HOW TO DETERMINE VOTING SHARES UNDER VIETNAMESE LAW

Following the previous article on the topic "HOW TO DETERMINE THE BENEFICIAL OWNER ACCORDING TO DECREE 168/2025/ND-CP ON ENTERPRISE REGISTRATION" (see at link: https://altas.vn/cap-nhat-phap-ly-cach-xac-dinh-chu-so-huu-huong-loi-theo-nghi-dinh-1682025nd-cp-ve-dang-ky-doanh-nghiep), which mentioned that Decree 168/2025/ND-CP on enterprise registration sets forth one of the criteria for identifying a Beneficial Owner as "An individual who directly or indirectly owns 25% or more of the charter capital or 25% or more of the total voting shares of the enterprise".

While determining the direct ownership percentage of charter capital in an enterprise is quite straightforward, determining the "total number of voting shares" can be more challenging. The following article aims to help businesses determine "voting shares" according to ALTAS's perspective based on current legal regulations.

A/ Regulations on "voting shares" under current Vietnamese law

1. Definition of voting shares

• Voting shares are shares whose owners are entitled to vote on matters within the authority of the General Meeting of Shareholders, including important decisions regarding the company's governance, strategy, personnel, and finance.

• According to the Law on Enterprises, voting shares include:

  • Ordinary shares: Each ordinary share corresponds to 1 voting right.

  • Voting preference shares: Each share of this type may correspond to multiple voting rights (the specific number of votes is stipulated by the company's Charter). This type of share is only for founding shareholders or organizations authorized by the Government and has a specific validity period.

2. Types of shares without voting rights

• Dividend preference shares: Have no voting rights, are not entitled to attend the General Meeting of Shareholders, except in special cases stipulated by the company's Charter.

• Redeemable preference shares: Have no voting rights.

• Treasury shares: Have no voting rights, do not receive dividends, and have no right to purchase new shares.

• Non-voting depositary receipt (NVDR): Issued based on underlying ordinary shares but have no voting rights (Clause 6, Clause 7 Article 114 of the Law on Enterprises). This is a new concept introduced by the Law on Enterprises, however, there are no specific guidelines at present.

3. How to calculate the total number of voting shares

Total voting shares = Number of ordinary shares + Number of voting preference shares (converted according to the number of votes per share)

• Ordinary shares: Each share = 1 voting right.

• Voting preference shares: Each share = number of votes according to the company's Charter (which can be 2, 3 or more).

Note: Do not include types of shares without voting rights (dividend preference shares, redeemable preference shares, treasury shares, non-voting depositary receipts) in the total number of voting shares.

Example

Total voting shares = 1,000,000 + 500,000 = 1,500,000 voting rights

4. Summary table of share classification by voting rights

To calculate "voting shares" in an unlisted joint-stock company in Vietnam, only ordinary shares and voting preference shares (converted according to the number of votes for each type) are added, excluding shares without voting rights and treasury shares, in accordance with current Law on Enterprises.

5. How to calculate "voting shares" in public companies or listed companies

In public companies and listed companies, voting shares are primarily ordinary shares and voting preference shares (if still valid according to legal regulations and company charter).

The formula for calculating the total number of voting shares in public companies and listed companies is also similar to ordinary joint-stock companies:

Total voting shares = Number of outstanding ordinary shares + Number of voting preference shares (converted according to the number of votes per share)

• Ordinary shares: Each share = 1 voting right.

• Voting preference shares: Each share = number of votes according to the company's Charter (which can be 2, 3 or more).

• Do not include types of shares without voting rights (dividend preference shares, redeemable preference shares, treasury shares, non-voting depositary receipts).

Note:

• When determining ownership percentage, listing conditions, public offerings, only outstanding voting shares are counted, not treasury shares and non-voting depositary receipts.

• Regulations on the minimum percentage of voting shares held by non-major shareholders (e.g., 10% or 15% depending on charter capital size) are all based on the actual total number of voting shares.

For public companies and listed companies, "voting shares" are calculated as the total number of ordinary shares and voting preference shares (if still valid), excluding shares without voting rights such as dividend preference shares, redeemable preference shares, treasury shares, and non-voting depositary receipts, in accordance with the Law on Enterprises, the Law on Securities and current guiding decrees.

B/ How ALTAS can assist?

ALTAS LAW provides comprehensive legal and accounting and tax services packages designed to seamlessly support during this transition period:

• Accounting and Tax Services: We provide accounting and tax services to help businesses manage financial impacts, including tax planning, tax finalization, tax audits, and tax refund support.

• Licensing & Regulatory Compliance: We will meticulously review existing licenses, advise on necessary amendments or renewals, and guide the process of obtaining new licenses/approvals. Our team will also ensure businesses comply with all relevant regulatory changes.

Please feel free to reach us via email contact@altas.vn to discuss your specific concerns and explore how we can navigate these reforms successfully.

C/ How to determine "voting rights" in the context of considering "actual control rights" of a company

Unlike determining "voting shares" used to identify individuals as beneficial owners as presented in the previous section, sometimes it is necessary to determine the "voting rights" of legal entities when calculating/considering actual control rights/interest percentage of one company in another company, to determine parent companies and subsidiaries in accordance with legal regulations on consolidated financial reporting, corporate governance, and related legal obligations.

In regards of this matter, we kindly refer to the Clause 5, Article 9 of Circular 202/2014/TT-BTC stipulates the principles for determining control rights and the percentage of interests of parent companies and non-controlling shareholders in subsidiaries, which includes specific guidance on how to determine voting rights as follows:

• The voting rights of a parent company in a subsidiary include both direct voting rights and indirect voting rights through other subsidiaries.

• How to calculate indirect voting rights:

  • Indirect voting rights are determined by multiplying the parent company's voting rights percentage in the first-tier subsidiary by the first-tier subsidiary's voting rights percentage in the second-tier subsidiary, and so on through intermediate ownership layers.

  • The total voting rights of the parent company in the subsidiary are the sum of direct and indirect voting rights.

Example (according to Circular 202/2014/TT-BTC guidance):

• Company X directly holds 20% of the voting rights in Company Z.

• Company X holds 80% of the voting rights in Company Y, and Company Y holds 60% of the voting rights in Company Z.

• In this case, Company X's indirect voting rights in Company Z are: 80% x 60% = 48%.

• Total voting rights of Company X in Company Z are: 20% (direct) + 48% (indirect) = 68%.

Thus, businesses can rely on the above regulations to determine voting rights, including both direct and indirect voting rights, using the formula commonly applied in consolidated accounting practices in Vietnam.

Kindly noted that the concepts of "control rights" and "voting rights" according to Circular 202/2014/TT-BTC are concepts serving consolidated financial reporting. Meanwhile, the criteria for determining beneficial owners according to Decree 168/2025/ND-CP focus on the capital ownership ratio (voting shares) of individuals or organizations, not solely based on control rights in the broad sense as in Circular 202/2014/TT-BTC.

Last but not least, the current regulations on beneficial owners still have many unclear points, and in the coming time, state agencies will provide more specific guidance on this matter.

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Written by: Mr. Luong Van Chuong  (Chris) – Partner Lawyer at ALTAS Law 
Date: 06/07/2025

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