Preference shares in a Vietnamese joint stock company are not a uniform block from a transferability standpoint: one class transfers as freely as ordinary shares, and exactly one class is locked almost absolutely — voting preference shares. The most common investor question is “if I buy voting preference shares, do I get the special voting rights” — and the law answers in a way many do not expect: that class cannot be transferred at all, so the story of buying special voting power never begins. This article separates the two most common preference classes and their opposite transfer regimes.
1. Voting preference shares: the class locked against transfer
Under Articles 116 and 119(3) of the Law on Enterprises 59/2020/QH14, voting preference shares carry more votes than ordinary shares, but belong only to a closed group of holders: organisations authorised by the Government and founding shareholders. And that very provision sets the core prohibition: a holder of voting preference shares may not transfer them to another person. The only two exceptions that break the prohibition are transfers under an effective court judgment or decision, and transfers by inheritance. There is also a time feature: founding shareholders’ voting preference is effective only for 03 years from the Enterprise Registration Certificate date; after that period, founders’ voting preference shares convert into ordinary shares. The negotiating consequence is categorical: any sale agreement over voting preference shares outside the two exceptions is an agreement that cannot be lawfully performed — the “buyer” cannot be entered in the shareholder register as a voting preference shareholder, and the special voting power never passes to the buyer by purchase. Anyone wanting greater voting weight in an unlisted company must structure it differently (for example, buying ordinary shares at a larger ratio, or a shareholders’ agreement on voting proxies) rather than buying the voting preference “class”.
2. Dividend preference shares: freely transferable, dividend rights follow the register
Dividend preference shares (Article 117 of the Law on Enterprises 2020) carry the right to dividends at a higher level than ordinary shares (fixed dividends and/or bonus dividends), in exchange for which their holders have no voting rights, no right to attend the General Meeting, and no right to nominate Board/Supervisory Board members. The law imposes no separate transfer restriction on this class: it transfers under the general Article 127 mechanism like ordinary shares, unless the charter adds conditions. On dividend rights in a transfer, the operating principle is that the dividend right attaches to shareholder status at the record date of the dividend-entitled shareholder list for the payment period: whoever is recorded in the shareholder register at the record date receives that period’s dividend, regardless of how long they held the shares during the period. Market practice therefore prices dividend preference share transfers with an express agreement on the running period’s dividend: whether the upcoming dividend belongs to seller or buyer (transfer “cum-dividend” or “ex-dividend”), because if the agreement is silent, the legal default is that the period’s dividend belongs to the person standing in the register at the record date — usually the buyer if the entry precedes the record date.
3. The transfer framework across share classes, compared
To prevent confusion between preference classes, the following framework summarises the regimes: Ordinary shares — freely transferable (founding shareholders subject to the 3-year restriction in Article 119(2)). Voting preference shares — transfer prohibited, except by inheritance and under court decisions; the preference belongs only to Government-authorised organisations/founding shareholders, and founders’ preference is effective for 3 years only. Dividend preference shares — freely transferable like ordinary shares (unless the charter restricts); dividend rights determined by the shareholder register at the record date. Redeemable preference shares (Article 118: the company redeems the contribution at the holder’s request or on conditions printed on the share certificate) — freely transferable under the general mechanism; note that when the company redeems, those shares are withdrawn on the printed conditions. Before any purchase of “preference” shares, the indispensable due diligence step is to open the company’s charter and share certificates to identify the exact class, any specific conditions printed on the certificates (especially for redeemable preference shares), and every charter-imposed transfer restriction — because the “preference” label on a certificate says nothing about transferability until the class is identified.
4. Tax and registration in preference share transfers (for the transferable classes)
For the preference classes that may be transferred (dividend, redeemable), the tax and registration mechanics are identical to ordinary shares: the transferee becomes a shareholder from entry in the shareholder register (Articles 122, 127), and the seller’s transfer income is taxed under the seller’s category — resident individuals under the Law on Personal Income Tax 109/2025/QH15 (20% on capital transfer income), organisations under CIT, foreign investors under the capital transfer mechanism with corresponding withholding. The only valuation difference to handle is the attached economic rights: which side takes the running period’s unpaid preference dividend, and, for redeemable preference shares, any redemption condition triggerable in the near future. A final warning on voting preference shares: because they cannot be bought or sold, any deal “packaged” as a loan coupled with a perpetual voting proxy, or a cooperation contract effecting a substantive transfer of special voting power outside the permitted holder group, carries the risk of being assessed as a sham transaction concealing a prohibited transfer — such structures need separate legal advice before being touched. The principle, once more: in the preference share system of Vietnamese enterprise law, economic rights (dividends) are transferable, while power rights (special voting) are locked within the original holder group — and every deal design must respect that line.
Are voting and dividend preference shares freely transferable like ordinary shares?
They differ. Dividend preference shares are freely transferable like ordinary shares under Article 127 of the Law on Enterprises 59/2020/QH14 (unless the charter restricts). Voting preference shares, by contrast, are prohibited from transfer under Article 119(3): the holder may not transfer them to another person, except under an effective court judgment/decision or by inheritance.
If someone buys voting preference shares, do they get the special voting rights?
The question does not arise in a lawful transaction: voting preference shares cannot be bought or sold, so there is no lawful buyer to enjoy the special voting rights. This class belongs only to Government-authorised organisations and founding shareholders; founders’ voting preference is moreover effective only for the first 03 years, after which the shares convert into ordinary shares. To gain greater voting weight, an investor must buy ordinary shares at a corresponding ratio or use a lawful voting proxy mechanism.
On transferring dividend preference shares, how are the buyer’s dividend rights determined?
The dividend right attaches to shareholder status at the record date of the dividend-entitled shareholder list for the payment period: whoever is recorded in the shareholder register at the record date receives that period’s dividend, irrespective of holding duration. Because the law does not apportion dividends by holding time, the parties should expressly agree in the transfer agreement on the running period’s dividend (belonging to seller or buyer — “cum” or “ex” dividend) and reflect it in the price; if the agreement is silent, the dividend belongs to the person in the register at the record date.
Is any class of preference shares prohibited from transfer?
Exactly one: voting preference shares — Article 119(3) of the Law on Enterprises 2020 prohibits their holders from transferring them to another person, with two exceptions: transfers under an effective court judgment/decision and transfers by inheritance. The other preference classes (dividend preference under Article 117, redeemable preference under Article 118) transfer under the general mechanism, save restrictions the company charter itself imposes.