Companies in Vietnam can be organised as a limited liability company, a joint stock company, a sole entrepreneur enterprise or a partnership enterprise. Among these companies, a joint stock company has the most sophisticated corporate structure and the most common corporate forms. In the following paragraphs, we discuss the corporate governance of a joint stock company including both public joint stock companies and non-public joint stock companies.
Vietnamese law is evolving and normally drafted in a broad and general manner without a system of binding precedents or guidance. In practice, Vietnamese authorities and officials often have broad discretion in interpreting or applying a provision of the law. Accordingly, the author’s view in this publication may from time to time be inconsistent with or different from the view of other Vietnamese officials or legal practitioners. As a practising lawyer, the author reserves his right to take a view or position different from the view or position expressed in this publication.
1. Character of a Joint Stock Company
1.1. Under the Enterprise Law 2014,[1] a joint stock company (JSC) has the following characteristics:
1.1.1. the charter capital of a JSC is divided into equal portions each of which is referred to as “share” (cổ phần);[2]
1.1.2. the individual or organisation owning at least one share in a JSC is referred to as “shareholder” (cổ đông);[3]
1.1.3. a JSC must have at least three shareholders. There is no restriction on the maximum number of shareholders in a JSC;[4]
1.1.4. a shareholder is liable for the debts and other property obligations of the JSC only to the extent of the amount of capital that has been contributed to the company by such shareholder;[5]
1.1.5. a shareholder may freely transfer its shares to other persons, except in case of certain ordinary shares held by founding shareholders or certain restrictions provided in the charter of the company;[6]
1.1.6. a JSC has legal person status from the date of issuance of the Enterprise Certificate[7] of the company;[8] and
1.1.7. a JSC may issue “shares” of different classes to raise funds.[9] The Enterprise Law 2005[10] provides that a JSC may issue “securities” (not just shares) to raise fund.[11] Presumably, the change from “securities” to “shares” is not intended to restrict the ability of a JSC to issue other kinds of securities such as bonds or warrants but to avoid the implied argument that only JSCs can (and an LLC cannot) issue securities.
1.2. Under Securities Law 2006,[12] a “public company” (công ty đại chúng) (Public JSC) is a JSC satisfies at least one of the following conditions:
1.2.1. it has conducted a public offering of shares;[13]
1.2.2. it has its shares listed on a stock exchange or securities trading centre;[14] or
1.2.3. its shares are owned by at least 100 investors, excluding professional securities investors, and paid-up charter capital of VND 10 billion or more.[15] “Professional investors” are commercial banks, finance companies, finance leasing companies, insurance companies and securities trading companies.[16]
1.3. A Public JSC will be subject to securities regulations in addition to the Enterprise Law 2014 and its implementing regulations. Being subject to securities regulations may have the following legal consequences, among other things:
1.3.1. the procedures for issuing shares and other securities by a Public JSC are mostly regulated by the Securities Law 2006 and are different from those under the Enterprise Law 2014;
1.3.2. Public JSCs have separate rules regarding foreign ownership limits and trading of shares by foreign investors;
1.3.3. Public JSCs are subject to additional corporate governance rules provided by the MOF;
1.3.4. Public JSCs have separate rules governing the transfer of shares including listing and tender offer; and
1.3.5. Public JSCs are subject to more public disclosure requirements.
1.4. Due to the difference between being a Public JSC and a JSC which is not a Public JSC (Private JSC or non-Public JSC), it is important to determine when a JSC becomes Public JSC and when a Public JSC ceases to be a Public JSC. A Public JSC needs to satisfy at least one of the conditions described at 1.2.1 - 1.2.3. Therefore, logically, a JSC will become a Public JSC when the JSC first satisfies any of these three conditions.
A Public JSCs whose shares are “listed” (niêm yết) on a stock exchange is a Listed JSC.
2. Organisation structure of a JSC
2.1. Under the Enterprise Law 2014, a JSC’s organisation structure includes the Shareholder Meeting,[17] Board of Directors (the Board), the Inspection Committee (Ban Kiểm Soát) and the General Director.[18] If a JSC has less than 11 shareholders and the Institutional Shareholders[19] own less than 50% of the charter capital of the company, then the JSC may not need an Inspection Committee.[20]
2.2. In addition to the usual organisation structure under the Enterprise Law 2005, for the first time, the Enterprise Law 2014 introduces the organisation structure of Shareholder Meeting, the Board and the General Director (i.e. no Inspection Committee) (Single Board Structure).[21]
2.3. In a Single Board Structure, 20% of the number of the directors of the Board must be independent Board directors (see 10.4) who will exercise the supervisory authority over the operation of the JSC. In addition, the Board in a Single Board Structure must have an internal audit unit.[22] If a JSC has Single Board Structure then the words “independent directors” must be added before names of the independent directors in all papers of the JSC.[23]
2.4. The Enterprise Law 2014 allows a Public JSC apply securities regulations regarding organisation structure.[24] Under Decree 71/2017,[25] a Public JSC’s organisation structure includes Shareholder Meeting, the Board, the Inspection Committee, and the General Director.[26] A Listed JSC will also need to have a person in charge of corporate governance (người phụ trách quản trị công ty).[27] The person in chage of corporate governance will be responsible for advising the Board of various corporate governance matters of a public company (see 14.5 - 14.6).[28]
3. Authorities of the Shareholder Meeting
3.1. Under the Enterprise Law 2014, the Shareholder Meeting comprising of all shareholders with voting rights remains to be the highest decision-making authority of a JSC.[29] The Shareholder Meeting under the Enterprise Law 2014 have the following “rights and obligations”:[30]
3.1.1. to decide on the development strategy of the company;[31]
3.1.2. to decide on classes of shares and the total number of shares of each class, which may be offered for sale;[32]
3.1.3. to decide on the rate of annual dividend for each class of shares;[33]
3.1.4. to elect, remove, or dismiss members of the Board or the Inspection Committee;[34]
3.1.5. to decide on investment or sale of assets valued at 35% or more of the total value of assets recorded in the most recent financial statements of the company, unless the charter of the company stipulates some other percentage or value;[35]
3.1.6. to decide on amendments to the charter of the company;[36]
3.1.7. to approve annual financial statements;[37]
3.1.8. to decide on buy-back of more than 10% of the total number of shares of each class already sold;[38]
3.1.9. to consider and deal with breaches by members of the Board or the Inspection Committee that cause damages to the company and its shareholders;[39]
3.1.10. to decide on reorganisation and dissolution of the company;[40] and
3.1.11. to have other rights and obligations in accordance with the Enterprise Law 2014 and the charter of the company.[41] In addition to Article 135 of the Enterprise Law 2014, the Shareholder Meeting has various other authorities scattered in the text of the Enterprise Law 2014.
3.2. The Enterprise Law 2014 fails to clarify the scope of authorities of the Shareholder Meeting in various areas including the following:
3.2.1. division of power between the Shareholder Meeting, the Board and the General Director (see 3.3 - 3.6);
3.2.2. it is not clear what could constitute a “development strategy” of the company. Since the Board has the power to decide on medium-term development strategy and annual business plan of the company,[42] arguably, development strategy under the Shareholder Meeting’s authority means long-term development strategy. However, it is still not clear if a long-term contract could fall under the meaning of development strategy and requires approval by the Shareholder Meeting;
3.2.3. Under Article 135.2(d) of the Enterprise Law 2014, the charter of a JSC may provide a number or percentage which is “different” from 35% of the total asset value of the company. It is not clear if the “different” number or percentage could be higher than the default value of 35% of the total asset value of the company. Logically, the different number or percentage should not be higher than the default value under the Enterprise Law 2014. This is because presumably, Article 135.2(d) is intended to provide protection to minority shareholders of a JSC regarding certain material contracts. If the default threshold can be increased by amending the charter of the JSC, then the intended statutory protection will be less meaningful. In addition, if the “different” number or percentage could be higher than the default value then the authorities of Shareholder Meeting under Article 135.2(d) could be inconsistent with Articles 143.2(dd) and 144.1(d) of the Enterprise Law 2014 both of which suggest that the charter can only provide a different number or percentage lower than the default threshold;
3.2.4. the authorities of the Shareholder Meeting to approve a material contract does not expressly cover authorities to approve a series of related contracts. As such, a material contract with high value can be arguably divided into two or more contracts with smaller value to avoid approvals by the Shareholder Meeting; and
3.2.5. the importance of approving annual financial statements of the company is not clear. In particular, it is not clear what is the legal consequence if an annual financial statement is not approved. E.g. if an annual financial statement is not approved then can the JSC still declare and pay dividends based on the unapproved financial statement. If an annual financial statement is approved then will the Shareholder Meeting forfeit the rights to take action against the directors regarding matters which is based on the approved financial statement.
3.3. In practice, due to the need for operational flexibility and efficiency, the Shareholder Meeting of many JSCs, especially Public JSCs, have authorised or delegated various matters to the Board. However, similar to the Enterprise Law 2005, the Enterprise Law 2014 remains unclear about whether the Shareholder Meeting may delegate or authorise the Board to exercise some authorities of the Shareholder Meeting.[43]
3.4. The following arguments suggest that delegation or authorisation of the authorities of the Shareholder Meeting (or at least regarding those specifically provided in Article 135.2 of the Enterprise Law 2014) is not legally possible:
3.4.1. The Shareholder Meeting and the Board are two corporate bodies under the Enterprise Law. Under the Civil Code 2005,[44] the Shareholder Meeting and the Board are not recognised as independent legal entities which can enter into contract or transaction including authorisation transaction;
3.4.2. Article 96.2 of the Enterprise Law provides that the Shareholder Meeting will have “the following rights and obligations”. The term “obligations” implies that at least matters within the authorities of the Shareholder Meeting specifically provided in Article 135.2 of the Enterprise Law 2014 must be considered and decided by the Shareholder Meeting itself. Under the Civil Code 2015, one could transfer its rights but could not transfer its obligations without consents of the persons to which the obligations are owed;[45] and
3.4.3. If the Board is controlled by a number of major shareholders of a JSC then delegating or authorising the Board to exercise the powers of the Shareholder Meeting may cause a potential conflict of interest between the company and the major shareholders. In addition, delegating the powers of the Shareholder Meeting to the Board could also reduce the protection that the Enterprise Law 2014 confers to minority shareholders in the JSC.
3.5. On the other hand, there are certain provisions, which recognise delegation or authorisation of powers from the Shareholder Meeting to the Board. For example:
3.5.1. Article 44.3 of Decree 78/2015[46] states that “if the Shareholder Meeting approves the issuance of shares to increase charter capital and at the same time delegates (giao) the Board to conduct procedures to register the increased charter capital after completion of each tranche of issuance …”;
3.5.2. Article 7.4 of Decree 58/2012 states that “the Board can only amend the plan for use of proceeds … if the Board is authorised (ủy quyền) by the Shareholder Meeting …”; and
3.5.3. a delegation of powers is quite common in practice. Therefore, it may become harder for the authorities to challenge a common practice.
3.6. Given the uncertainty under the Enterprise Law 2014 about delegation of power by the Shareholder Meeting, the charter of a JSC should try to address this issue to make it clear whether the Shareholder Meeting could delegate its power to the Board. And if so, how the delegation would work.
4. Meetings of the Shareholder Meeting
4.1. The Shareholder Meeting of a JSC must convene a meeting at least once a year during the first four months or, if permitted by the Business Registration Authority and the Board, six months after the end of a financial year.[47] Such meeting is called the annual meeting (cuộc họp thường niên)[48] and other meetings of the Shareholder Meeting are called irregular meetings (cuộc họp bất thường). The Enterprise Law 2014 is not clear if there are two or more meetings of the Shareholder Meeting of a JSC in the first four months after the end of a financial year, then whether the first meeting among these meetings is regarded as the annual meeting or the JSC may have flexibility in deciding which meeting is the annual meeting.
4.2. In an annual meeting, the Shareholder Meeting will consider and approve the following:
4.2.1. annual business plan. The Board also has the authority to approve the annual business plan.[49] Therefore, it is not clear whether (a) annual business plan must be approved by both the Board and the Shareholder Meeting or (b) the Shareholder Meeting only given that the Shareholder Meeting is superior to the Board;
4.2.2. annual financial statements;
4.2.3. report of the Board regarding management by and operational results of the Board and each Board director. This is slightly different from the Enterprise Law 2005 which does not require report on activity of each Board director;
4.2.4. report of the Inspection Committee regarding business results of the company and/or operational results of the Board and the General Director;
4.2.5. report on self-assessment of operational results of the Inspection Committee and of each inspector; and
4.2.6. an amount of dividend payable on each class of share.
4.3. Similar to the Enterprise Law 2005, unless otherwise provided by the charter, all reports prepared by the Board for presentation at the annual meeting of the Shareholder Meeting must be sent to the Inspection Committee for review at least 30 days before the date of the meeting.[50]
4.4. As in the case of the Enterprise Law 2005, regarding an annual meeting of the Shareholder Meeting, the Enterprise Law 2014 remains unclear whether the matters within the scope of an annual meeting of the Shareholder Meeting:
4.4.1. could be decided at an irregular meeting of the Shareholder Meeting or by a collection of written opinions from shareholders (see 5). In the absence of a clear prohibition, one could reasonably argue that these matters could also be considered and approved at an irregular meeting of the Shareholder Meeting or via a collection of written opinions from shareholders. Otherwise, Article 136.2 of the Enterprise Law 2014 becomes too restrictive and inflexible for the operation of a JSC; and
4.4.2. must be decided at an annual meeting of the Shareholder Meeting. For example, it is not clear if a JSC has no profit for paying dividends then whether the annual meeting of the Shareholder Meeting of such JSC must still decide that the JSC will not pay dividends for the relevant year. Or the Shareholder Meeting of such JSC can decide to skip dividend payment from the agenda of the annual meeting of Shareholder Meeting.
4.5. The Board is responsible for convening a meeting of the Shareholder Meeting including both annual meetings and irregular meetings.[51] Under the Enterprise Law 2014,[52] if the Board fails to convene an irregular meeting of the Shareholder Meeting in certain cases (e.g. at the request of the Inspection Committee or a 10% Major Shareholder),[53] then:
4.5.1. all Board directors (instead of just the JSC Chairman[54] as in the Enterprise Law 2005) will be jointly liable for any damages arising from such failure;[55] and
4.5.2. other persons such as the Inspection Committee or a 10% Major Shareholder will be responsible for convening a meeting of the Shareholder Meeting.[56]
In this publication, an ordinary shareholder or a group of ordinary shareholder holding 10% (or a lower percentage provided by the charter) or more of the total ordinary shares of the company for six consecutive months is referred to as a 10% Major Shareholder.
4.6. The persons convening a meeting of the Shareholder Meeting must complete various preparation works including, among other things:[57]
4.6.1. to prepare a list of shareholders entitled to attend a meeting;
4.6.2. to prepare the program and agenda of the meeting;
4.6.3. to draft a resolution of the Shareholder Meeting in accordance with the proposed agenda of the meeting; list and details of candidates in the case of election of members of the Board of Management or inspectors. This is a new item under the Enterprise Law 2014; and
4.6.4. to send a notice of invitation to the meeting to each shareholder entitled to attend the meeting.
4.7. A meeting of the Shareholders’ Meeting must be held in Vietnam. If a meeting of the Shareholder Meeting occurs in more than one location, then the location where the chairing person of the meeting resides is deemed to be the location of the meeting.[58] The chairing person of a meeting of the Shareholder Meeting is usually the JSC Chairman (see 13.2).
4.8. The Enterprise Law 2014 now requires the list of shareholders attending a meeting of the Shareholder Meeting to be prepared not earlier than five days (or a longer period under the charter) before the date of sending notice of the meeting to shareholders.[59] Under Decree 71/2017,[60] a Public JSC must disclose the record date for fixing the list of attending shareholders at least 20 days before such date.
4.9. The change in timing in the Enterprise Law 2014 is quite important. This is because, under the Enterprise Law 2014, it is no longer possible for a JSC to use a very outdated list of attending shareholders to organise a meeting of a Shareholder Meeting.
4.10. The Enterprise Law 2014 also imposes express obligations on managers of a JSC to provide details of the list of attending shareholders to shareholders and to correct information in the list.[61]
4.11. The Enterprise Law 2014 now requires that notices of a meeting of the Shareholder Meeting of a JSC must be sent to shareholders of the JSC at least 10 days (or a longer period provided in the charter) before the date of the meeting.[62] Presumably, the 10 day period should commence from the date on which the JSC sends the notice of meeting, not the date on which the relevant shareholders receives the notice of meeting. This is because a JSC may not be able to know when a shareholder receives the notice of meeting. That said, the Enterprise Law 2014 should use “business days” instead of “days” since from time to time Vietnam may have a very long public holiday.
4.12. The Enterprise Law 2014 now allows a JSC to upload documents relating to a meeting of the Shareholders to its website instead of attaching the same to the notice of meeting.[63] If documents relating to a meeting of the Shareholder Meeting are uploaded to the JSC’s website,[64]
4.12.1. the notice of meeting must clearly indicate how such documents could be downloaded; and
4.12.2. the JSC still needs to send the documents if so requested by the shareholders.
4.13. A Public JSC may invite its auditor to attend the annual meeting of Shareholder Meeting and to speak about issues relating to the audited annual financial statements of the company if the auditing report contains a material qualification.[65]
4.14. Under the Enterprise Law 2014, a shareholder may attend a meeting of the Shareholder Meeting via any of the following methods:[66]
4.14.1. directly attend the meeting in person.[67] If the shareholder is an Institutional Shareholder and has appointed an Authorised Representative[68] of such shareholder then the Authorised Representative will attend the meeting of the Shareholder Meeting;
4.14.2. authorise another person to attend and vote at the meeting.[69] Similarly to Enterprise Law 2005, the wording of Article 140.2(b) suggests that only one proxy could be appointed under this provision. If the shareholder is an Institutional Shareholder and has not appointed an Authorised Representative then the Institutional Shareholder must authorise another person to attend the meeting of the Shareholder Meeting.[70] It is not clear whether, in this scenario, the legal representative of the Institutional Shareholder has the power to attend the meeting of the Shareholder Meeting without having to have any power of attorney. It is also not clear if the person receiving a proxy to attend a meeting of the Shareholder Meeting must be an individual as in the case of Authorised Representative or could also be an organisation. A Public JSC must provide guidance for shareholders to give authorisation to attend meetings of Shareholder Meeting;[71]
4.14.3. attend via an online conference, electronic voting or other electronic means.[72] The Enterprise Law 2014 considers attending via electronic means equal to attending in person.[73] Decree 71/2017 even goes further to require Listed JSCs to maximise the use of information technology to facilitate shareholders to attend meetings of Shareholder Meeting;[74] and
4.14.4. send a voting slip to the meeting via mail, facsimile or emails.[75] The Enterprise Law 2014 also considers attending sending in a voting slip equal to attending in person.[76] Under this method, it is not clear if the relevant shareholder could authorise another person to complete the voting slips on behalf of the shareholder or the shareholder must sign the voting slip directly.
4.15. Both the Enterprise Law 2005 and the Enterprise Law 2014 are silent on the scenario of “partial attendance” by a shareholder. For example, if a meeting of the Shareholder Meeting is supposed to approve three issues and a shareholder only sends a voting slip regarding one issue then it is not clear if such shareholder could be deemed to attend the meeting for the purpose of the remaining two issues. Similar situations may also happen in the context of an interrupted online conference or electronic voting or a shareholder stepping out of the meeting room after registering at the beginning. Logically, a shareholder should be deemed to attend the meeting for the purpose of the voted item only. But the charter of a JSC should clarify this issue.
4.16. Under the Enterprise Law 2014,[77]
4.16.1. a meeting of the Shareholder Meeting at the first call could proceed if the attending shareholders representing at least 51% (or a higher percentage provided in the charter) of “the total number of votes” (tổng số phiếu biểu quyết);
4.16.2. if the quorum for the meeting of the Shareholder Meeting is not satisfied at the first call, a second call for the meeting of the Shareholder Meeting may be made, and at the second call, the meeting could proceed if the attending shareholders representing at least 33% of the total number of votes.[78] The Enterprise Law 2014 requires the second meeting of the Shareholder Meeting to be convened within 30 days from the proposed date of the first meeting unless otherwise provided by the charter of the JSC. As such, unlike Enterprise Law 2005 which requires a second meeting of the Shareholder Meeting to be made within 30 days after the proposed date of the first meeting,[79] Article 141.2 of the Enterprise Law 2014 allows a JSC the flexibility to shorten this time gap; and
4.16.3. if the quorum for the second meeting of the Shareholder Meeting is not satisfied, a third call for the meeting may be made and a meeting of the Shareholder Meeting at the third call could proceed regardless of the number of votes represented by the attending shareholders. However, similar to the meeting at the second call, the Enterprise Law 2014[80] allows the charter of the JSC to shorten the minimum time gap between the meeting at the third call and the proposed date of the second meeting to less than 20 days.
4.17. It appears that a meeting of the Shareholder Meeting at the first and the second call under the Enterprise Law 2014 may be quorate even if there is only one person present at the meeting as long as such person holds at least the minimum shareholding required by law. This is because Articles 141.1 and 141.2 of the Enterprise Law 2014 refer to “a number of shareholders” (số cổ đông). However, for a meeting of the Shareholder Meeting at the third call, Article 141.3 of the Enterprise Law 2014 uses the words “attending shareholders” (các cổ đông dự họp), which may arguably mean that the meeting must be attended by more than one shareholder.
4.18. The Enterprise Law 2005 uses the term “shares which carry voting rights” (cổ phần có quyền biểu quyết). In our view, this is a more accurate choice of word since a shareholder in certain cases does not have the right to vote on certain issues (e.g. a related party transaction involved such shareholder). In such cases, the shareholder has votes but such votes do not carry voting rights. On the other hand, the Enterprise Law 2014 uses the words “total number of votes” (tổng số phiếu biểu quyết) which does not make clear whether the votes to be counted when determining a quorum of a meeting of the Shareholder Meeting include:
4.18.1. only votes that have voting rights of the shareholders who have voting rights; or
4.18.2. all votes of all shareholders whether such votes or such shareholders carry voting rights or not.
4.19. Both the Enterprise Law 2005 and the Enterprise Law 2014 allow the charter of a JSC to provide a “specific ratio” (tỷ lệ cụ thể) for the required quorum of a meeting of the Shareholder Meeting. There are two possible interpretations of the words “specific percentages”:
4.19.1. a strict interpretation pursuant to which the charter of a JSC can only contemplate a specific number (e.g. 60% or 65%) as a quorum threshold for a meeting of the Shareholder Meeting; or
4.19.2. a more flexible interpretation pursuant to which the charter of a JSC can provide other conditions to the quorum requirement of a meeting of the Shareholder Meeting instead of having a specific number only (e.g. having the presence of a particular shareholder). Perhaps, if a JSC adopts the more flexible approach, it would have to argue that the words “specific ratio” in the Enterprise Law 2014 should allow the charter of a JSC specify how the numerator and the denominator of a ratio are determined.
4.20. The Enterprise Law 2014 is also not clear whether a quorum must be maintained at all times during a meeting of the Shareholder Meeting.
4.21. Similar to the Enterprise Law 2005, the Enterprise Law 2014 allows the charter of a JSC to contemplate how a meeting of the Shareholders’ Meeting should be conducted.[81] If the charter of a JSC does not contemplate about the conducts of a meeting of the Shareholder Meeting, then various default rules on conducts of a meeting of the Shareholder Meeting will apply. These default rules under the Enterprise Law 2014 are similar to those under the Enterprise Law 2005.[82]
4.22. Under the Enterprise Law 2014,[83] in a meeting of the Shareholder Meeting, except for:
4.22.1. super majority matters (see 4.25); or
4.22.2. the election of Board directors or Inspectors (see 11.3), all matters presented to the Shareholder Meeting can be passed by the approval of a number of shareholders representing at least 51% of the “total votes” (số phiếu biểu quyết) of all attending shareholders.
4.23. The 51% simple majority voting under the Enterprise Law 2014 is a major change compared with the Enterprise Law 2005 which provides for a 65% simple majority.[84] In addition, except for super majority matters, an amendment to the charter is now a 51% simple majority matter instead of a 75% super majority matter under the Enterprise Law 2005. However, if a JSC incorporated under the Enterprise Law 2005 follows the Enterprise Law 2005’s voting rules, then such JSC will need to amend its charter to enjoy the new lower voting thresholds under the Enterprise Law 2014. And such amendment is still subject to the old 75% super majority vote under the Enterprise Law 2005.
4.24. Both the Enterprise Law 2005 and the Enterprise Law 2014 allow the charter of a JSC to provide a “specific ratio” (tỷ lệ cụ thể) for the simple majority voting threshold required for passing a decision of a meeting of the Shareholder Meeting. The use of the words “specific ratio” suggests that the charter of a JSC may provide a higher than 51% simple majority voting thresholds. Similar to the discussion at 4.19, it is not clear if the words “specific ratio” could be interpreted to cover a requirement that a simple majority vote must include the votes of a specific shareholder.
4.25. Under the Enterprise Law 2014,[85] the approval of a number of shareholders representing at least 65% (or higher percentage provided by the charter) of the total votes of all attending shareholders will be required for the following matters:
(a) classes of shares and the total number of shares of each class;
(b) change of lines of business and business sectors;
(c) change of the organisational and managerial structure of the company;
(d) Investment project or sale of assets valued at equal to or more than 35% of the total value of assets recorded in the most recent financial statements of the company, or a smaller percentage or a smaller specific value as stipulated in the charter (see 3.2.3). While a specific value is still permitted under this provision, such specific value is required to be lower than 35% of the total value of assets of the JSC;
(e) reorganisation or dissolution of the company; and
(f) other matters as stipulated in the charter of the company.
4.26. Again this is a major change compared to the Enterprise Law 2005, which provides for a 75% supermajority voting threshold.[86] There is no clarification as to what could constitute a change to “organisational and managerial structure of a JSC”. For example, a change to the number of Board directors or the rights of the General Director could also be considered as changes to organisational and managerial structure of a JSC. Therefore, many changes to the charter may still be subject to supermajority voting.
4.27. Please see 4.24 for the discussion about whether the words “specific ratio” could be interpreted to cover a requirement that a supermajority vote must include the votes of a specific shareholder.
4.28. Both the Enterprise Law 2005 and the Enterprise Law 2014 use the words “total votes” (tổng số phiếu biểu quyết) in the calculation of voting thresholds applicable to simple majority voting or super majority voting on a matter presented to a meeting of the Shareholder Meeting. These words could be interpreted to mean any of the following:
4.28.1. votes of the attending shareholders that carry voting rights regarding the relevant matter and that have been casted on the relevant matter; or
4.28.2. votes of the attending shareholders that carry voting rights regarding the relevant matter (whether or not such votes have been cast for such matters); or
4.28.3. votes of the attending shareholders (whether or not such votes carry voting rights or have been cast regarding the relevant matters). Logically, the Enterprise Law 2014 should expressly exclude from voting calculation the votes of the shareholders who are not entitled to vote on a matter presented to the Shareholder Meeting.
4.29. The Enterprise Law 2014 remains unclear whether a shareholder can split its votes on a matter presented to the Shareholder Meeting. In a split voting, a shareholder will cast some votes for the matter presented to the Shareholder Meeting and some votes against. Under the Enterprise Law 2005,[87] unless otherwise provided by the charter, a shareholder at a meeting of the Shareholder Meeting can only receive one voting slip for one matter to be approved at the meeting. Therefore, under the Enterprise Law 2005, unless provided by the charter, it may be difficult for a shareholder to split its votes. The Public JSC Model Charter[88] also contains a similar mechanism which may prevent a split voting.[89]
4.30. The Enterprise Law 2014 does not contain wording similar to those under the Enterprise Law 2005. However, a JSC which wishes to allow split voting should still make it clear in its charter that split voting is possible. In practice, split voting is necessary for a JSC to allow a shareholder (e.g. a fund management company or DR Bank who is holding shares in the JSC as the owner of records for other beneficial owners to vote its shares according to different instructions of the beneficial owners.
4.31. The Enterprise Law 2014 is silent on whether the Enterprise Law 2014 repeals or modifies the provisions of Resolution 71/2006[90] on quorum and voting in LLCs and JSCs. Resolution 71/2006 is stated to implement Vietnam’s WTO Commitments,[91] which provides that
“… notwithstanding the requirements in the 2005 Enterprise Law, investors establishing a commercial presence as a joint venture under the commitments in Viet Nam's Schedule of Specific Commitments would have the right to establish, through the enterprise's charter, all the types of decisions that had to be submitted to the Members' Council or Shareholders' Meeting for approval; the quorum rules, if any, that governed voting procedures; and the precise percentages of voting majorities necessary to make all decisions, including a simple majority of 51 per cent. … Viet Nam would give legal effect to these provisions of such enterprises' charters.”
4.32. In particular, Resolution 71/2006 provides that “[A] shareholding company is entitled to provide in its charter … the number of members [of the company] required for holding a shareholder meeting [and] … the majority vote necessary (including 51% majority) in order to pass decisions … of the shareholder meeting”. While the WTO Commitments only refer to “joint venture companies”, Resolution 71/2006 appears to refer to all shareholding or limited liabilities companies. This has resulted in different views on how Resolution 71/2006 should be interpreted:
4.32.1. the restrictive view which is as the WTO Commitments only refer to joint venture companies, Resolution 71/2006 should only apply to (1) joint venture companies, which operate in the service sectors committed by Vietnam in the WTO Commitments but not to domestic companies and (2) joint venture companies established before 11 January 2007 and choose to amend their charters; and
4.32.2. the more liberal view is that Resolution 71/2006 replaces the relevant quorum and voting requirements under the Enterprise Law and applies to all shareholding or limited liability companies (or at least those with foreign investors). This view is based on the fact that Resolution 71/2006 was published in the Official Gazette and was promulgated by the President pursuant to the Law on Laws.[92] This suggests that Resolution 71/2006 is a legal document having the force of law in its own right rather than a specific resolution approving an international undertaking. Accordingly, Resolution 71/2006 should be applied in accordance with its own wording rather than by reference to the WTO Commitments.
4.33. If the liberal interpretation of Resolution 71/2006 is adopted, then all matters within the authorities of the Shareholder Meeting including the super majority matters can be approved by a 51% simple majority. Unlike Resolution 71/2006, the Enterprise Law 2014 requires a 65% super majority voting for certain matters presented to a meeting of the Shareholder Meeting. Since the Enterprise Law 2014 is after Resolution 71/2006, under the Law on Law 2015, the Enterprise Law 2014 will prevail Resolution 71/2006. As such, it appears that the liberal interpretation is no longer available for a JSC. That said, the restrictive view of Resolution 71/2006 should remain valid. However, under the Enterprise Law 2014, a foreign investor may find it more difficult in invoking the restrictive view of Resolution 71/2006 in practice, because:
4.33.1. the Enterprise Law 2014 does not expressly recognise or refer to Resolution 71/2006. This makes it more difficult to relate the Enterprise Law 2014 with Resolution 71/2006; and
4.33.2. joint venture company no longer exist as a concept under the Enterprise Law 2014 and Investment Law 2014.
4.34. Under the Enterprise Law 2014, minutes of meeting of the Shareholder Meeting:[93]
4.34.1. need not to be included in a minutes book (sổ biên bản) as in the case of the Enterprise Law 2005;[94]
4.34.2. may now include voice or other digital recordings;[95]
4.34.3. must clearly specify the methods of voting, numbers of eligible votes and ineligible votes, and the number of “yes” vote for each decision;[96] and
4.34.4. may be uploaded to the JSC’s website instead of sending to its shareholders.[97]
4.35. A Vietnamese version of minutes of meeting of the Shareholder Meeting now expressly prevail a foreign language version of the same in case of inconsistency. For JSCs with majority control by foreign investors, this is not good news.[98] Under The Enterprise Law 2005, a Vietnamese version and a foreign language version of minutes of meeting of the Shareholder Meeting have equal validity.[99]
[1] The Law on Enterprise of the National Assembly dated 26 November 2014 (Enterprise Law 2014).
[2] Article 110.1(a) of the Enterprise Law 2014.
[3] Article 4.2 of the Enterprise Law 2014.
[4] Article 110.1(b) of the Enterprise Law 2014.
[5] Article 110.1(c) of the Enterprise Law 2014.
[6] Article 110.1(d) of the Enterprise Law 2014.
[7] Enterprisde Registration Certificate (Giấy chứng nhận đăng ký doanh nghiệp) or Business Registration Certificate (Giấy Chứng nhận đăng ký kinh doanh) (generally, Enterprise Certificate).
[8] Article 110.2 of the Enterprise Law 2014.
[9] Article 110.3 of the Enterprise Law 2014.
[10] The Law on Enterprise of the National Assembly dated 29 November 2005 (Enterprise Law 2005).
[11] Article 77.3 of the Enterprise Law 2014.
[12] The Law on Securities of the National Assembly dated 29 June 2006, as amended (Securities Law 2006).
[13] Article 25.1(a) of the Securities Law 2006.
[14] Article 25.1(b) of the Securities Law 2006.
[15] Article 25.1(c) of the Securities Law 2006.
[16] Article 6.11 of the Securities Law 2006.
[17] The General Meeting of Shareholders of a JSC (Shareholder Meeting).
[18] Article 134.1(a) of the Enterprise Law 2014.
[19] An institutional shareholder of the JSC (Institutional Shareholder).
[20] Article 134.1(a) of the Enterprise Law 2014.
[21] Article 134.1 of the Enterprise Law 2014.
[22] Article 134.1(b) of the Enterprise Law 2014.
[23] Article 150.4 of the Enterprise Law 2014.
[24] Article 134.1 of the Enterprise Law 2014.
[25] Decree 71 of the Government dated 6 June 2017 guiding corporate governance of public companies (Decree 71/2017).
[26] Chapters II, III and IV of Decree 71/2017.
[27] Article 18 of Decree 71/2017.
[28] Article 18.3 of Decree 71/2017.
[29] Article 135.1 of the Enterprise Law 2014.
[30] See also Truong Nhat Quang, Enterprise Law Principles, section 10-10.
[31] Article 135.2(a) of the Enterprise Law 2014.
[32] Article 135.2(b) of the Enterprise Law 2014.
[33] Article 135.2(b) of the Enterprise Law 2014.
[34] Article 135.2(c) of the Enterprise Law 2014.
[35] Article 135.2(d) of the Enterprise Law 2014.
[36] Article 135.2(dd) of the Enterprise Law 2014.
[37] Article 135.2(e) of the Enterprise Law 2014.
[38] Article 135.2(g) of the Enterprise Law 2014.
[39] Article 135.2(h) of the Enterprise Law 2014.
[40] Article 135.2(i) of the Enterprise Law 2014.
[41] Article 135.2(k) of the Enterprise Law 2014.
[42] Article 149.2(a) of the Enterprise Law 2014.
[43] See also Truong Nhat Quang, Enterprise Law Principles, section 10-7.
[44] Article 84 of the Enterprise Law 2014.
[45] Articles 365.1 and 370.1 of the Civil Code 2015.
[46] Decree 78 of the Government dated 14 September 2015 on enterprise registration (Decree 78/2015).
[47] Article 136.2 of the Enterprise Law 2014.
[48] Article 136.1 of the Enterprise Law 2014.
[49] Article 149.2(a) of the Enterprise Law 2014.
[50] Article 170.3 of the Enterprise Law 2014.
[51] Article 149.2(m) of the Enterprise Law 2014.
[52] Article 136.4 of the Enterprise Law 2014.
[53] Article 136.3 of the Enterprise Law 2014.
[54] The chairman of the Board of the JSC (JSC Chairman).
[55] Article 136.4 of the Enterprise Law 2014.
[56] Article 136.5 of the Enterprise Law 2014.
[57] Article 136.7 of the Enterprise Law 2014.
[58] Article 136.1 of the Enterprise Law 2014.
[59] Article 137.1 of the Enterprise Law 2014.
[60] Article 8.1 of Decree 71/2017.
[61] Article 137.3 of the Enterprise Law 2014.
[62] Article 139.1 of the Enterprise Law 2014.
[63] Article 139.4 of the Enterprise Law 2014.
[64] Article 139.4 of the Enterprise Law 2014.
[65] Article 8.4 of Decree 71/2017.
[66] Article 140.2 of the Enterprise Law 2014.
[67] Article 140.2(a) of the Enterprise Law 2014.
[68] The authorised representative (người đại diện theo ủy quyền) of an institutional shareholder of the JSC (Authorised Representative).
[69] Article 140.2(b) of the Enterprise Law 2014.
[70] Article 140.1 of the Enterprise Law 2014.
[71] Article 8.1 of Decree 71/2017.
[72] Article 140.2(c) of the Enterprise Law 2014.
[73] Article 140.2 of the Enterprise Law 2014.
[74] Article 8.3 of Decree 71/2017.
[75] Article 140.2(d) of the Enterprise Law 2014.
[76] Article 140.2 of the Enterprise Law 2014.
[77] Article 141.1 of the Enterprise Law 2014.
[78] Article 141.2 of the Enterprise Law 2014.
[79] Article 102.2 of the Enterprise Law 2005.
[80] Article 141.3 of the Enterprise Law 2014.
[81] Article 144 of the Enterprise Law 2014.
[82] Article 103 of the Enterprise Law 2014.
[83] Article 144.2 of the Enterprise Law 2014.
[84] Article 104.3(a) of the Enterprise Law 2005.
[85] Article 144.1 of the Enterprise Law 2014.
[86] Article 104.3(b) of the Enterprise Law 2005.
[87] Article 103.1 of the Enterprise Law 2005.
[88] The modal charter for Public JSCs under Circular 95 of the Ministry if Finance dated 22 September 2017 guiding corporate governance for Public JSCs (Public JSC Model Charter).
[89] Article 20.2 of the Public JSC Model Charter.
[90] Resolution 71 of the National Assembly dated 29 November 2006 approving Vietnam’s WTO Commitments (Resolution 71/2006).
[91] The commitments of Vietnam to the World Trade Organization are contained in WTO document number WT/ACC/VNM/48 dated 27 October 2006 (WTO Commitments).
[92] Order 16/2016 of the President dated 6 December 2006 promulgating Resolution 71.
[93] For a discussion regarding the need of a minutes of meeting and its relationship with a decision or resolution of the Shareholders Meeting, see Truong Nhat Quang, Enterprise Law Principles, section 10-12, 10-13.
[94] Article 106.1 of the Enterprise Law 2005.
[95] Article 146.1 of the Enterprise Law 2014.
[96] Article 146.1(g)-(h) of the Enterprise Law 2014.
[97] Article 146.3 of the Enterprise Law 2014.
[98] Article 146.1 of the Enterprise Law 2014.
[99] Article 106.1 of the Enterprise Law 2005.
