Sample share transfer contract and drafting instructions

A sample share transfer contract is a legal document stipulating the rights and obligations between the transferor and the transferee in the transaction of transferring share ownership. This document establishes the legal basis for changing shareholders and ownership ratio in a joint stock company according to the provisions of the current Law on Enterprise. The following article analyzes common share transfer cases and provides guidance on drafting contracts in accordance with the law.

Cases where it is necessary to create a share transfer contract are common today

The transfer of shares in a joint stock company takes place in many different forms. The Law on Enterprise 2020 specifically stipulates cases of share transfer and procedures to be followed. Enterprises must clearly understand these cases to properly apply the law during the transaction process.

The first case is the transfer of common shares. According to Article 127 of the Law on Enterprise 2020, common shares of founding shareholders are restricted from transfer within 03 years from the date the company is granted a Business Registration Certificate. After this period, founding shareholders have the right to freely transfer their common shares to other shareholders or outsiders.

The second case is the transfer of preferred shares. For this type of shares, the transfer conditions and procedures must comply with the provisions of the company’s Charter and must be approved by the General Meeting of Shareholders. Preferred shares often have special rights attached, so the transfer must ensure the rights of the company and other shareholders.

The third case is the transfer of restricted shares. According to Clause 3, Article 120 of the Law on Enterprise 2020, transfer-restricted shares can only be transferred when the transfer restriction conditions are met. These conditions may be stipulated in the company charter or an agreement between shareholders and the company.

The fourth case is transfer in a public joint stock company. For listed companies, stock transactions must comply with the provisions of the Law on Securities and guiding documents. In addition to the transfer contract, the parties must also carry out transaction procedures through the Stock Exchange or through the Securities Depository Center.

The fifth case is transferring shares when contributing capital. When a shareholder wants to use his or her shares to contribute capital to another enterprise, they must draw up a share transfer contract as a legal basis for the transfer of ownership.

Sample share transfer contract

Share transfer contract needs to be drafted fully and accurately to ensure legal validity. This contract form must comply with the provisions of the Civil Code and Law on Enterprise regarding the form, content and valid conditions of the contract. Each clause in the contract must be clear and transparent to avoid future disputes.

The opening part of the contract must clearly state the information of the parties participating in the transaction. For the transferor and transferee who are individuals, it is necessary to write full name, date of birth, ID card/CCCD number, place of issue, date of issue, and permanent residence address. In case the participating party is an organization, the organization’s name, head office address, business code, and legal representative must be clearly stated.

The content of the share transfer contract should include the following basic provisions:

• Article 1: Subject of the contract (number of transferred shares, type of shares, par value of shares, total value according to par value).
• Article 2: Transfer price and payment method.
• Article 3: Time to transfer ownership of shares.
• Article 4: Rights and obligations of the transferor.
• Article 5: Rights and obligations of the transferee.
• Article 6: Commitments of the parties.
• Article 7: Terms of breach of contract.
• Article 8: Provisions on dispute resolution.
• Article 9: Terms of contract validity.

According to Article 111 of the Law on Enterprise 2020, the transfer of shares must be recorded in the company’s shareholder register. Therefore, the contract needs to have provisions on the parties’ responsibility to notify the company to update the shareholder register.

The last part of the contract must be signed by the participating parties. In case the participating party is an organization, the legal representative or legally authorized person must sign and stamp. The contract needs to be made into multiple copies with equal legal value for the parties and the joint stock company to keep.

>>> Reference: STANDARD STANDARD SHARE TRANSFER CONTRACT FORM.

Some important notes when drafting a share transfer contract

Share transfer contracts need to be drafted with care to protect the interests of the parties involved in the transaction. Accurately determining the transfer object, price and accompanying conditions will help avoid arising disputes. Practice shows that many lawsuits occur because share transfer contracts are unclear or lack necessary provisions.

The first note is about transfer conditions. Before drafting a contract, the parties need to check the company charter to determine whether there are any transfer restrictions. According to Article 127 of the Law on Enterprise 2020, common shares of founding shareholders cannot be transferred within 03 years from the date of establishment of the company, unless approved by the General Meeting of Shareholders. In addition, if the company charter has provisions on the priority right to purchase shares, the parties must comply with this provision before proceeding with the transfer.

The second note concerns the transfer price. The share transfer price needs to be clearly expressed in numbers and words in the contract. The parties should specifically agree on payment method, payment term and payment currency. In the case of multiple payments, the contract should clearly stipulate the amount and term of each installment, as well as the legal consequences if the transferee does not pay on time.

The third note is about the time to transfer ownership of shares. According to Clause 3, Article 120 of the Law on Enterprises 2020, ownership of shares is transferred from the moment the transferee’s information is recorded in the shareholder register. However, the parties can agree on another time to transfer ownership, as long as it is consistent with the law. The contract should clearly stipulate the parties’ responsibilities in notifying the company to update the shareholder register.

The fourth note concerns tax obligations. According to current regulations, income from share transfer is subject to personal income tax or corporate income tax depending on the subject of transfer. The contract should clearly stipulate which party is responsible for declaring and paying taxes, or how the parties will divide tax obligations.

The fifth note is about commitments and guarantees. The transferor needs to commit that the transferred shares belong to their legal ownership, are not in dispute, are not mortgaged, mortgaged or transfer restricted. If any dispute arises, the transferor must be responsible for resolving and compensating damages (if any) to the transferee.

What should businesses do after a share transfer occurs?

After the share transfer contract is signed, the enterprise needs to carry out a number of procedures to complete the transfer process. Timely and accurate updating of information about new shareholders is not only a legal obligation but also ensures the rights of related parties. Businesses need to strictly comply with regulations to avoid violating the law.

The first procedure is to update the shareholder register. According to Article 127 of the Law on Enterprise 2020, the company must record the transferee’s information in the shareholder register within 24 hours of receiving a valid request. Information that needs to be updated includes full name, contact address, nationality, and legal document number of individual shareholders; name, business code, head office address of the institutional shareholder; number of shares, type of shares owned and starting time of ownership.

The second procedure is to issue a new share certificate. If a joint stock company has issued a share certificate, the company must revoke the old share certificate and issue a new one to the transferee. According to the provisions of Article 121 of the Law on Enterprises 2020, the share certificate must have the company’s seal and the signature of the company’s legal representative.

The third procedure is to report shareholder changes if necessary. For public joint stock companies, if the transfer leads to a change in major shareholders (owning 5% or more of the total number of voting shares), the company must report to the State Securities Commission and the Stock Exchange where the company is listed in accordance with the provisions of the Law on Securities.

The fourth procedure is to update the list of shareholders into the internal information system. The company should update information about new shareholders into internal management systems to ensure communication, sending notifications and paying dividends to the right people. This list also needs to be updated to serve the General Meeting of Shareholders.

The fifth procedure is to notify the tax authorities if necessary. In some cases, the company may have to notify the tax authority about the transfer of shares to serve the purpose of declaring and paying income tax from the transfer of shares, especially when the transferor is a foreign organization.

Full package share transfer contract drafting service at Long Phan Consulting Company

Long Phan Consulting Company provides professional share transfer contract drafting services, ensuring legality and protecting customers’ rights. Our team has experience in the corporate and securities fields and has a deep understanding of the law related to share transfer. Our services help customers save time and avoid legal risks during the transaction process.

Full service of Long Phan Consulting Company includes three main stages as follows:

• The first phase is consulting and analysis: The specialist will study the company charter, legal status of transferred shares and related conditions to come up with the optimal transfer plan. Long Phan will clearly identify issues that need attention and propose appropriate solutions for each specific case.
• The second stage is contract drafting: Based on the customer’s information and requirements, Long Phan will draft a share transfer contract that fully meets the legal requirements according to Article 127, Clause 3, Article 120 and Article 111 of the Law on Enterprise 2020. Each clause in the contract is carefully considered to maximize the customer’s rights and prevent disputes that may arise.
• The third phase is post-transfer procedural support: Long Phan will assist customers in carrying out necessary procedures after signing a share transfer contract, including: notifying the joint stock company, updating the shareholder register, declaring and paying income tax from share transfer (if any), and other procedures according to the provisions of law.

In addition to the service of drafting share transfer contracts, Long Phan Consulting Company also provides related services such as consulting on business purchases and sales, legal appraisal of businesses before purchasing shares, tax consulting related to share transfer, and representing customers in disputes related to share transfer contracts.

Some frequently asked questions

Below are some frequently asked questions about share transfer, please refer to:

What is the maximum time limit for recording share transfers in the shareholder register?

According to Article 127 of the Law on Enterprise 2020, the company must record the transferee’s information in the shareholder register within 24 hours of receiving a valid request.

Is it mandatory to issue a new share certificate after transferring shares?

If a joint stock company has issued a share certificate, the company must revoke the old share certificate and issue a new one to the transferee.

In what cases must a joint stock company report changes in shareholders to the State Securities Commission?

For public joint stock companies, if the transfer leads to a change in major shareholders (owning 5% or more of the total voting shares), the company must report to the State Securities Commission and the Stock Exchange where the company is listed.

What basic terms does a share transfer contract need to have?

Basic terms include: subject of the contract, transfer price and payment method, time of transfer of share ownership, rights and obligations of the parties, commitments, provisions on breach of contract, dispute resolution and contract validity.

Are common shares of founding shareholders subject to transfer restrictions?

According to Article 127 of the Law on Enterprise 2020, common shares of founding shareholders are restricted from transfer within 03 years from the date the company is granted a Business Registration Certificate.

How must the share transfer price be expressed in the contract?

The share transfer price needs to be clearly expressed in numbers and words in the contract.

Conclude

The share transfer contract form plays a decisive role in ensuring legal rights for the parties participating in the transaction. Customers need to pay attention to the terms and regulations under the Law on Enterprise 2020 and post-transfer procedures to avoid legal risks. Long Phan Consulting Company is committed to providing professional share transfer contract drafting services, maximum protection of customer interests. Please contact us immediately via the hotline 0906735386 for detailed advice and full support from contract drafting to completing post-transfer procedures.