Founding Shareholders in Joint-Stock Companies

Pursuant to Article 4 of the Law on Enterprises 2020,
"A founding shareholder is an individual or organization that owns at least one common share and signs the list of founding shareholders of the joint-stock company."

According to Article 120 of the Law on Enterprises 2020:

"A newly established joint-stock company must have at least three founding shareholders. A joint-stock company converted from a state-owned enterprise or from a limited liability company, or split, merged, or consolidated from another joint-stock company, is not required to have founding shareholders. In such cases, the company's charter in the enterprise registration dossier must be signed by the legal representative or the common shareholders of the company.

Founding shareholders must jointly register to purchase at least 20% of the total number of common shares that are entitled to be offered when registering for the establishment of the enterprise."

Cases in Which Information of Founding Shareholders Must Be Updated

According to Article 31 of the Law on Enterprises 2020, a company must notify the Business Registration Authority of any changes to the founding shareholders and foreign investors in the joint-stock company, except for listed companies.

The company is responsible for notifying changes in the business registration information within 10 days from the date of the change to the unlisted portion, and this notification must be sent to the Business Registration Office.

Thus, for unlisted joint-stock companies, within 10 days of any change in the information of founding shareholders, the company must notify the Business Registration Office.

Specifically, Article 57 of Decree No. 01/2021/ND-CP stipulates the change of founding shareholder information as follows:

"1. Founding shareholders, as defined in Clause 4, Article 4 of the Law on Enterprises, are shareholders who own at least one common share and sign the list of founding shareholders submitted to the Business Registration Office at the time of company registration.

2. The notification of changes in founding shareholder information to the Business Registration Office is required only in cases where the founding shareholder has not paid or has only partially paid the shares they registered to purchase under the provisions of Article 113 of the Law on Enterprises. The company must notify the Business Registration Office of any changes in the founding shareholder's information within 30 days after the payment deadline for the registered shares.

3. In the case of changes in founding shareholder information as provided in Clause 2, the company must submit a notification to update the business registration information, including the following documents:

a) A notification of changes in business registration information signed by the company's legal representative;

b) A list of the founding shareholders of the joint-stock company, excluding information about founding shareholders who have not paid for the shares they registered to purchase.

6. After receiving the business registration documents, the Business Registration Office will issue a receipt, check the validity of the documents, and update the founding shareholder information in the national business registration database. If requested by the company, the Business Registration Office will issue a certificate confirming the changes to the business registration information."

Under the previous regulations, if the founding shareholder's information changed due to the shareholder not paying or only partially paying for the shares they registered to purchase, the company was only required to notify the Business Registration Office of the changes in the business registration information. If the shareholder had not paid for the shares, they would no longer be considered a shareholder of the company and would be removed from the shareholder list (From October 10, 2018, the information of founding shareholders can only be updated in the case of non-payment or incomplete payment of the registered shares).

Procedure for Notifying Changes in Founding Shareholders of a Joint-Stock Company

Legal Basis:

- Article 31 of the Law on Enterprises 2020

- Article 57 of Decree No. 01/2021/ND-CP on enterprise registration

Step 1: Preparation of Notification Dossier

Depending on the specific case, the dossier includes different documents:

A. Founding Shareholder Fails to Pay or Only Partially Pays for Subscribed Shares

Notification of change in business registration information (Form II-1, Circular No. 02/2019/TT-BKHĐT);

If the company holds an Investment Registration Certificate (IRC) or equivalent legal document:

+ A valid copy of the IRC;

+ A valid copy of the Tax Registration Certificate;

+ Request for update of business registration information (Form II-18, Circular No. 02/2019/TT-BKHĐT).

B. Transfer of Shares by a Founding Shareholder

- Notification of change in business registration information (Form II-1);

- Updated list of founding shareholders (Form I-7);

- Share transfer agreement or supporting documents proving the completion of the transfer;

- Approval from the Department of Planning and Investment for foreign investor share acquisition (if applicable under Clause 1, Article 26 of the Law on Investment 2020);

- Valid copies of IRC, tax certificate, and update request form (if applicable).

C. Founding Shareholder (Organization) is Merged, Split, or Consolidated

- Notification of change in business registration information (Form II-1);

- Updated list of founding shareholders (Form I-7);

- Merger agreement, decision on company split, or consolidation agreement;

- Approval from DPI for foreign capital contribution (if applicable);

- Valid copies of IRC, tax certificate, and update request form (if applicable).

D. Transfer by Gift or Inheritance

- Notification of change in business registration information (Form II-1);

- Updated list of founding shareholders (Form I-7);

- Gift agreement or certified documentation proving lawful inheritance;

- DPI approval for foreign capital contribution (if applicable);

- Valid copies of IRC, tax certificate, and update request form (if applicable).

Step 2: Submission of Notification Dossier

The enterprise or its authorized representative may submit the dossier either:

- Directly at the Business Registration Office where the company is headquartered, or

- Online via the National Business Registration Portal, signed by the legal representative.

Step 3: Review and Update by the Business Registration Office

- Upon receipt, the Business Registration Office issues a Receipt of Dossier, verifies its validity, and updates the founding shareholder information in the National Business Registration Database.

- Upon request, the office may issue a Certificate of Change in Business Registration within 3 working days.

If the dossier is incomplete or invalid:

- A notification will be sent requesting completion;

- The company must submit the corrected dossier within 30 days to receive the business registration certificate or confirmation of change.

Non-compliance:

Failure to notify changes in founding shareholder information may result in administrative penalties under regulations on planning and investment.

Important Notes When Changing Founding Shareholders:

- Within 3 years from the date of issuance of the Enterprise Registration Certificate, founding shareholders may freely transfer shares to each other, but must obtain approval from the General Meeting of Shareholders to transfer shares to non-founders.

- After transfer procedures are completed, the transferee becomes a founding shareholder within the initial 3-year period.

- After 3 years, all restrictions on share transfer are lifted. However, while the old shareholder’s name remains on the registration (with 0 shares), the new shareholder will not appear on the business registration certificate.

The Business Registration Office does not update founding shareholder names on the registration certificate; instead, changes must be recorded in the company’s shareholder register, which must be maintained for all share transactions.