In the fields of business and securities investment, terms such as shares, stocks, dividends, and shareholders are commonly used. However, many people still confuse their meanings and roles because these concepts are closely related and have similar names.
Understanding and distinguishing these terms will help individuals, investors, and businesses make financial decisions more quickly and effectively. In this article, Siglaw Firm will help you clearly understand the definitions, characteristics, and differences between shares, stocks, dividends, and shareholders in a simple and easy-to-understand manner.
What are Shares?
According to Point a, Clause 1, Article 111 of the Law on Enterprises 2020, a share is a portion of a joint-stock company’s charter capital divided into equal parts.
Article 114 stipulates that shares of a joint-stock company are divided into two categories: ordinary shares for holders of ordinary shares and preference shares for certain special shareholders. Preference shares are further classified into the following types:
- Dividend preference shares;
- Redeemable preference shares;
- Voting preference shares;
- Other preference shares as prescribed by the company’s Charter and securities laws.
What are Stocks?
According to Article 121 of the Law on Enterprises 2020, a stock certificate is a certificate issued by a joint-stock company, an accounting entry, or electronic data confirming the ownership of one or more shares in that company.
Accordingly, a stock certificate must contain the following essential information:
- Company name, enterprise code, and head office address;
- Number and type of shares;
- Par value of each share and total par value stated on the stock certificate;
- Information about the shareholder (individual or organization);
- Signature of the company’s legal representative;
- Registration number in the shareholder register and the issuance date of the stock certificate;
- Other information as prescribed by law.
In addition, according to Clause 1, Article 4 of the Law on Securities 2019, stocks are considered a type of security, equivalent to an asset, and may be legally traded on the stock exchange.
What are Dividends?
Clause 5, Article 4 of the Law on Enterprises 2020 defines dividends as after-tax profits distributed to each share in cash or other assets. Accordingly, a company’s net profit is calculated by subtracting all expenses, including taxes, from its total revenue generated from selling products, goods, and services.
According to Article 135 of the Law on Enterprises 2020, dividends paid on preference shares are determined according to the specific conditions applicable to each type of preference share. Dividends paid on ordinary shares are determined based on realized net profits, and dividend payments are made from the company’s retained earnings.
A joint-stock company may only pay dividends on ordinary shares when all of the following conditions are satisfied:
- The company has fulfilled all tax obligations and other financial obligations prescribed by law;
- All accumulated losses have been settled and company funds have been established in accordance with the company’s Charter;
- After paying dividends, the company remains capable of paying all due debts and financial obligations.
In addition, dividends may be paid in various forms, such as cash, company shares, or other assets as prescribed in the company’s Charter. However, if dividends are paid in cash, they must be paid in Vietnamese Dong (Clause 3, Article 135 of the Law on Enterprises 2020).
Who are Shareholders?
According to Clause 3, Article 4 of the Law on Enterprises 2020, a shareholder is an individual or organization owning at least one share of a joint-stock company.
A founding shareholder is a shareholder who owns at least one ordinary share and whose name appears on the list of founding shareholders of the company.
According to Article 111, a joint-stock company must have at least three shareholders, and there is no maximum limit on the number of shareholders.
Shareholders of a joint-stock company are only liable for the company’s debts and other property obligations within the amount of capital they have contributed. In addition, each shareholder’s rights correspond to the type of shares they own.
Differences Between Shares, Stocks, Dividends, and Shareholders
The following table summarizes the differences between these four concepts to help investors and businesses distinguish them more easily.
| Criterias | Shares | Stocks | Dividends | Shareholders |
| Definition | Charter capital divided into equal portions | A certificate confirming ownership of shares | Net profits distributed based on shares owned . | Individuals or organizations owning shares in a joint-stock company |
| Per se | Represents ownership rights and financial interests in a joint-stock company | Confirms ownership rights over shares | Profits distributed after tax | Owners of a portion of the company’s assets |
| Value | Determined by the joint-stock company | VND 10,000 (Clause 2, Article 13 of the Law on Securities 2019) | Depends on after-tax profits and the number of shares owned | The more shares owned, the greater the influence within the company |
| Classification | Ordinary shares and preference shares, including:
|
Common stocks and preferred stocks, including
|
Dividends for ordinary shares and preference shares | 03 types:
|
The above information is provided by Siglaw Firm to help clarify the differences between shares, stocks, dividends, and shareholders.
If you require legal consultation regarding corporate law, investment, company establishment, or other related legal matters, please contact us for assistance:
Head Office in Hanoi: No. 44/A32 – NV13, Geleximco Area A, Le Trong Tan Street, Tay Mo Ward, Hanoi, Vietnam
Southern Branch: No. 103 – 105 Nguyen Dinh Chieu Street, Xuan Hoa Ward, Ho Chi Minh City, Vietnam
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