Legal regime on capital of joint stock companies under Vietnamese law

which can be contributed in the form of permission to use the land use right without giving the company legal entity the right to decide on the contributed capital asset, which is the value of the land use right. After the expiration of the term or the occurrence of an event as agreed in the capital contribution contract that terminates the capital contribution, the capital contributor has the right to receive the land use right back. This method is similar to contributing capital by the company leasing the land use right, but instead of taking the rent, the capital contributor receives shares corresponding to the rental price. In fact, this is a case of capital contribution, in which the contributed capital asset is the right to use as analyzed in Chapter 1, our enterprise law does not provide for this case.

2.4.4.2 Capital contribution by intellectual property value

Intellectual property rights are the rights of organizations and individuals to intellectual property including copyright, rights related to copyright, industrial property rights and rights related to plant varieties (K1-D4 - Intellectual Property Law 2005)

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According to the law on intellectual property, the transfer of ownership or the right to use intellectual property rights, industrial property rights and rights related to plant varieties, must be carried out in the form of a written contract and is only effective when registered with a competent state agency (in the case of industrial property rights established on the basis of registration) (K1 - D148; K3 - D192). Therefore, capital contribution to a joint stock company for assets that are the value of intellectual property rights, industrial property rights and rights related to plant varieties must be carried out in accordance with the provisions of law. The law on intellectual property not only allows the transfer of ownership but also allows the transfer of the right to use intellectual products. However, the law on enterprises has not yet clearly regulated the case of capital contribution in the value of the right to use intellectual products.

For example, can an organization contribute capital to a joint stock company with the value of the right to use plant varieties? There are no regulations in the Enterprise Law.

2.4.4.3 Contributing capital with other special assets

Our Enterprise Law also does not provide for cases where the contributed capital is a special asset, such as an airplane. For these special assets, the capital contributor and the capital recipient must both be allowed to own that type of contributed capital according to the provisions of law.

2.4.5 Time limit, responsibility

In LDN 1999, there are no regulations on the time limit for capital contribution procedures as well as the obligation to notify the business registration authority, and the responsibility in case the founding shareholder does not contribute capital as committed, so compared to the regulations on the responsibility of capital contribution of founding members of LLCs, it is somewhat less strict. This has been overcome in the newly issued LDN 2005.

Compared with LDN 99, LDN 2005 has stricter regulations on joint stock companies in terms of procedures as well as ensuring state management on capital contribution to establish joint stock companies, reflected in the following three new points:

1. Pay in full for the purchased shares within 90 days from the date the company is granted the business registration certificate 14 .

Stricter regulations on capital contribution period, founding shareholders must pay in full for the registered shares within a certain period of 90 days, no longer allowing founding shareholders the right to set their own capital contribution commitment period as before because this could lead to an unnecessary prolongation of the capital contribution period right at the beginning of the company's operation.

14 K1 - Article 84 - LDN 2005

Compared with the regulations on capital contribution of founding members of LLCs, the regulations on capital contribution period of founding shareholders in joint stock companies are now one step stricter according to the spirit of the new law. Capital contribution must comply with the statutory time limit. Founding shareholders do not have the right to freely agree on capital contribution commitments as with founding members of LLCs.

2. Procedures for notifying the business registration authority of capital contribution , ensuring close supervision from competent state agencies on the progress of capital contribution according to the shareholders' commitments 15 .

3. The procedure for handling cases where founding shareholders do not pay in full for the registered shares is specifically stipulated as follows:

In case a founding shareholder fails to pay in full for the number of shares registered to purchase, the number of shares not yet fully contributed by the founding shareholder shall be handled in one of the following ways:

a) The remaining founding shareholders contribute enough shares according to their share ownership ratio in the company;

b) One or more founding shareholders accept to contribute the full amount of shares;

c) Mobilize other people who are not founding shareholders to contribute the full amount of shares; the person receiving the capital contribution will naturally become a founding shareholder of the company. In this case, the founding shareholder who has not contributed shares as registered will naturally no longer be a shareholder of the company.

When the number of shares registered to be contributed by founding shareholders has not been fully contributed, the founding shareholders shall be jointly responsible for the debts and

Other property obligations of the company within the value of the uncontributed shares 16 .

2.5 Capital transfer

Before the Enterprise Law 99, 2005 was issued, the issue of capital transfer of joint stock companies was mentioned in the Company Law 1990, according to which the transfer of shares depends on the form of shares. For unregistered shares, they are freely transferable, registered shares are only allowed to be transferred with the consent of the Board of Directors (K4

- Article 30- Company Law 1990)

Such a provision reduces the transferability of registered shares, thereby affecting the rights of shareholders. The Enterprise Law has overcome this by not distinguishing between registered and unregistered shares to set conditions for transfer, but by stipulating that shareholders have the right to freely transfer their shares to others, except for the following two cases of transfer restrictions:

- Shareholders owning voting preference shares are not allowed to transfer those shares to others .

- Within three years from the date the company is granted the Certificate of Business Registration, founding shareholders have the right to freely transfer their common shares to other founding shareholders, but may only transfer their common shares to persons who are not founding shareholders if approved by the General Meeting of Shareholders. In this case, shareholders intending to transfer shares do not have the right to vote on the matter.

16 K3 - D 84 - LDN 2005

transfer those shares and the transferee automatically becomes a founding shareholder of the company.

After a period of three years from the date the company is granted the Certificate of Business Registration, all restrictions on common shares of founding shareholders shall be abolished .

The transfer shall be effected in writing in the usual manner or by hand delivery of the shares. The transfer document shall be signed by the transferor and the transferee or their authorized representatives. The transferor shall remain the owner of the shares concerned until the name of the transferee is entered in the register of shareholders. In the case of transfer of only some shares in a registered share, the old share shall be cancelled and the company issuing the new share shall record the number of shares transferred and the number of shares remaining .

Through the above regulations, we see that the transfer of capital in a joint stock company is done easily and conveniently without being bound by any conditions. This is a prerequisite to contribute to promoting the stock market to develop more and more, promoting the advantages of a joint stock company compared to other types of companies.

In addition, to protect the rights of minority shareholders, the Enterprise Law also stipulates cases where shareholders have the right to request the company to buy back shares in certain cases as follows:

Shareholders who vote against the decision to reorganize the company or change the rights and obligations of shareholders as stipulated in the company's charter have the right to request the company to buy back their shares. The request must be in writing, stating clearly the name and address of the shareholder, the number of shares of each type, the expected price.

18 K5 - D 84 - LDN 2005

19 K5 - D 87 - LDN 2005

The request must be sent to the company within ten working days from the date the General Meeting of Shareholders passes the decision on the matters specified in this clause.

2. The company must repurchase shares at the request of the shareholder as prescribed in Clause 1 of this Article at the market price or the price calculated according to the principles prescribed in the Company Charter within ninety days from the date of receipt of the request. In case of failure to reach an agreement on the price, the shareholder may sell the shares to another person or the parties may request a professional valuation organization to determine the price. The company shall introduce at least three professional valuation organizations for the shareholder to choose from and that choice shall be the final decision. (Article 90 - LDN 2005)

The requirement for a company to repurchase shares is not regulated by the 1990 Enterprise Law. Compared to the 1999 Enterprise Law, the 2005 Enterprise Law has completed one more step in the regulations on procedures for requesting a company to repurchase shares to ensure the rights of shareholders, which is the regulation on requiring the participation of a professional valuation organization in case the parties cannot agree on the repurchase price. Previously, the 1999 Enterprise Law stipulated that if no agreement could be reached, the matter would be referred to economic arbitration for settlement. Such a regulation does not ensure practicality because the nature of the problem here is only stock valuation.

However, the interests of shareholders are still ranked below the interests of the company's bondholders, so the law also stipulates that the company is only allowed to buy back in cases where it does not affect the interests of the company's creditors, accordingly:

The company is only entitled to pay for the repurchased shares to shareholders as prescribed in Articles 90 and 91 of this Law if immediately after payment

After paying off all the shares bought back, the company still ensures full payment of debts and other financial obligations.

After paying for all the repurchased shares, if the total value of assets recorded in the company's accounting books decreases by more than 10%, the company must notify all creditors within fifteen days from the date of paying for all the repurchased shares. (K1,4 - Article 92- LDN 2005)

The 2005 Enterprise Law has shown to be quite strict in terms of procedures to protect shareholders' rights when regulating the right to request the company to buy back shares. However, the law has not yet specified the time limit for the company to decide on the buyback and whether shareholders requesting the company to buy back must sell all the shares they are holding or not? These are practical issues that need specific and clear provisions of the law to protect the legitimate rights of shareholders.

2.6 Capital mobilization

2.6.1 Share Offering

The Enterprise Law divides stock offerings into two types based on the scope, scale, and offering subjects: private stock offerings and public stock offerings. Private stock offerings are guided by the government, but there is currently no government document regulating private stock offerings; public stock offerings are implemented in accordance with the provisions of the law on securities.

The Board of Directors shall decide on the time, method and price of offering shares among the shares authorized for offering. The price of offering shares shall not be lower than the market price at the time of offering or the value recorded in the books of the shares at the most recent time, except in the following cases:

a) Shares offered for the first time to persons who are not founding shareholders;

b) Shares offered to all shareholders in proportion to their existing shares in the company;

c) Shares offered to brokers or underwriters. In this case, the specific discount amount or discount rate must be approved by shareholders representing at least 75% of the total number of voting shares;

d) Other cases and the discount rate in such cases are prescribed by the Company Charter.

In case a company issues additional common shares and offers those shares to all common shareholders in proportion to their existing shares in the company, it must comply with the following provisions:

a) The Company must notify shareholders in writing by a method guaranteed to reach their permanent addresses. The notice must be published in three consecutive issues within ten working days from the date of notice.

b) The notice must include the full name, permanent address, nationality, ID card number, passport number or other legal personal identification of the individual shareholder; the name, permanent address, nationality, establishment decision number or business registration number of the organization shareholder; the number of shares and current shareholding ratio of the shareholder in the company; the total number of shares expected to be issued and the number of shares that the shareholder is entitled to purchase; the offering price of the shares; the registration period for purchase; the full name and signature of the legal representative of the company. The time limit specified in the notice must be reasonable enough for the shareholder to register to purchase the shares. The notice must be accompanied by a registration form issued by the company;

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