptcy case to review the matter.

Pursuant to Article 8 of the Bankruptcy Law 2014, as amended by Article 4 of the Law amending the Civil Procedure Code, the Administrative Procedure Law, the Juvenile Justice Law, the Bankruptcy Law, and the Law on Mediation and Dialogue at Court 2025, the Bankruptcy Division of the Regional People’s Court has jurisdiction over bankruptcy matters involving enterprises and cooperatives whose head offices fall within its territorial jurisdiction.

IV. Questions regarding shareholder equity disputes in bankruptcy cases

1. What is the statute of limitations for initiating legal proceedings in shareholding rights disputes arising from bankruptcy?

The statute of limitations for initiating legal proceedings concerning shareholding rights disputes in bankruptcy situations depends on the nature of the dispute and the applicable legal provisions.

• Pursuant to Article 429 of the Civil Code 2015, the statute of limitations for filing a lawsuit to request the Court to resolve a contractual dispute is three (03) years from the date on which the claimant knew or should have known that their lawful rights and interests had been infringed.
• Pursuant to Article 319 of the Commercial Law 2005, the statute of limitations applicable to commercial disputes is two (02) years from the date on which the lawful rights and interests were infringed.

2. Who may represent shareholders in shareholding rights disputes when a company enters bankruptcy proceedings?

Pursuant to Points b and c, Clause 1, Article 111 of the Law on Enterprise 2020 (as amended in 2025), shareholders may be organizations or individuals. Shareholders are liable for the debts and other property obligations of the enterprise only to the extent of the capital they have contributed.

Pursuant to Clauses 1 and 2, Article 166 of the Law on Enterprise 2020 (as amended in 2025), a shareholder or group of shareholders holding at least 1% of the total ordinary shares may, either in their own name or on behalf of the company, initiate legal proceedings against members of the Board of Directors, the Director, or the General Director to seek restitution of benefits or compensation for damages suffered by the company or another party in the following circumstances:

• Breaching the obligations of company managers as prescribed in Article 165 of the Law on Enterprise;
• Failing to perform, improperly performing, untimely performing, or performing contrary to the law, the company charter, or resolutions and decisions of the Board of Directors with respect to assigned rights and obligations;
• Abusing their position, authority, information, trade secrets, business opportunities, or other company assets for personal gain or for the benefit of another organization or individual;
• Other circumstances prescribed by law or the company charter.

The procedures for initiating legal proceedings shall comply with the laws on civil procedure. Litigation expenses in cases where a shareholder or group of shareholders files a lawsuit on behalf of the company shall be borne by the company, except where the claim is dismissed.

Pursuant to Article 186 of the Civil Procedure Code 2015, agencies, organizations, and individuals may either directly file a lawsuit or authorize a lawful representative to file a lawsuit before a competent court to protect their lawful rights and interests.

3. What documents are necessary to prove shareholding rights in disputes arising during bankruptcy proceedings?

Pursuant to Article 94 of the Civil Procedure Code 2015, evidence may be collected from the following sources:

• Readable, audible, visual materials and electronic data;
• Physical evidence;
• Statements of the parties;
• Witness testimony;
• Expert conclusions;
• Records of on-site inspections;
• Asset valuation and appraisal results;
• Documents recording legal events or acts prepared by competent persons;
• Notarized or authenticated documents;
• Other sources prescribed by law.

Accordingly, the following documents are commonly required to establish shareholding rights in disputes arising during a company’s bankruptcy proceedings:

• Share certificates or certificates of share ownership specifying the shareholder’s name, number of shares, and class of shares held;
• Capital contribution certificates, particularly during the initial stages of a company or where formal share certificates have not yet been issued;
• Shareholder register recording the official details of all existing shareholders;
• Company charter setting out shareholders’ rights, obligations, and ownership structure;
• Minutes and resolutions of the General Meeting of Shareholders recording capital increases, share allocations, or changes in ownership structure;
• Enterprise Registration Certificate showing founding shareholders and charter capital at the time of incorporation;
• Receipts or bank confirmations evidencing payment for subscribed shares;
• Share transfer agreements accompanied by proof of payment and evidence of registration of ownership changes with the competent authority;
• Tax declarations and filings relating to share transfers or dividend distributions (if any);
• Other relevant supporting documents.

4. How are shareholding rights disputes resolved in bankruptcy proceedings?

The procedure for resolving shareholding rights disputes through court proceedings generally includes:

- Step 1: Filing a lawsuit

• A shareholder or authorized representative whose property rights or shareholding interests are in dispute files a petition directly with the Court or submits it through postal services in accordance with Article 189 of the Civil Procedure Code 2015.

- Step 2: Court review and case acceptance

• Upon receiving the petition and supporting evidence, if the Court determines that the matter falls within its jurisdiction, the Judge shall notify the claimant to complete the court fee advance payment procedures as prescribed under Articles 191 and 195 of the Civil Procedure Code 2015.

- Step 3: Mediation

• Pursuant to Article 205 of the Civil Procedure Code 2015, during the preparation stage for first-instance adjudication, the Court shall conduct mediation to facilitate settlement between the parties, except in cases where mediation is prohibited or impracticable under Articles 206 and 207 of the Code or where the case is resolved under summary procedures.

- Step 4: Trial preparation and hearing

• The first-instance hearing shall be conducted at the time and place specified in the decision to bring the case to trial or in the notice of resumption of the hearing in cases where postponement is required under Article 222 of the Civil Procedure Code 2015.

5. What interim protective measures may be applied in shareholding rights disputes when a company is bankrupt?

Pursuant to Clause 1, Article 70 of the Law on Bankruptcy 2014, during the process of considering a petition to commence bankruptcy proceedings, persons entitled or obligated to file such petition under Article 5 of the Law, bankruptcy administrators, and asset management and liquidation enterprises may request the competent People’s Court to apply one or more interim emergency measures to preserve the debtor’s assets and protect the lawful rights and interests of employees, including:

• Authorizing the sale of perishable goods, goods nearing expiration, or goods that may become difficult to sell if not disposed of promptly; authorizing the harvesting and sale of crops or other products and goods;
• Seizing and sealing assets of the enterprise or cooperative;
• Freezing bank accounts and assets held by third parties;
• Sealing warehouses and funds, and taking custody of accounting books and related documents;
• Prohibiting transfers of ownership rights over assets belonging to the insolvent enterprise or cooperative;
• Prohibiting alterations to the condition of the enterprise’s assets;
• Prohibiting or compelling enterprises, cooperatives, individuals, or organizations concerned to perform or refrain from specific acts;
• Requiring employers to advance salaries, wages, compensation, or occupational accident and disease benefits to employees;
• Other interim emergency measures as prescribed by law.

V. Are you looking for a reputable and experienced lawyer to assist with shareholding rights disputes in bankruptcy cases?

The foregoing provides general guidance on shareholding rights disputes in bankruptcy situations. With a team of experienced lawyers and legal professionals, NPLaw offers reliable and professional legal services aimed at protecting clients’ lawful rights and interests to the fullest extent possible. Should you require assistance with any legal matter, please contact NPLaw for professional support and consultation.

The information provided above is for reference purposes only. Should you require advice tailored to your specific circumstances, please contact NPLaw for prompt and comprehensive legal assistance.