After incorporating a joint stock company (JSC), the founding shareholders of the JSC will typically have 90 days from the issuance of the enterprise registration certificate (Capital Contribution Period) to pay for the shares they have subscribed as at the incorporation of the JSC (Subscription Shares). Under the Enterprise Law 2020, it is reasonable to consider that during the Capital Contribution Period, the founding shareholders who have not paid for the Subscription Shares in full would have all the shareholders rights including rights to transfer the Shares which have not been paid up. However, the drafting of the Enterprise Law 2020 could give rise to the position that during the Capital Contribution Period shareholder rights, the founding shareholders have only the voting right.

The ambiguity arises from two provisions under Article 113 of the Enterprise Law 2020:

Article 113.5 of the Enterprise Law 2020 provides that the person contributing capital to the JSC becomes a shareholder of the JSC from the moment (i) such person completes the payment of the Subscription Shares and (ii) such person’s information is recorded in the shareholder register, except for the provision in Article 113.2 of the Enterprise Law 2020; and
Article 113.2 of the Enterprise Law 2020 provides that during the Capital Contribution Period, the number of votes of the shareholders will be determined based on the number of shares they have subscribed.

Reading two provisions, one could reason that if the founding shareholders have not paid for the Subscription Shares in full during the Capital Contribution Period, by default, the founding shareholders will not be shareholders by virtue of Article 113.5 of the Enterprise Law 2020, thus will not have any shareholder rights (including the voting right), except for the shareholder rights conferred on the founding shareholders under Article 113.2 of the Enterprise Law 2020. As Article 113.2 of the Enterprise Law 2020 only says about the voting right, it follows that the voting right is the only right granted to the founding shareholders.

Such reading of the law does not fit the assumption that is built in other provisions of Article 113 of the Enterprise Law 2020 and the operation of the JSC as contemplated in other parts of the Enterprise Law 2020 in general. The mentioned assumption is that during the Capital Contribution Period, the founding shareholders will have all shareholder rights even though they have not paid for the Subscription Shares in full. It could be found in the following provisions:

Article 113.2 of the Enterprise Law 2020 itself refers to the founding shareholders as “shareholders”, not “person contributing capital”; therefore, one could make the arguments that (i) Article 113.2 of the Enterprise Law 2020 implies that even if the founding shareholders have not paid for the Subscription Shares in full, they are treated as shareholders during the Capital Contribution Period, thus will have all the shareholder rights and (ii) the fact that Article 113.2 of the Enterprise Law 2020 only mentions the voting right does not limit the scope of the shareholder rights granted to the founding shareholders during the Capital Contribution Period;
Article 113.4 of the Enterprise Law 2020 requires the founder who fails to pay for the relevant Subscription Shares to bear the financial liabilities of the JSC to the total par value of the Subscription Shares until the charter capital of the JSC has been adjusted downwards as a result of the unpaid Subscription Shares. By imposing the financial liabilities of the JSC to the total par value of the Subscription Shares (including the unpaid Subscription Shares) on the founding shareholders, this provision implies that the founding shareholders are deemed to have paid for the Subscription Shares during the Capital Contribution Period, and thus, are deemed to be shareholders and have all shareholder rights during such period;
Article 112.2 of the Enterprise Law 2020 provides that the Subscription Shares shall be considered as fully paid-up shares during the Capital Contribution Period. As a corollary, the founding shareholders are deemed to have paid up the Subscription Shares during such period, thus, will have all shareholder rights.
in general, it would create many issues and unsatisfied consequences in the application of the Enterprise Law 2020 if the founding shareholders only have the voting rights during the Capital Contribution Period. For example, if the founding shareholders did not have the shareholder right to convene the general meeting of shareholders, the founding shareholders would lose an important right to protect their interests; and
interestingly, in Articles 47.2 and 47.5 of the Enterprise Law 2020, founding members of a limited liability company are referred to as members and are said to have rights and obligations of members (not just voting rights) corresponding to the ratio of their committed capital contribution amount.
This post is written by Ha Thanh Phuc and edited by Nguyen Quang Vu.
Updated 29/3/2024: This post has been updated to include another argument relating to Article 112.2 of the Enterprise Law 2020 in favor of the proposition that the founding shareholders will have all shareholder rights during the Capital Contribution Period.

Vietnam Business Law