Similar to the Enterprise Law 2005 and the Enterprise Law 2014, the Enterprise Law 2020 is silent on whether founding shareholders may hold voting preference shares newly issued after the issuance date of the enterprise registration certificate (ERC), and only provides at Article 116.1 that the voting preference of founding shareholders is effective for three years from that date. This blog will examine different views on this issue.

On the one hand, one may support the view that founding shareholders are entitled to hold voting preference shares issued after ERC issuance date because:

· Article 116.1 of the Enterprise Law 2020 and Article 11.3 of Decree 47/2021 only provide for the duration of the voting preference and are silent on when voting preference shares must be issued. One may therefore argue that founding shareholders can still hold voting preference shares issued after the ERC issuance date, provided that the voting preference expires three years from that date.

· Since a voting preference share is defined as an ordinary share with more voting rights (Article 116.1) and Article 120.4(a) of the Enterprise Law 2020 expressly contemplates ordinary shares acquired by founding shareholders after enterprise registration, it could be interpreted that founding shareholders may hold voting preference shares issued after the ERC issuance date.

· Form No. 12 in Appendix I of Circular 68/2025, which a JSC uses to register a change in charter capital after establishment, provides a section for the company to declare the number of shares of each class, including voting preference shares. The registration framework therefore may suggest that a company may change the number of its voting preference shares after establishment.

On the other hand, one can argue that voting preference shares may only be issued at the time of establishment because:

· Wordings that the voting preference is effective "for three years from the ERC issuance date" should be interpreted to mean that founding shareholders may only hold voting preference shares issued at the time of establishment. The phrase "from the ERC issuance date" fixes when the three-year period starts to run. If voting preference shares could be issued after the ERC issuance date, the period would already have started running before those shares came into existence, which may make wordings “from the ERC issuance date” inaccurate.

· Article 120.3 of the Enterprise Law 2020 uses the same wordings "within 3 years from the date of ERC issuance" to provide for the restrictions that apply to ordinary shares of founding shareholders, which, given the exemption at Article 120.4(a) for shares acquired after enterprise registration, in effect only apply to ordinary shares held at the time of establishment. If applied by analogy, same wordings at Article 116.1 of the Enterprise Law 2020 should apply to shares issued at the time of establishment only.

In our view, we support the first view because it would be unreasonable to prohibit founding shareholders from holding voting preference shares issued after the ERC issuance date, provided that they still comply with the 3-year limitation of voting preference as required under the Enterprise Law 2020.

This post is written by Trinh Phuong Thao.

Vietnam Business Law