A shareholders’ agreement on preemptive right of shares is an important tool in corporate governance, helping to protect the interests of existing shareholders and ensure that shares are not transferred to unwanted parties.

This article was consulted by Lawyer Nguyen Quang Trung

Here is a detailed analysis of how a shareholders’ agreement on preemptive right of shares should be regulated in Vietnam:

1. Concept and importance of preemptive right of shares

Preemptive right of shares are the right of existing shareholders to have priority in purchasing shares when another shareholder wants to sell their shares. This right helps to protect the interests of existing shareholders and ensure that shares are not transferred to unwanted parties. Preemptive right of shares also help maintain stability and control within the company, while preventing the entry of competitors or unwanted parties.

2. Basic provisions of a shareholder agreement on preemptive right of shares

Conditions for applying the preemptive right of shares

The shareholders’ agreement should clearly state the conditions under which the preemptive right of shares apply. This includes the circumstances under which the preemptive right of shares apply, such as when a shareholder wants to sell his or her shares to a third party. The agreement should also clearly state the circumstances under which the preemptive right of shares do not apply, such as when shares are transferred between existing shareholders or between family members.

The process for exercising preemptive right of shares

The shareholders’ agreement should clearly state the process for exercising preemptive right of shares. This includes the specific steps that a shareholder wishing to sell shares must take, such as notifying other shareholders of the intention to sell shares and providing information related to the transaction. The agreement should also specify the time period during which other shareholders can exercise their preemptive right of shares and the steps to take if no shareholder exercises them.

Share purchase price

The shareholders’ agreement should specify how the share purchase price will be determined. This may include using market price, book value, or another valuation method agreed upon by the shareholders. The agreement should also specify factors that affect the share purchase price, such as the company’s financial condition, market conditions, and other factors.

3. Shareholder protection measures

Preemptive right of shares in special circumstances

The shareholders’ agreement should specify preemptive right of shares in special circumstances, such as when a shareholder becomes bankrupt, becomes insolvent, or is disqualified from holding shares. This protects the rights of existing shareholders and ensures that shares are not transferred to unwanted parties.

Preemptive right of shares in the event of a change of control

The shareholders’ agreement should clearly state preemptive right of shares in the event of a change of control, such as when a shareholder wants to sell his shares to a third party that could result in a change of control of the company. This helps protect the rights of existing shareholders and ensures that the change of control does not affect the operations of the company.

4. Remedies for breach of the shareholders’ agreement

Remedies for breach of preemptive right of shares

The shareholders’ agreement should clearly state remedies for breach of preemptive right of shares. This includes remedies for breach of preemptive right of shares, such as rescinding the transfer of shares, claiming damages, or taking other legal action. The agreement should also specify the remedies available if a shareholder fails to comply with the preemptive right of shares.

Resolution of disputes relating to preemptive right of shares

The shareholders’ agreement should specify the remedies available for resolving disputes relating to preemptive right of shares. This includes dispute resolution methods, such as mediation, arbitration, or litigation. The agreement should also specify the specific steps the parties must take in the event of a dispute relating to preemptive right of shares.

5. Factors affecting the exercise of preemptive right of shares

The company’s financial situation

The financial situation of the company is an important factor affecting the exercise of preemptive right of shares. If the company is in good financial condition, shareholders can easily exercise the preemptive right of shares. On the contrary, if the company is in financial difficulty, exercising the preemptive right of shares may be difficult.

Market situation

The market situation is also an important factor affecting the exercise of preemptive right of shares. If the stock market is in a growth phase, the share price may increase, making the exercise of preemptive right of shares more difficult. On the contrary, if the stock market is in a recession, the share price may decrease, making the exercise of preemptive right of shares easier.

Shareholder consensus

Shareholder consensus is an important factor affecting the exercise of preemptive right of shares. If shareholders agree with the terms of the shareholder agreement, the exercise of preemptive right of shares will proceed smoothly. On the contrary, if there is disagreement among shareholders, the exercise of preemptive right of shares may encounter many difficulties.

6. Conclusion

Clear and detailed provisions on preemptive right of shares in the shareholders’ rights help ensure that shareholders’ rights are protected and not violated. In addition, compliance with legal regulations related to preemptive right of shares in Vietnam is also an important factor to ensure that the exercise of this right takes place legally and smoothly.