Managing Joint Stock Companies under Vietnamese Law: Current Situation and Solutions

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Maybe you are interested!

17. Cao Dinh Lanh, Conflict of interest groups in joint stock companies, Democracy and Law Magazine, No. 3/2007, p.22.

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31. Communist magazine website

http://www.tapchicongsan.org.vn/details.asp?Object=4&news_ID=3435467

32. Website of Vietnam Business Forum http://dddn.com.vn/7330cat86/phuong-an-tang-von-cua-vipco-nha-dau-tu-can-rong.htm

33. Website of the Electronic Legislative Research Journal

http://www.nclp.org.vn/nha_nuoc_va_phap_luat_/cong_ty_co_phan_mot_co_dong.

APPENDIX

Case: Huynh Van Quang sued Tu Liem Import Export Production Service Joint Stock Company (Economic Judgment No. 39 dated March 4, 2005. Court of Appeal of the Supreme People's Court in Hanoi) regarding the convening of the General Meeting of Shareholders not in accordance with the procedures prescribed by law.

According to the first instance judgment, the contents of the case are as follows:

On March 25, 2004, Mr. Huynh Van Quang and Mr. Nguyen Huy Manh, two shareholders of Tu Liem Import-Export Production Service Joint Stock Company (Tu Liem Joint Stock Company), filed a lawsuit requesting the Court to cancel the minutes and contents of the company's General Meeting of Shareholders on December 30, 2003 because the meeting was not conducted in accordance with the prescribed procedures and order. The content of the meeting contained many points that violated the law.

The plaintiffs present the grounds for requesting the Court to resolve the petition as follows:

- Regarding the procedure for convening the meeting : (i) There was no meeting of the Board of Directors to convene the General Meeting of Shareholders on December 30, 2003. The convening of the meeting was not based on any legal basis but was still conducted; (ii) The meeting invitation was not sent on time as prescribed by law. As Mr. Quang and Mr. Manh received the invitation on December 27, 2003, only three days before the meeting; (iii) The documents attached to the meeting invitation, such as the expected economic and financial indicators for 2003, were not in accordance with regulations. If it was a financial report, it must include three accompanying documents: Financial report, Balance sheet, and Business performance report. On page 10 of the draft report, there were many slanderous words about the company's shareholder, Mr. Huynh Van Quang. The Court is requested to clarify this act of slander. Some people who are not shareholders of the company still attended the meeting, such as Ms. Tran Thi Thu, residing at 158 Tran Vu, Hanoi; Mr. Huynh Van Thang, residing at 24 Chua Vua, Hanoi.

- Regarding the congress process : The meeting content included a resolution recognizing the Resolution of the meeting on September 8, 2003 of the Shareholders' Meeting as legal, while this Congress is being considered by the Court according to the petition of a number of shareholders.

The announcement No. 05/TB-HĐQT dated January 7, 2004 stated that the Congress also included: representatives of the city's enterprise innovation board, representatives of the enterprise finance department, etc. These representatives attending the Congress were incorrect. If there were no representatives but it was stated in the announcement, it was also incorrect. Some issues regarding voting and voting on the Board of Directors and the Supervisory Board were not in accordance with the law. For example, the announcement stated that Mr. Kim Ngoc Luan achieved 78.26% of the charter capital, which was incorrect, but the number of voters corresponding to the percentage of charter capital should be stated. The Congress temporarily distributed dividends in 2003, which was not in accordance with the regulations. The law does not allow temporary dividends. The Congress voted to approve each chapter and article of the Company's Charter, which was not in accordance with the law. The order and program of the Congress were reversed, not in accordance with the order in the meeting invitation sent to shareholders.

The defendant's comments on the plaintiff's statement are as follows:

- Regarding the procedure for convening the meeting: On December 18, 2003, the Board of Directors of the company met and decided to convene the General Meeting of Shareholders on December 30, 2003. The meeting was attended by all five members of the Board of Directors. Mr. Huynh Van Quang was a member of the Board of Directors but was dismissed by the General Meeting of Shareholders on September 8, 2003. Therefore, Mr. Quang is no longer a member of the Board of Directors. Regarding the meeting invitation, the company sent it to Mr. Nguyen Huy Manh at the address registered with the company. As for Mr. Huynh Van Quang's address at 58 Tran Vu, Mr. Quang called the company's administrative officer (Ms. Thu) and said that it was convenient to conduct transactions at this address. The invitation was sent on December 22, 2003 by express mail. Due to no recipient, the post office returned it on December 22, 2003. The company then directly transferred it to Mr. Thang (with Mr. Quang's consent) to receive on December 26, 2003. The document attached to the invitation had a plan to report on economic and financial indicators for 2003. This was only a plan because the fiscal year 2003 had not yet ended, so the tax authority had not yet approved the final settlement. What the company stated in the report on page 10 was completely true because Mr. Quang currently owed the company more than 500 million VND. Before the General Meeting, Ms. Tran Thi Thu (Mr. Quang's wife) presented the stock transfer contract of Mr. Hoai Nam. As for Mr. Huynh Van Thang (brother

Mr. Quang's relatives presented Ms. Dieu Phuong's authorization letter. Therefore, the company accepted to let Ms. Thu and Mr. Thang attend the Congress.

- Regarding the content of the Congress: In the Congress on December 30, 2003, the content of the shareholders' meeting on September 8, 2003 was re-presented. Due to complaints from some shareholders, this Congress voted again to confirm that the content of the meeting on September 8, 2003 was the will of the General Meeting of Shareholders. The Congress on December 30, 2003 was the end of its term, so inviting agencies and departments was necessary and not contrary to the provisions of the law. The change of the meeting agenda was approved by the General Meeting of Shareholders with a majority of votes in favor. The Congress conducted the election of the Board of Directors and the Board of Supervisors in accordance with the provisions of the Law on Enterprises. Regarding the issue of dividend payment, according to the financial report, the company was profitable, so the General Meeting voted to pay dividends to shareholders. Thus, Tu Liem Joint Stock Company's holding of the General Meeting of Shareholders was completely legal. In the economic judgment No. 45.KTST dated September 6, 2004 of the People's Court of Hanoi City, based on Articles 53, 67, 70, 71, 72, 74, 75, 76, 79, 93 of the Law on Enterprises, Decree 03/2000/ND-CP, Articles 12, 49, Clause 2 of the Ordinance on Procedures for Settling Economic Cases, Decree 70/CP dated June 12, 1997 of the Government on court fees, it was decided:

 Partially accept the lawsuit of Mr. Huynh Van Quang and Mr. Nguyen Huy Manh represented by Mr. Pham Dang Cao;

 Confirm that the order and procedures for convening the Shareholders' Meeting on December 30, 2003 of Tu Liem Joint Stock Company, Hanoi are legal.

 Cancel part of the content of the Resolution of the General Meeting of Shareholders dated December 30, 2003 of Tu Liem Joint Stock Company on the provisional dividend payment for 2003. The Board of Directors of the Company must announce the issue of dividend payment at the nearest General Meeting of Shareholders for the General Meeting to decide.

In addition, the first instance judgment also decides on court costs and declares the right to appeal for the parties.

………

After listening to the parties present and debate at the trial.

………

COMMENTS

Regarding the content of the appeal of the litigants, the Trial Panel found that: on December 30, 2003, Tu Liem Joint Stock Company held a meeting of the General Meeting of Shareholders for the second term (2004 - 2007). However, immediately after the meeting, a number of shareholders of the company filed a lawsuit requesting the cancellation of the resolution of the General Meeting, on the grounds that this meeting violated the procedures for conducting the meeting, such as not having a meeting of the Board of Directors on December 18, 2003 to decide to hold the General Meeting of Shareholders on December 30, 2003 and a number of other violations.

At the appeal hearing, the legal representative of Tu Liem Joint Stock Company, the defendant in the case, argued that the Board of Directors of the company met on December 18, 2003 to decide to convene the General Meeting of Shareholders on December 30, 2003 and did not summon Mr. Huynh Van Quang because at the extraordinary General Meeting of Shareholders on September 8, 2003, the company had a Resolution to remove Mr. Huynh Van Quang from the Board of Directors. But in fact, immediately after the Resolution of September 8, 2003 of the company, Mr. Huynh Van Quang and a number of shareholders of the company filed a lawsuit with the Court requesting to cancel the minutes and the content of the resolution of the extraordinary General Meeting of Shareholders on September 8, 2003; the lawsuit of Mr. Quang and a number of shareholders has been considered and resolved by the Court of First Instance and the Court of Appeal. Therefore, of course, Mr. Huynh Van Quang is still a member of the Board of Directors of the company, so Mr. Quang should have attended the Board of Directors meeting on December 18, 2003 to decide to convene the General Meeting of Shareholders on December 30, 2003 of the company. However, the Board of Directors of the first term did not summon Mr. Quang to attend the Board of Directors meeting on December 18, 2003 to decide the General Meeting of Shareholders on December 30, 2003, which is to deprive Mr. Quang of his rights and violate Point a, Clause 2, Article 71 of the Enterprise Law, leading to the convening of the Company's General Meeting of Shareholders also being in violation of the Enterprise Law. The Court of First Instance's determination that: the meeting of the Board of Directors on December 18, 2003 had 5 members of the Board of Directors participating and 5 members voted 100% in favor, so the General Meeting of Shareholders on December 30, 2003 of the company was conducted in accordance with the correct order and procedures for convening the meeting according to the law is incorrect. Therefore, the Court of Appeal found that it is necessary to base on Article 276 of the Civil Procedure Code to amend the entire judgment of first instance, cancel the minutes of the meeting of the Board of Directors of the company on December 18, 2003 and the Resolution.

Resolution of the General Meeting of Shareholders dated December 30, 2003 for Tu Liem Joint Stock Company to convene the General Meeting of Shareholders in accordance with the provisions of law and the Enterprise Law. In case the General Meeting is convened at the request of the Board of Directors, Mr. Huynh Van Quang must attend the meeting in accordance with the provisions of Clause 2, Article 82 of the Enterprise Law and in accordance with the spirit of Article 26 of the Company's Charter.

From the above analysis and comments, Decide: Pursuant to Article 276 of the Civil Procedure Code:

 Partially accept the plaintiffs' appeal; do not accept the defendants' appeal.

 Statement: Amend the first instance economic judgment.

 Cancel the Resolution of the Board of Directors meeting dated December 18, 2003 and the Resolution of the General Meeting of Shareholders dated December 30, 2003 of Tu Liem Joint Stock Company so that the company can re-convene the General Meeting of Shareholders in accordance with the provisions of the Law on Enterprises.

This judgment is final.

Managing Joint Stock Companies under Vietnamese Law: Current Situation and Solutions - 13

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