The question “do I have a veto over capital increases” has no one-word answer, because it depends on the percentage you hold and on what was written into the charter the day the joint venture was formed. At one end, a 40 percent shareholder already holds a statutory veto over every capital increase. At the other, a 15 percent shareholder holds nothing but a pre-emptive right — unless the charter was negotiated to give them a blocking mechanism. This article maps the two zones precisely and shows how to move from the no-veto zone to the veto zone by design.
The statutory zone: the 35 percent line decides the blocking power
Increasing charter capital means amending the charter, and in a joint stock company a charter amendment resolution falls in the class of Clause 1 of Article 148 of Enterprise Law No. 59/2020/QH14: it needs approval by at least 65 percent of total voting shares. The direct arithmetic consequence: a shareholder or alliance holding more than 35 percent holds a de facto veto over every capital increase, because its opposing votes keep the resolution permanently below 65 percent. A 30 percent shareholder does not: the 70 percent majority clears the threshold alone. In a limited liability company, Members’ Council decisions on capital increases and charter amendments likewise sit in a high-threshold class under the Enterprise Law and the charter, and the blocking logic works the same way on contributed capital ratios of attending members.
Beyond blocking, the law gives every existing shareholder a pre-emptive right to buy newly issued capital in proportion to its holding: Article 124 of the Enterprise Law for share offers to existing shareholders in a joint stock company, and the pro-rata additional contribution mechanism in Article 68 for LLCs. A pre-emptive right cannot stop the increase itself, but it prevents dilution where the shareholder can finance its portion. For a sub-35 percent minority, therefore, the anti-dilution battle is really a battle over subscription periods, information and funding readiness — not over a blocking right.
The design zone: manufacturing a veto through charter and agreement
A company charter may set approval thresholds above the statutory level for particular classes of business. This is the basis for negotiating a “designed veto”: the charter raises the threshold for capital increase decisions to 75, 80 or 90 percent, thereby handing a blocking right to a shareholder holding more than 25, 20 or 10 percent respectively. A more sophisticated variant is the class consent clause: any capital increase needs the affirmative vote of each founding shareholder side regardless of current ratios — the strongest mechanism, but also the most deadlock-prone, so it usually travels with deadlock-breaking and buy-out clauses.
The second layer is the shareholders agreement undertaking: the parties agree not to propose or vote for capital increases outside an approved financial plan, backed by damages. Its limit must be remembered: a shareholders agreement binds its signatories, but a capital increase resolution validly passed under the law and the charter remains effective for the company and the registrar even if a party broke its agreement undertaking — the victim is left with a contract damages claim. That is why a capital increase veto, if it truly matters, must live in the charter.
A complete anti-dilution toolkit for a small minority
Beyond the veto, a full anti-dilution package for a minority investor usually includes: a pre-emptive right with a minimum subscription period counted in weeks, not days, sufficient for an international transfer through the investment capital account; an oversubscription right to take up entitlements other shareholders waive, preserving the ratio when one side does not follow; price adjustment or bonus share mechanics where an issue is priced below a floor referenced to book value or the latest independent valuation; and an undertaking to deliver an independent funding-need report before each increase. Each tool addresses a different dilution path, and whichever tool is missing is exactly the path a determined majority can walk around through.
A ten-minute audit of your anti-dilution position
- How does your current ratio (and your alliance’s) compare with the 35, 25, 20 and 10 percent lines?
- Does the charter raise the voting threshold for capital increases above the statutory 65 percent?
- Is there a class consent clause for capital increases in the charter or the agreement?
- How long is the subscription period for new issues in the charter — long enough for an inbound transfer from abroad?
- Is there a mechanism for issues priced below book value (price adjustment, compensating shares)?
Frequently Asked Questions
Does a capital increase need the minority’s consent?
Only if the minority’s ratio is large enough or the charter so provides. Under Clause 1 of Article 148 of the Enterprise Law, a capital increase or charter amendment resolution in a joint stock company needs 65 percent approval, so a minority above 35 percent can block it; a smaller minority cannot if the majority has the votes alone. If the charter raises the threshold to 80–90 percent or contains a class consent clause, the minority’s consent right expands accordingly.
How should an anti-dilution clause be drafted?
A complete clause has five pieces: a raised voting threshold for capital increase decisions in the charter; a sufficiently long minimum subscription period for pre-emptive rights; an oversubscription right over entitlements others waive; price protection for issues below a reference value; and information conditions (funding-need report, use-of-proceeds plan) that must precede the vote. Drafting only some pieces leaves a walk-around path for a party intent on diluting.
If I cannot follow an increase, what is my resulting percentage?
The post-increase ratio is your contributed capital divided by total charter capital after the increase. If you hold 30 of 100 and the company raises 200 more while you contribute nothing, you are left with 30/300, i.e. 10 percent. You may simultaneously cross important rights lines: losing the ability to block 65 percent resolutions, the 10 percent nomination threshold and the 5 percent supervision threshold. Model all three lines before deciding not to follow.
The majority passed an increase while I was absent. Is the resolution valid?
Validity turns on whether meeting convocation and notice complied with the law and the charter. A duly convened shareholder who is absent is bound by a resolution passed at the correct threshold. Conversely, if notice was late, the capital increase was not in the notified agenda, or the approval ratio fell short of the charter threshold, the absent shareholder may still ask a court or tribunal to annul the resolution within the statutory period from receiving it.
This article has been quality-reviewed by the FLAW AI Legal Council