When do the founding shareholders sell the ordinary shares?

I and the 2 partners set up joint-stock companies, so we are 3 founding shareholders. The company has operated for 2 years, now I want to transfer all my shares to others who are not members of the company. However, other shareholders do not agree. I would like to ask you: Can I transfer my ordinary shares to the others? What do I have to do if I can transfer my shares?

 FDVN’s opinion:

Sincerely thank you for concerning our legal consulting service. We are glad to give you our advice on your question.

As per the provisions of Clause 3, Article 119 of the 2014 Law on Enterprises: “Within 03 years from the issuance date of the Certificate of Business registration, founding shareholders may transfer their shares to other founding shareholders; they may transfer their ordinary shares to people other than founding shareholders if approved by the General Meeting of Shareholders. In this case, the transferring shareholders do not have the right to vote on the transfer of such shares.”

In your case, your company has just been established for 2 years, during this time, you are a founding shareholder and you have the right to freely transfer your shares to other founding shareholders. However, for the transfer of ordinary shares to non-founding shareholders, the approval of the general meeting of shareholders must be obtained. In case you do not have the consent of the general meeting of shareholders, you cannot transfer your ordinary shares at this time to other people.

Restrictions on ordinary shares of founding shareholders are abolished after a period of 03 years from the date the company is granted a business registration certificate [Item 4 Article 119 of the 2014 Law on Enterprise]. Accordingly, after a period of 3 years from the date the company is granted the Business Registration Certificate, you have the right to freely convert your ordinary shares and not be restricted to the object of the transfer.

At the same time, you should also note the  Company Charter with restrictions on the transfer of shares. In the case that these transfer restrictions are shown in the shares of the corresponding shares, you must comply with this provision.

The transfer of shares is stipulated in Clause 2, Article 126 of the 2014 Law on Enterprises: “The transfer shall be made into a common contract or via a transaction on the securities market. Where the transfer is made into a contract, transfer documents must bear the signatures of the transferor and the transferee (or their representatives). Where the transfer is made via a transaction on the securities market, the procedures and recording of ownership shall comply with regulations of law on securities.”

            After fully satisfying the conditions for the transfer of shares, the parties may transfer shares according to the above provisions. Recipients of shares in the cases mentioned in this Article shall only become the company’s shareholders from the day on which their information mentioned in Clause 2 Article 121 of this Law is fully recorded in the shareholder register.  

Above is FDVN Law Firm's advisory opinion regarding the request of a consultant of the Guest on the basis of studying legal regulations. Hopefully, FDVN's advice will be helpful to you.

- Nguyen Thi Thao -

FDVN Law Firm

FDVN LAW FIRM