The death of a shareholder-cum-legal representative may cause the operations of a joint stock company to come to a standstill because there is no longer an authorized person to sign documents, represent the company before government authorities, and perform other legal acts on behalf of the company. At the same time, ownership of the deceased’s shares is not automatically transferred to his or her family members but must be handled in accordance with the laws on inheritance. The following discusses the legal issues that a company needs to address during this period.
The death of a shareholder-cum-legal representative does not cause a joint stock company to cease its operations or lose its legal entity status. However, the company will simultaneously face multiple issues relating to share ownership, changes in shareholders, and the appointment of a new legal representative.
If the deceased was the company’s sole legal representative, the company may encounter difficulties in executing contracts, carrying out banking transactions, working with tax authorities, the Business Registration Authority, and other government authorities. Certain internal corporate activities may also be disrupted due to the absence of a person authorized to represent the company.
In addition, the shares owned by the deceased are not automatically transferred to the heirs. Until inheritance rights are legally established, the rights attached to those shares may affect the determination of voting ratios and quorum requirements for meetings of the General Meeting of Shareholders or the Board of Directors.
For companies with a small number of shareholders or where the deceased held a controlling shareholding, the change in the ownership structure may also affect corporate control, the adoption of resolutions, and the company’s governance direction in the subsequent period. Therefore, the company should fully assess all legal issues arising before carrying out inheritance procedures and updating its enterprise registration information.
The shares owned by the deceased become part of the estate in accordance with Part Four of the Civil Code 2015.
Where there is a will, the estate shall be distributed in accordance with the will[1]. The will must be valid[2].
Where there is no will, the estate shall be distributed by statutory succession[3]. Accordingly, the estate shall be distributed among the statutory heirs in the order prescribed by law. If any heir does not wish to receive his or her inheritance, he or she must carry out the procedure for disclaiming the inheritance.
2.1.1. The internal documents required for the distribution of the inherited estate include:
a. The Company Charter;
b. The lawful Register of shareholders (note that this register should record the date of issuance, bear the signature of the competent signatory, be affixed with the Company’s seal, and include the share certificate number);
c. Share Certificate.
2.1.2. Notes on distribution by statutory succession:
a. Where the shares are marital common property and one spouse dies: The estate shall be managed by the surviving spouse. Before the estate is distributed, one-half of the shares shall belong to the surviving spouse[4], while the remaining half shall be distributed by statutory succession.
b. Minor children, parents, spouses, and adult children who are incapable of working are still entitled to receive two-thirds of the statutory inheritance share of an heir, even if the testator excludes them from the will or leaves them a smaller share[5].
c. Income derived from the inheritance of shares is subject to personal income tax pursuant[6]. The applicable personal income tax rate is 10% of the taxable income in accordance[7]. The taxable income is determined at the time the taxpayer receives the inherited shares[8]. Therefore, if a company declares an inflated charter capital that does not reflect the actual contributed capital, the heirs may consequently be required to pay a substantially higher amount of tax.
Distribution of the estate
The appointment of a new shareholder does not require the company to register changes to its enterprise registration information with the business registration authority. This is an internal corporate procedure, and the company only needs to update the new shareholder’s information in the Register of shareholders.
The first step is to carry out the inheritance procedures for the deceased shareholder’s estate in accordance with the Civil Code at a notary office. After the notarization procedures have been completed and the new shareholder’s corresponding shareholding has been determined, the company should retain relevant documents in its internal records, including the death certificate, the declaration of inheritance or agreement on the distribution of the estate, and other documents proving inheritance rights. The company shall then update the information of the new shareholder in the Register of shareholders without notifying or registering such change with any government authority.
It should be noted that where the person inheriting the shares is a minor, the guardian of the beneficiary shall manage the shares on the beneficiary’s behalf within the company.
Unlike the procedure for updating shareholders, a change of the legal representative must be registered with the business registration authority.
Specifically, Article 43 of Decree No. 168/2025/ND-CP sets out detailed regulations on the application dossier, the authorized signatory, and the procedures for changing the legal representative.
Accordingly, the company shall prepare an application for registration of changes to enterprise registration information and submit it to the provincial business registration authority where the company’s head office is located. The person authorized to sign on behalf of the deceased legal representative is the Chairman of the Board of Directors or a person authorized by the Chairman of the Board of Directors. Where the deceased legal representative also held the position of Chairman of the Board of Directors, the authorized signatory shall be the person temporarily elected as Chairman of the Board of Directors[9].
After receiving the application, the business registration authority shall issue an acknowledgment of receipt and schedule the issuance of the result within three working days from the date of receipt. If the application is valid, the business registration authority shall issue a new Enterprise Registration Certificate to the company[10].
Companies commonly make the following mistakes in this situation:
3.1. Failing to identify all statutory heirs.
3.2. Updating the new shareholder before the inheritance procedures are completed.
3.3. Failing to update the register of shareholders.
3.4. Failing to register, or delaying the registration of, the new legal representative.
3.5. Failing to review the Company Charter.
3.6. Failing to update the company’s relevant information: bank account, tax,...
3.7. Failing to properly maintain internal corporate records.
See more: The formation and legal significance of internal corporate documents
The death of a shareholder-cum-legal representative requires the company to follow the applicable legal procedures, including the inheritance of shares, updating the Register of shareholders, and registering the change of the legal representative with the business registration authority. If you have any questions regarding this matter, please contact Lexsol for timely legal advice. Lexsol can review your specific circumstances and provide legal support before your company proceeds with the relevant procedures.
[1] Chapters XXII and XXIV of the Civil Code 2015.
[2] Article 630 of the Civil Code.
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