Regulations on share transfer constitute the legal framework governing the sale, purchase, and transfer of shares among shareholders, thereby ensuring lawful rights and interests, transparency, and stability in corporate operations.
I. Current practices relating to share transfer regulations
In practice, share transfers are quite common in corporate activities; however, many transactions are not conducted in full compliance with legal requirements. Numerous shareholders conduct transfers through verbal agreements, handwritten documents, or fail to update changes in the shareholder register, which may result in disputes concerning rights and obligations.
Moreover, a lack of understanding regarding transfer restrictions, particularly those applicable to founding shareholders, may expose companies to legal risks and destabilize internal governance.
II. Concept of share transfer regulations
1. What are share transfer regulations?
In a joint stock company, the transfer of shares is a fundamental right that ensures investment flexibility and capital mobility for shareholders. Vietnamese enterprise laws allow shareholders to freely dispose of their shares while imposing certain limitations to safeguard corporate governance stability and the interests of relevant stakeholders.
Pursuant to Point d, Clause 1, Article 111 of the Law on Enterprise 2020 (as amended in 2025), shareholders are entitled to freely transfer their shares to others, except for cases subject to restrictions under Clause 3, Article 120 and Clause 1, Article 127 of the same Law.
2. Which types of enterprises are subject to share transfer regulations?
Share transfer regulations apply exclusively to joint stock companies, as shares are the specific capital units of such a type of enterprise. In such companies, charter capital is divided into shares, and shareholders are entitled to transfer their shares in accordance with Point a, Clause 1, Article 111 of the Law on Enterprise 2020 (as amended in 2025).
For other types of enterprises, such as limited liability companies or private enterprises, the law does not recognize a mechanism for share transfer. Instead, capital contribution transfers or asset transfers are governed by separate legal provisions applicable to each type of entity.
3. What is the purpose of issuing share transfer regulations?
These regulations are developed to ensure the freedom of investment and the right of shareholders to dispose of their assets, thereby facilitating the flexible circulation of capital within the economy. At the same time, they help maintain stability in the shareholder structure and minimize disruptions that may adversely affect corporate governance and management.
Additionally, the imposition of transfer restrictions serves to protect the lawful interests of the company, existing shareholders, and other stakeholders, while enhancing transparency and legal certainty in share transfer transactions.
III. Legal provisions governing share transfer regulations
1. Principles of share transfer
Enterprise laws recognize the free transferability of shares as a general principle in joint stock companies, ensuring both property rights and investment flexibility.
Under Point d, Clause 1, Article 111 of the Law on Enterprise 2020 (as amended in 2025), shareholders may freely transfer their shares, except where restrictions apply under Clause 3, Article 120 and Clause 1, Article 127. Simultaneously, Clause 1, Article 127 further affirms that shares are freely transferable unless otherwise provided by law or restricted under the company’s charter.
Thus, while share transfer is a fundamental right, it may be restricted in specific circumstances to preserve governance stability and protect the company’s overall interests.
2. Methods of share transfer
Pursuant to Clause 2, Article 127 of the Law on Enterprise 2020 (as amended in 2025), share transfers may be conducted via two methods by contract or through transactions on the securities market.
In the case of contractual transfer, the transfer document must bear the signatures of the transferor and transferee, or their duly authorized representatives, to ensure legal validity.
For transfers conducted through the securities market, the transaction must comply with applicable securities laws, ensuring transparency, publicity, and transactional safety.
3. Cases where share transfer is restricted
Although shares are generally freely transferable, Law on Enterprise 2020 provides certain restrictions to ensure stability in the shareholder structure and protect corporate interests.
Pursuant to Clause 1, Article 127 of the Law on Enterprise 2020 (as amended in 2025), restrictions include:
- Restrictions applicable to founding shareholders: Within three (03) years from the issuance date of the Enterprise Registration Certificate, founding shareholders may freely transfer their ordinary shares to other founding shareholders, but transfers to non-founding shareholders require approval from the General Meeting of Shareholders. In such cases, the transferring founding shareholder is not entitled to vote on the proposed transfer (Clause 3, Article 120).
- Restrictions under the company’s charter: The company may impose transfer restrictions in its charter; however, such restrictions are only legally enforceable if clearly indicated on the corresponding share certificates, ensuring transparency and protection for transferees.
Accordingly, transfer restrictions apply only in clearly defined cases under law or the company’s charter, ensuring both transparency and structural stability.
4. When is a share transfer deemed completed?
Under Clause 6, Article 127 of the Law on Enterprise 2020 (as amended in 2025), a transferee becomes a shareholder only when their information, as prescribed in Clause 2, Article 122, is duly recorded in the shareholder register.
The company is responsible for updating changes in the shareholder register at the request of relevant shareholders within 24 hours from receipt of such request, in accordance with the company’s charter. The shareholder register is a main corporate record reflecting shareholder information and any changes thereto as stipulated in Article 122.
IV. Questions on share transfer regulations
1. Can a shareholder authorize another person to conduct a share transfer?
Enterprise laws permit shareholders to authorize another person to conduct share transfer transactions on their behalf.
Specifically, under Clause 2, Article 127 of the Law on Enterprise 2020 (as amended in 2025), transfer documents may be signed by the parties or their duly authorized representatives, confirming the legality of authorized execution.
For transactions conducted via the securities market, authorization procedures must comply with applicable securities regulations.
2. Does share transfer affect the company’s charter capital?
Share transfer does not alter the charter capital of a joint stock company. The transaction merely changes the ownership of shares, while the total par value of issued shares remains unchanged. Consequently, only the shareholder structure and ownership ratios may change.
3. Is notarization required for share transfer contracts?
Currently, the Law on Enterprise 2020 (as amended in 2025) does not require notarization or certification of share transfer contracts.
Under Clause 2, Article 127, a written contract bearing the signatures of the parties or their authorized representatives is sufficient for legal validity.
However, in practice, parties may opt for notarization to enhance legal certainty and minimize dispute risks, although it is not a mandatory requirement.
4. Is a handwritten share transfer agreement legally valid?
Under Clause 2, Article 127 of the Law on Enterprise 2020, share transfer must be effected through a contract signed by the parties. The law does not mandate notarization or a standard form; therefore, a handwritten agreement may be deemed valid if it satisfies requirements regarding parties, content, and signatures.
Nevertheless, such a document does not confer shareholder status unless the transfer is recorded in the shareholder register. In practice, handwritten agreements often lead to disputes and may not be accepted by companies for updating shareholder records.
In conclusion, although handwritten agreements may be recognized, they do not guarantee legal certainty; a properly executed contract and registration in the shareholder register are strongly recommended.
5. Can founding shareholders transfer shares within the first three years?
Pursuant to Clause 3, Article 120 of the Law on Enterprise 2020 (as amended in 2025), within three (03) years from the issuance of the Enterprise Registration Certificate, founding shareholders may freely transfer ordinary shares to other founding shareholders, but transfers to non-founding shareholders require approval from the General Meeting of Shareholders. In such cases, the transferring shareholder has no voting rights on the transfer.
However, Clause 4, Article 120 provides that these restrictions do not apply to:
- Shares acquired by founding shareholders after enterprise registration;
- Shares already transferred to non-founding shareholders.
Additionally, Clause 1, Article 127 affirms the general principle of free transferability, except for statutory or charter-based restrictions.
Therefore, whether a founding shareholder may transfer shares within the first three years depends on the specific circumstances, the transferee, and applicable legal and charter provisions.
V. Why seek legal advice from NPLaw on share transfer regulations?
Although the legal framework on share transfer is relatively clear, practical implementation often involves complex risks relating to company charters, founding shareholders’ rights, contractual validity, and the timing of transfer completion. With a team of experienced lawyers in corporate and investment law, NPLaw provides precise, practical, and timely advisory services, helping clients accurately identify their rights and obligations and adopt appropriate solutions for each specific case.
The above information is for reference purposes only. For detailed advice tailored to your specific situation, please contact NPLaw for prompt assistance.
