Internal Protection Mechanism Under the Enterprise Law 2005

- Decide on solutions for market development, marketing and technology; approve contracts for purchase, sale, borrowing, lending and other contracts with a value equal to or greater than 50% of the total value of assets recorded in the company's accounting books or another smaller ratio specified in the company's Charter;

- Appoint, dismiss, remove the Director (General Director) and other important managers of the company; decide on the salary and other benefits of those managers;

- Decide on the organizational structure, internal management regulations of the company, decide on the establishment of subsidiaries, branches, representative offices and capital contribution and purchase of shares of other enterprises;

- Submit annual financial settlement report to the General Meeting of Shareholders;

- Propose the level of dividends to be paid, decide on the time limit and procedures for paying dividends or handling losses arising during the business process;

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- Decide on the offering price of the company's shares and bonds; value contributed capital assets other than Vietnamese currency, freely convertible foreign currency, or gold;

- Approve the agenda and content of documents for the General Meeting of Shareholders, convene the General Meeting of Shareholders or carry out procedures to ask for opinions for the General Meeting of Shareholders to pass decisions;

- Decision to buy back no more than 10% of the sold shares of each type;

- Proposing the reorganization or dissolution of the company;

Compared to the 1990 Law on Enterprises, in addition to adding more powers to the Board of Directors, the 1999 Law on Enterprises also stipulates many contents related to the organization and operation of the Board of Directors that the 1990 Law on Enterprises does not have, such as: Rights and obligations of the Chairman of the Board of Directors; Board of Directors' meetings; The right to information of Board of Directors' members and Regulations on dismissal, removal and addition of Board of Directors' members. However, in reality, in the legal relationship on protecting shareholders, the Board of Directors is mostly protected.

rights and serve the interests of the majority shareholders. Most of the management and business of the company are decided by the Board of Directors or the major shareholders or their representatives in this body.

2.2.2.3. Director/General Director

According to Article 85 of the 1999 Law on Enterprises, the Board of Directors shall appoint one of them or another person as Director/General Director. The Chairman of the Board of Directors may concurrently be the Director/General Director of the company. In cases where the Company Charter does not stipulate that the Chairman of the Board of Directors is the legal representative, the Director/General Director shall be the legal representative of the company. The Director/General Director shall be the person who manages the daily operations of the company and is responsible to the Board of Directors for the implementation of the assigned rights and duties. The Director/General Director shall have the following rights and duties:

- Decide on all matters related to the company's daily operations;

- Organize the implementation of decisions of the Board of Directors;

- Organize the implementation of the company's business plan and investment plan;

- Propose plans for organizational structure and internal management regulations of the company;

- Appoint, dismiss, and remove management positions in the company, except for positions appointed, dismissed, and removed by the Board of Directors;

- Decide on salary and allowances (if any) for employees in the company, including managers under the appointment authority of the Director/General Director;

Although the 1999 Law on Enterprises has stipulated many rights and obligations of the Board of Directors as well as the Director/General Director, other contents related to the person

management such as: The obligations of managers (including the obligations of care, loyalty and honesty); Or the standards of managers and the principles for determining their remuneration linked to the company's performance have not been regulated.

In the legal relationship of protecting shareholders, the Director/General Director is an important subject because when they fulfill their duties well, it means that the rights of shareholders are guaranteed. The 1999 Enterprise Law grants the Director/General Director separate rights from the Board of Directors, in order to help the Director/General Director not to depend too much on the Board of Directors. However, in reality, the Director/General Director is appointed by the Board of Directors, so the Director/General Director often tends to side with the Board of Directors, mainly serving the interests of the majority shareholders and ignoring the interests of shareholders.

2.2.2.4. Board of Control

The Board of Supervisors is a mandatory management institution in a joint stock company with more than 11 shareholders. The Board of Supervisors has from three to five members, of which at least one member must have accounting expertise. The Board of Supervisors must elect one member, who is a shareholder, to be the Head of the Board; The Board of Supervisors has the following rights and duties:

- Check the reasonableness and legality in management and operation of business activities, in accounting records and financial reports;

- Appraise the company's annual financial statements; examine each specific issue related to the management and operation of the company when deemed necessary or by decision of the General Meeting of Shareholders, at the request of shareholders or groups of shareholders owning more than 10% of common shares for a continuous period of at least six months or another smaller percentage as prescribed in the Company Charter;

- Regularly inform the Board of Directors about the performance results; consult the Board of Directors before submitting reports, conclusions and recommendations to the General Meeting of Shareholders;

- Report to the General Meeting of Shareholders on the accuracy, honesty and legality of recording, keeping documents and preparing accounting books, financial statements and other reports of the company; the honesty and legality in managing and operating the company's business activities;

- Propose measures to supplement, amend and improve the organizational structure, management and operation of the company's business activities;

Compared to the 1990 Law on Enterprises, in addition to adding more powers to the Board of Supervisors, the 1999 Law on Enterprises also stipulates many contents related to the organization and operation of the Board of Supervisors that the 1990 Law on Enterprises does not have, such as: The right to be provided with information of the Board of Supervisors (Article 89); Persons who are not allowed to be members of the Board of Supervisors (Article 90) and Other issues related to the Board of Supervisors (Article 91). However, in reality, in the legal relationship on protecting shareholders during this period, the role of the Board of Supervisors was "insignificant". The Board of Supervisors was trusted and empowered by the Law, but in reality, it could not demonstrate its role in protecting shareholders. The main reason is probably because the Board of Supervisors depends largely on the Board of Directors. Although the Board of Supervisors is nominally elected by the General Meeting of Shareholders, it is actually appointed by major shareholders; On the other hand, a member of the Board of Supervisors is just an ordinary employee in the company, subject to management and receiving salary decided by major shareholders, so the Board of Supervisors cannot oppose the Board of Directors.

2.2.3. Internal protection mechanism under the Enterprise Law 2005

According to Article 95 of the 2005 Law on Enterprises, the organizational structure of a joint stock company must include a General Meeting of Shareholders, a Board of Directors, and a Director/General Director; for a joint stock company with more than eleven individual shareholders or with an organization shareholder owning more than 50% of the total shares of the company, there must be a Board of Supervisors. The regulations on the conditions for establishing a Board of Supervisors have been more strictly regulated. Previously, the 1999 Law on Enterprises only stipulated that "a joint stock company with more than eleven shareholders must have a Board of Supervisors".

2.2.3.1. General meeting of shareholders

According to Article 96 of the 2005 Enterprise Law, the General Meeting of Shareholders, consisting of all shareholders with voting rights, is the highest decision-making body of a joint stock company. Therefore, shareholders with voting rights can, through the General Meeting of Shareholders, exercise the rights of the General Meeting of Shareholders as follows:

- Through the company's development orientation;

- Decide on the types of shares and the total number of shares of each type that are allowed to be offered for sale; decide on the annual dividend rate for each type of shares, unless otherwise provided in the Company Charter;

- Elect, dismiss, remove members of the Board of Directors, members of the Board of Supervisors;

- Decision to invest or sell assets with a value equal to or greater than 50% of the total asset value recorded in the company's most recent financial report if the company's charter does not stipulate a different ratio;

- Decide to amend and supplement the Company Charter, except for the case of adjusting the charter capital due to selling new shares within the number of shares allowed to be offered as prescribed in the Company Charter;

- Through annual financial reports;

- Decision to buy back more than 10% of total sold shares of each type;

- Review and handle violations by the Board of Directors and the Board of Supervisors that cause damage to the company and its shareholders;

- Decision to reorganize and dissolve the company [20, Article 96];

* In case a shareholder is an organization, it has the right to appoint one or more authorized representatives to exercise its shareholder rights in accordance with the provisions of law.

Thus, basically, LDN 2005 still retains the rights that have been stipulated.

prescribed in LDN 1999. However, the General Meeting of Shareholders is supplemented with: (i) the right to decide to invest or sell assets with a value equal to or greater than 50% of the total value of assets recorded in the company's most recent financial report if the company's Charter does not stipulate a different ratio (previously, the General Meeting of Shareholders only had the right to decide to sell assets) and (ii) the right to review and handle violations by the Board of Directors and the Board of Supervisors that cause damage to the company and its shareholders.

In addition, according to the Law on Enterprises 2005, issues related to the procedures for convening and holding the General Meeting of Shareholders are also regulated in more detail, such as regulations on the list of shareholders entitled to attend the General Meeting of Shareholders, the agenda and content of the General Meeting of Shareholders, regulations on invitation to the General Meeting of Shareholders, the right to attend the General Meeting of Shareholders, conditions for holding the General Meeting of Shareholders... Particularly for the Authority to convene the General Meeting of Shareholders , Article 97 of the Law on Enterprises 2005 has further regulations on the annual General Meeting of Shareholders: The General Meeting of Shareholders must hold an annual meeting within four months from the end of the fiscal year. At the request of the Board of Directors, the business registration authority may extend the period, but not more than six months from the end of the fiscal year. This regulation helps to better ensure the rights of shareholders, shareholders through the annual General Meeting of Shareholders can grasp the company's operating situation and their rights.

2.2.3.2. Board of Directors

Basically, the rights of the Board of Directors under the 2005 Enterprise Law have not changed much compared to the 1999 Enterprise Law. In the legal relationship on protecting minority shareholders, the Board of Directors mostly protects the rights and serves the interests of the majority shareholders. Most of the management and business activities of the company are decided by the Board of Directors or the major shareholders or their representatives in this agency.

2.2.3.3. Director/General Director

Basically, the rights of the Director/General Director under the 2005 Enterprise Law have not changed compared to the 1999 Enterprise Law. In the legal relationship on protecting shareholders, the Director/General Director is

an important subject because when they fulfill their duties well, it also means that the rights of shareholders are guaranteed. LDN 2005 gives the Director/General Director separate rights from the Board of Directors, to help the Director/General Director not to depend too much on the Board of Directors. Moreover, the law also sets out criteria for selecting directors, clearly demarcating the power between the Director/General Director and the Board of Directors so that the company can develop sustainably and shareholders are protected. But in reality, the Director/General Director is appointed by the Board of Directors, so the Director/General Director often tends to side with the Board of Directors, ignoring the interests of shareholders.

2.2.3.4. Board of Control

According to the Law on Enterprises 2005, although the contents of the Board of Supervisors have been regulated more strictly than the Law on Enterprises 1999, in the legal relationship on protecting shareholders, the role of the Board of Supervisors seems to have not changed. The Board of Supervisors is trusted and empowered by the Law, but in reality, it has not been able to demonstrate its role in protecting shareholders. During the implementation of the Law on Enterprises 2005, there were many wrongdoings by the Board of Directors and the Director/General Director that seriously affected the interests of shareholders, but there were no warnings or detections from the Board of Supervisors. The main reason is that the Board of Supervisors is still largely dependent on the Board of Directors. Although the Board of Supervisors is nominally elected by the General Meeting of Shareholders, in reality it is people "planted" by major shareholders; Furthermore, the members of the Supervisory Board are just ordinary employees in the company, under the management and receiving salaries decided by major shareholders. The Supervisory Board cannot help but "ignore" the wrongdoings of the Board of Directors, the Director/General Director or the company's managers. In short, the role of the Supervisory Board in protecting shareholders is practically non-existent.

2.2.4. Internal protection mechanism under the Enterprise Law 2014

According to Article 134 of the 2014 Enterprise Law on the organizational structure of a joint stock company, a joint stock company has the right to choose to organize management and operations according to one of the following two models, unless otherwise provided by the law on securities:

- General Meeting of Shareholders, Board of Directors, Supervisory Board and Director or General Director. In case a joint stock company has less than 11 shareholders and the shareholders are organizations owning less than 50% of the total shares of the company, it is not required to have a Supervisory Board;

- General Meeting of Shareholders, Board of Directors and Director or General Director. In this case, at least 20% of the members of the Board of Directors must be independent members and there must be an Internal Audit Committee under the Board of Directors. Independent members perform the function of supervision and organize the implementation of control over the management and operation of the company... [23, Article 134].

Thus, the special new point of the 2014 Law on Enterprises is that a JSC has the right to choose whether or not to have a Supervisory Board in its organizational and management structure according to the provisions of the Law. Previously, Article 95 of the 2005 Law on Enterprises did not have such an open provision: “A joint stock company with more than eleven individual shareholders or with an organization shareholder owning more than 50% of the total shares of the company must have a Supervisory Board”. This change is considered to be consistent with international practice; consistent with the diverse reality of enterprises in terms of scale, ownership nature and diversity of corporate governance methods in Vietnam; moreover, consistent with the actual operation of the Supervisory Board in a JSC today. In theory, the existence of a Supervisory Board seems to bring many benefits to the company, but in reality, the Supervisory Board cannot fulfill its role. Therefore, it is completely reasonable to let a JSC decide whether to establish a Board of Supervisors or not, depending on the specific needs of each JSC.

2.2.4.1. General meeting of shareholders

As is known, the General Meeting of Shareholders, consisting of all shareholders with voting rights, is the highest decision-making body of a joint stock company. According to Article 135 of the 2014 Enterprise Law, the General Meeting of Shareholders has the following rights and obligations:

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