For five straight years the joint venture reports profits and its bank balance keeps growing, yet the dividend remains a perfect zero. The majority always has a plausible reason: this year a production line reinvestment, next year a volatility reserve, the year after a land purchase opportunity. Meanwhile the majority-appointed management enjoys steadily rising pay and bonuses, and the venture’s real value is consumed through other channels. For the minority investor, a perpetual zero-dividend policy is no longer a neutral financial decision; it is economic oppression that needs no adverse resolution at all.
What the law says: who decides dividends
Article 135 of Enterprise Law No. 59/2020/QH14 provides that dividends on ordinary shares are determined from realised net profit and paid out of retained earnings, with the General Meeting of Shareholders deciding the annual dividend level. The hard conditions for payment are that the company has fulfilled its tax and other financial obligations, has made required fund allocations and offset prior losses, and will still be able to pay debts and obligations falling due after the dividend is paid. For a limited liability company, Article 69 leaves post-tax profit distribution to the Members’ Council under the charter, on similar financial-obligation conditions.
The legal consequence should be stated plainly to avoid false expectations: Vietnamese law gives no minority shareholder a unilateral right to force a distribution. If a validly constituted General Meeting decides to retain profits for reinvestment, that decision is in principle lawful, and courts rarely substitute their own judgement for the board’s view of the company’s capital needs. The minority’s battle is therefore not “can we compel a dividend”, but the genuineness of the retention rationale and the majority’s parallel conduct.
When “no dividend” becomes abuse: realistic lines of attack
The first line is consistency. If retained profits are never deployed into any concrete project year after year, while idle cash sits in deposit accounts or is lent to related parties, the “retained for reinvestment” argument erodes. The minority may demand a detailed plan for the use of retained profits at the General Meeting and have its objection minuted when no plan exists, or when the promised plan is not implemented year after year.
The second line is benefit asymmetry. When the majority receives no dividend but takes substitute benefits through salary, bonuses, management fees or related-party transactions, a zero-dividend policy stops being neutral. The file should then be built around breach of managers’ duties of honesty and prudence under Articles 165 and 166, with a claim under Article 161 of the Enterprise Law, rather than around dividends alone. The third line is a priced exit: a shareholder who votes against a resolution changing shareholders’ rights and obligations or reorganising the company may require the company to buy back its shares under Article 132 — not a cure for every no-dividend case, but real negotiating leverage when a retention resolution is packaged with changes to shareholder rights.
Designing a minimum dividend policy when the JV is formed
The durable solution is a minimum dividend clause in the charter or shareholders agreement: for example, a commitment to distribute at least a fixed percentage of audited after-tax profit, subject to a closed list of exceptions such as bank covenant breaches or a jointly approved investment project with a concrete budget. The clause should include an “idle cash” mechanism: cash balances above a defined operating threshold for a prolonged period must be put to a separate General Meeting vote on their use. Negotiation experience shows majorities rarely oppose the principle of a minimum payout; they argue about the percentage, and that argument belongs before capital is contributed, not after five years of zero dividends.
The file a minority should build against a zero-dividend policy
- Three to five years of audited financial statements: accumulated retained earnings, cash balances and loans to related parties.
- General Meeting minutes: the retention reason given each year and how far the promised reinvestment plan was actually carried out.
- Data on the majority’s substitute benefits: management pay and bonuses, management fees and related-party deals in the same period.
- Written demands for a retained-profit use plan, with objections recorded in the minutes.
- A charter amendment proposal on minimum dividends for the next meeting, plus a buy-back fallback if talks deadlock.
Frequently Asked Questions
The company is profitable but has paid no dividend for five years. What can I do?
First test the validity of the retention decisions: Article 135 of the Enterprise Law leaves the dividend level to the General Meeting, so a valid resolution with a genuine rationale cannot be overridden unilaterally. Build the file instead: demand a use plan for retained profits, track its implementation across years, minute your objections, and check whether the majority is taking substitute benefits through pay, bonuses or related-party transactions.
Can I force the company to pay a dividend?
There is no direct statutory compulsion under current law. The law only sets prohibitions: no dividend before tax obligations are fulfilled, losses offset, and post-payment solvency for debts falling due (Article 135 for joint stock companies, Article 69 for LLCs). A right to compel payment arises only if the charter or shareholders agreement contains a minimum dividend clause; refusal then breaches that commitment and can be sued on.
Is a zero-dividend policy minority oppression?
Not automatically. Retaining profits for a real project with a budget and a timetable is ordinary management. It becomes oppression when signs converge: retained profits are not used for the declared purpose over many years; the majority simultaneously draws substitute benefits through other channels; and the minority is refused all information about the capital plan. The legal focus then shifts from dividends to managers’ liability under Articles 161, 165 and 166 of the Enterprise Law.
If I cannot get a dividend, how do I exit?
Three exits are commonly used: negotiate a buy-back of your stake by the company or the majority at an independently appraised price; trigger the Article 132 buy-back right where you voted against a resolution changing shareholder rights and obligations or reorganising the company; or sell the stake to a third party following the charter’s priority offer procedure. Every route needs an independent valuation, because a minority stake in a non-dividend-paying JV is typically pressed to a deep discount.
This article has been quality-reviewed by the FLAW AI Legal Council