A Second Cautionary Tale: When a Signed Share Transfer Agreement Still Unravels Years Later

The Yên Bái dispute referenced in Part 1 is not an isolated illustration of how pre-IPO and private share arrangements can go wrong in Vietnam. A more recent appellate judgment, Bản án số 63/2023/KDTM-PT issued by the People’s High Court in Ho Chi Minh City on 26 June 2023, offers an equally instructive — and in some ways more troubling — pattern for anyone typing “pre IPO investment scam lawyer near me” into a search bar after handing money to a promoter in exchange for shares that were never properly recorded.

In that case, the plaintiff paid VND 510,000,000 to acquire 51,000 shares — 8.5% of the charter capital — in a fertilizer joint-stock company, under a share transfer contract signed on 27 November 2017 with the company’s then-General Director, who personally held 81% of the company. The buyer paid in full. But the seller never completed the internal corporate procedures required to make the transfer effective: no shareholder certificate was issued, the company’s shareholder register was never updated with the buyer’s name or shareholding, and personal income tax on the transfer was never declared or paid. Years later, the buyer sued, asking the court to declare the 2017 contract void under Article 123 of the 2015 Civil Code — violation of a legal prohibition — and to order the seller to refund the full purchase price.

Legal Opinion: What the Law Says vs. How the Court Actually Ruled

This is precisely the kind of case where a purely textual reading of Vietnamese corporate law and the way a court applies it in practice can diverge sharply — and investors need to understand that gap before they assume a signed contract protects them.

What the law says. Under Article 120(3)-(4) and Article 127 of the 2020 Law on Enterprises, transfers of shares held by founding shareholders within the first three years after a joint-stock company’s establishment are subject to specific internal-approval and disclosure conditions, and any transfer must be reflected in the company’s shareholder register to be effective against the company and third parties. Separately, Article 123 of the 2015 Civil Code voids a transaction only where it violates a genuine legal prohibition — a relatively high bar, since the Law on Enterprises does not flatly prohibit share transfers; it merely conditions them. The defendant seized on this distinction, arguing that a failure to follow internal notification procedures, or a personal tax default, is not the kind of “prohibited act” that Article 123 contemplates, and that the tax obligation was a personal duty to the State, not a contractual condition between buyer and seller. The defendant also raised a limitations defense, arguing that under Article 319 of the 2005 Commercial Law and point (e), Clause 1, Article 217 of the 2015 Civil Procedure Code, the two-year limitation period had already expired by the time the lawsuit was filed in December 2020 — more than three years after the November 2017 contract.

What the court actually did. The first-instance Ho Chi Minh City Court did not accept this narrower reading. It applied Article 123, 131, 132 and 407 of the Civil Code together with Article 120 and 127 of the Law on Enterprises, declared the 2017 share transfer contract void, and ordered the seller to return the full VND 510,000,000 to the buyer — effectively treating the seller’s failure to complete the statutory transfer formalities (register update, tax settlement, internal notification) as fatal to the validity of the agreement itself, not merely as an administrative afterthought. On appeal, the Procuracy’s representative reviewed the seller’s arguments — including the limitation defense — and recommended rejecting the appeal in full and upholding the first-instance judgment under Article 308 of the Civil Procedure Code, finding no legal basis to disturb the lower court’s reasoning.

For an investor evaluating a pre-IPO or private share deal in Vietnam, the practical lesson is blunt: a court is willing to unwind a fully paid, signed share purchase years after the fact when the seller never completed the basic statutory mechanics of a lawful transfer — and a defendant’s limitations defense, while always worth raising, does not automatically defeat a well-pleaded claim grounded in the underlying invalidity of the transaction. This is exactly the terrain where a lawyer familiar with both the Law on Enterprises’ procedural requirements and the Civil Code’s rules on contract invalidity earns their fee — spotting, before money changes hands, whether a “pre-IPO” seller has actually done the paperwork that makes a share sale real, and after the fact, framing a claim so that a limitations argument does not become an easy escape hatch for the other side.

Why Documentation Discipline Is the Real Dividing Line Between a Legitimate Deal and a Scam

Both cases above turn on the same underlying failure: paperwork that was supposed to exist — shareholder register entries, tax filings, corporate approvals — simply never materialized, leaving the investor holding nothing but a signature and a receipt. This is worth contrasting with what a properly executed cross-border investment or company-formation process in Vietnam actually looks like on the ground.

Unilaw has handled matters for foreign investors setting up corporate presence in Vietnam where the entire engagement centered on building out exactly this kind of documentation trail before any capital moved. In one such matter, a client with Japanese ties engaged Unilaw to prepare for the establishment of a new legal entity in Vietnam. The scope of work was not glamorous, but it was precisely the discipline that the plaintiffs in both court cases above were missing: a detailed checklist covering the parent company’s certificate of incorporation and articles of incorporation, bank statements evidencing capital sufficient to cover the proposed charter capital, the Vietnam-based legal representative’s passport and residence documentation, and a memorandum of understanding on office leasing together with proof of the landlord’s legal standing — with clear instructions on which documents required consular legalization at the Vietnamese Embassy in Japan or the Japanese Embassy in Vietnam, and which required notarization inside Vietnam itself. Once this checklist was delivered, the client had a concrete, verifiable foundation on which to proceed with registration.

The contrast is instructive: legitimate capital-raising and company-formation activity in Vietnam generates a paper trail that can be checked — legalized corporate documents, notarized identity and lease records, verifiable bank statements. Pre-IPO promoters who resist putting anything in comparable, checkable form, who cannot produce a shareholder register entry, or who wave away tax and registration formalities as “we’ll sort it out later,” are asking investors to accept exactly the kind of documentary vacuum that turned a facially valid VND 510,000,000 share deal into three years of litigation.

The Administrative Penalty Layer: Decree 122/2021/NĐ-CP

Beyond civil litigation to void a contract and recover funds, Vietnam’s regulatory architecture also carries an administrative penalty layer specifically aimed at the investment and business-registration space in which pre-IPO promoters operate. Decree No. 122/2021/NĐ-CP, effective from 1 January 2022, sets out administrative sanctions for violations in investment, bidding, business registration, and planning. Under Article 4 of the Decree, maximum fines for violations in the field of investment reach VND 300,000,000 for organizations (with individual fines generally set at half the organizational rate), while business-registration violations carry a maximum fine of VND 100,000,000. Article 5 further fixes a one-year statute of

limitations for the imposition of administrative sanctions in the investment and business-registration space. In practical terms, this means the regulatory authority must act within one year of a violation being committed (or discovered, where the violation is ongoing) if it intends to impose a fine under Decree 122/2021/NĐ-CP. For a pre-IPO investor, this administrative layer runs on a separate track from the civil remedies described above: a promoter who registers a business incorrectly, solicits capital without the proper investment procedures, or misrepresents its registration status can be fined up to the ceilings set out in Article 4 — independent of, and in addition to, any private lawsuit an investor brings to void the share purchase and recover funds. The one-year window is also a practical reason not to sit on a suspected scam: an administrative complaint filed after that period may be time-barred even where a civil claim for contract invalidity remains fully available.

FAQ: Pre-IPO Scams, FDI, and Finding the Right Lawyer

Is a pre-IPO investment scam the same thing as normal FDI risk in Vietnam?

No. Foreign direct investment in Vietnam follows a defined legal pathway — investment registration, business registration, capital contribution through a licensed capital account, and (where relevant) shareholder registers that can be checked against corporate records. A pre-IPO investment scam is not a risk inherent to FDI itself; it is what happens when a promoter asks an investor to skip that pathway entirely — no investment registration certificate, no verifiable shareholder entry, no capital account — and simply transfer money against a promise of future shares. The court cases discussed above, and the VND 510,000,000 share transfer that ended up in litigation, involved exactly this kind of documentary vacuum rather than a properly structured FDI transaction.

If I’m searching for a “pre IPO investment scam lawyer near me,” does physical location in Vietnam actually matter?

Less than most investors assume. The core work in these matters — reviewing the share purchase agreement, checking whether the counterparty’s registration and shareholder records are genuine, assembling evidence for a civil suit to void the contract, or filing an administrative complaint under Decree 122/2021/NĐ-CP — is done through document review and filings with Vietnamese courts and regulators, not through in-person meetings. A firm’s ability to trace corporate registration records, request certified formation and shareholder documents, and coordinate consular legalization where a foreign party is involved matters far more than its street address. Unilaw handles exactly this kind of cross-border documentation, including for clients based abroad who never set foot in Vietnam before instructing counsel.

What is the difference between “investing in Vietnam” through proper foreign investment channels and buying pre-IPO shares informally?

Proper foreign investment in Vietnam generates a checkable paper trail: a certificate of incorporation and articles of incorporation for the investing entity, bank statements demonstrating capital sufficient to cover the proposed charter capital, legalized identity and residence documents for any Vietnam-based legal representative, and — where an office is involved — a lease agreement together with proof of the landlord’s legal standing. Informal pre-IPO share purchases, by contrast, often rest on nothing more than a signed agreement and a bank transfer, with no shareholder register entry, no tax or registration formalities completed, and no means of confirming that the underlying company or its shares exist as represented. The distinction is not one of nationality or investment size; it is the presence or absence of a verifiable documentary foundation.

How can I check whether a company offering pre-IPO shares is legitimately registered for investment in Vietnam?

At minimum, ask for the same categories of documentation Unilaw prepares for legitimate company formation: the entity’s certificate of incorporation and articles of incorporation, evidence of registered charter capital, and confirmation of who is listed as a shareholder or capital contributor of record. Where a foreign parent company is involved, ask whether its formation documents have been through the consular legalization required for use in Vietnam, and whether any local representative’s documentation has been properly notarized. A promoter who cannot produce these items, or who insists tax and registration formalities can be “sorted out later,” is asking you to accept the same documentary vacuum that has turned facially valid-looking share deals into years of litigation.

What should I do if I’ve already paid for pre-IPO shares and now suspect a scam?

Preserve every document connected to the transaction — the share purchase agreement, payment records, any correspondence about the company’s registration or shareholder status — and have counsel assess two tracks in parallel. The first is civil: whether the contract can be challenged as invalid and the funds recovered through litigation, following the pattern of the court cases discussed earlier in this article. The second is administrative: whether the promoter’s conduct falls within the violations sanctioned under Decree 122/2021/NĐ-CP, bearing in mind the one-year limitation period for regulators to act. Because that clock starts running early, the sooner a suspected scam is raised with counsel, the more options — civil and administrative — remain open.

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