Many company founders call themselves “strategic shareholders” on business cards and pitch decks. That is a dangerous misconception: “founding shareholder” is a concept of the Enterprise Law, while “strategic shareholder”/”strategic investor” is a concept of securities law (linked to private placements by public companies). The two concepts belong to two different statutes — they are not a matching pair within one law, and the rights of each come from entirely different sources.
1. Founding shareholders: the founders, “locked in” for 3 years
Statutory definition (clause 4 Article 4 of the Enterprise Law — cited per consolidated document 67/VBHN-VPQH 2025): “A founding shareholder is a shareholder owning at least one ordinary share and signing the list of founding shareholders of the joint stock company.” So a founding shareholder is not simply “the first person to contribute capital” — two cumulative conditions must be met: owning at least one ordinary share and signing the founding shareholders list.
Article 120 of the Enterprise Law sets the framework of duties and restrictions:
- Minimum number: a newly established joint stock company must have at least 03 founding shareholders (clause 1). Exceptions: companies converted from state-owned enterprises or limited liability companies, or formed by division, split, consolidation or merger of other joint stock companies.
- Minimum subscription: founding shareholders must together subscribe at least 20% of the total ordinary shares offered upon establishment registration (clause 2).
- 3-year transfer restriction (clause 3): within 03 years from the issuance date of the Enterprise Registration Certificate, ordinary shares of founding shareholders may be freely transferred to other founding shareholders, but may be transferred to non-founding shareholders only with approval of the General Meeting of Shareholders. Notably, a founding shareholder planning the transfer has no voting right on that transfer.
- Exceptions (clause 4): the restriction does not apply to (a) shares a founding shareholder acquires after enterprise registration; (b) shares already transferred to non-founding shareholders. After the 03-year period, the shares are freely transferable — unless the company charter provides otherwise.
Time-limited voting preference (Article 116): founding shareholders may hold voting preference shares (together with organizations authorized by the Government). Voting preference shares are effective for 03 years from the issuance date of the Enterprise Registration Certificate, then convert into ordinary shares, and may not be transferred (except under an effective court judgment/decision or by inheritance).
2. “Strategic shareholders”: invited in later — rights come from the charter, not the law
Key point: the Enterprise Law does not define “strategic shareholder”. The closest statutory concept is “strategic investor” under clause 1 Article 31 of the Securities Law 54/2019/QH14 (as amended by Law 56/2024/QH15, effective 01/01/2025): an eligible participant in private placements of shares by public companies (together with professional securities investors). Conditions: a decision of the General Meeting of Shareholders approving the issuance plan and clearly defining the criteria for investors. Transfer restrictions: at least 03 years for strategic investors and at least 01 year for professional securities investors, counted from the completion date of the offering (point c clause 1 Article 31).
In a non-public company, “strategic shareholder” is only a practical term — referring to an investor approved to purchase shares through a private placement under Article 125 of the Enterprise Law (no public offering, offered to fewer than 100 investors). The “special rights” strategic investors typically demand — veto rights, board nomination rights, anti-dilution, pre-emptive rights — are not granted by default under the law. They exist only when agreed in the company charter (Article 24) or a shareholders agreement.
3. Veto rights: the law gives them to no one
A review excluding Articles 144–148 of the Enterprise Law shows: the law provides veto rights to no class of shareholders — neither founding shareholders nor strategic investors. If a shareholder can “block” a decision, that power comes from the company charter as agreed (for example: requiring 90% approval for matter X — in substance creating a veto). Stating in a contract that “the law grants the strategic investor veto rights” is entirely wrong.
4. Comparison table
| Criterion | Founding shareholder | “Strategic shareholder” (strategic investor) |
|---|---|---|
| Statutory concept? | Yes (Enterprise Law) | No (Enterprise Law); the law only has “strategic investor” in the Securities Law |
| When they appear | At company establishment | At a private placement raising additional capital |
| How one becomes one | Owns at least 01 ordinary share + signs the founding list (+ together subscribe at least 20%) | Approved by the GMS under the private placement plan; meets criteria set by the GMS (public companies) |
| Transfer restriction | 03 years from Enterprise Registration Certificate issuance: free transfer only among founding shareholders; sales outside need GMS approval | At least 03 years (strategic investor) / 01 year (professional investor) from offering completion |
| Special voting rights | May hold voting preference shares (03-year effect, non-transferable) | Not provided by law — by charter/agreement |
| Veto right | Not provided by law | Not provided by law — only if the charter agrees |
| After restrictions expire | Freely transferable (unless the charter says otherwise) | Freely transferable (after the lock-up) |
Sources: clause 4 Article 4, Article 116, Article 120 of the Enterprise Law; clause 1 Article 31 of the Securities Law (as amended by Law 56/2024/QH15).
5. Checklist: 5 clauses to put in the charter/shareholders agreement when negotiating with a strategic investor
- Veto rights over key matters — list them specifically (further share issuance, merger, charter amendments, large asset sales), not in vague terms.
- Board nomination rights — number of seats and the nomination mechanism.
- Anti-dilution and pre-emptive rights when the company issues additional shares.
- Non-compete commitment of the strategic investor while holding the shares.
- Exit mechanism after the transfer restriction expires (tag-along, put options).
Note: the criteria for identifying a “strategic investor” after Law 56/2024 are set by the General Meeting of Shareholders in the issuance plan — the charter and shareholders agreement should expressly refer to that plan to avoid later disputes.
FAQs
Is a founding shareholder the first person to contribute capital?
No. Two cumulative conditions apply under clause 4 Article 4 of the Enterprise Law: owning at least one ordinary share and signing the list of founding shareholders.
Can a founding shareholder sell shares 1 year after establishment without GMS approval?
Within 03 years from the Enterprise Registration Certificate issuance: shares may be freely transferred only to other founding shareholders; selling outside requires General Meeting of Shareholders approval (clause 3 Article 120). Note the restriction does not apply to shares acquired after enterprise registration (clause 4).
Does a strategic investor have default veto rights?
No. The law grants veto rights to no class of shareholders; all special rights must be agreed in the company charter or a shareholders agreement.
Legal sources
- Enterprise Law (consolidated document 67/VBHN-VPQH 2025): clause 4 Article 4 (founding shareholder definition), Article 116 (voting preference shares), Article 120 (ordinary shares of founding shareholders), Articles 144–148 (shareholder rights — no veto right).
- Securities Law 54/2019/QH14 (amended by Law 56/2024/QH15, effective 01/01/2025): clause 1 Article 31 (strategic investor, transfer restriction).
Is your company bringing in a strategic investor or reviewing its charter to define shareholder rights? Reach us via the Contact page of FLAT Law Firm for a review of the charter, shareholders agreement and voting-right structures under current Vietnamese enterprise law.
The legal content of this article is being reviewed by FLAT’s AI Legal Council and will be submitted to the owner for approval before publication; it is not an opinion of a licensed lawyer and does not replace legal advice for specific cases.
For reference only, not legal advice.