Protecting the rights of shareholders in unlisted joint stock companies under Vietnamese law

The company's management said, "The shareholders have not yet fulfilled their duties." How can they fulfill their duties when the General Meeting of Shareholders meets once a year and only those with 200 shares or more are allowed to attend the meeting? Poor workers with small shares had to pool their resources to send a representative to the meeting. Because of the fear of being persecuted, the person sent to attend was not a shareholder but a retired person, someone outside the company, so how could they fully reflect the shareholders' irregularities?

The workers' hope of becoming owners of a joint-stock company, which was raised by the introductory lecture on shares, shareholders, and the movie "Return to Eden", has gone up in smoke.

A new director has taken over, but shareholders are still worried about whether the new board of directors will be able to revive the company [59]?

The gift of only 3 kilos of sticky rice at the end of the year and the beginning of the New Year from the employees - shareholders of Tran Phu Tea Company is indeed a painful lesson for the equitization process. The aspects of ensuring the rights and interests of shareholders in this case are:

Restricting the right to attend and vote at the General Meeting of Shareholders with a provision (in the charter) on the condition of holding 200 shares to be able to attend the meeting.

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Lack of transparency in management and operations, failure to disclose related interests of directors.

The Board of Supervisors' monitoring activities are ineffective due to poor qualifications and working conditions.

The root cause of the series of violations probably lies in the half-hearted equitization, in which the State still holds a controlling stake in the company after equitization. The democratic management style in joint stock companies is not applied, instead, there are still administrative boards from the state-owned company era.

3.1.4. Inadequacies in the way shareholders' rights are exercised

The weak awareness of shareholders is also one of the reasons leading to prolonged disputes within the company. When the Board of Directors violates the charter and fails to fulfill its obligations, shareholders do not exercise their right to replace the Board of Directors but write a complaint requesting state agencies to intervene; when the company shows signs of violating the financial management regime, shareholders do not ask the company's Board of Supervisors to clarify but instead request state agencies to inspect and examine [47, p. 57]. The case at Huu Nghi Joint Stock Company is a typical example: Due to lack of understanding of the operating mechanism of the General Meeting of Shareholders and the enticement of some people who take advantage of it, a group of shareholders arbitrarily set up a Board of Directors, filed a lawsuit asking the court to declare invalid the transfer contracts that had been signed and performed completely voluntarily.

Although the enterprise has transformed into a joint stock company, the shareholders - employees in the enterprise have not been able to give up the habit of using political - social institutions such as the Party, Trade Union, Women's Union, Youth Union to express their wishes. Therefore, the General Meeting of Shareholders in these companies cannot promote its role.

On the contrary, in many companies that were equitized from state-owned enterprises, shareholders and employees exercise their ownership rights in an "excessive" way. To the extent that in a company in Hanoi, the Board of Directors, when making a decision to spend more than 100,000 VND, must hold a "meeting to ask for opinions" which is very stressful and time-consuming, not in line with the market mechanism that requires flexibility and responsiveness [59]. When this happens, the joint stock company is at risk of turning into a cooperative, where all members have equal rights in managing the business [28, p. 384].

Besides, a quite common phenomenon is that when disagreeing with the developments at the General Meeting of Shareholders, some shareholders immediately

harassing and obstructing the meeting process in extremely "violent" ways such as snatching the microphone, throwing away documents, snatching the chair's papers, preventing the chair from controlling the meeting... [59].

In many cases, minority shareholders are not aware of the opportunity they have to create "governance" that best suits the actual conditions of the company, or do not have enough position and capacity to negotiate, creating a more advantageous position in corporate governance. In fact, the charter of many companies stipulates the limitation of shareholders who are not allowed to attend the General Meeting of Shareholders. Thus, a large number of shareholders have not had access to company information, have not received notifications of decisions of the General Meeting of Shareholders, and have not even received notifications of dividend payments.

Regarding shareholders who are the State, when some relevant officials and state agencies do not clearly distinguish between shareholder rights and administrative management rights, they directly intervene in the internal management of the company, such as not allowing the convening of the General Meeting of Shareholders, or directing the convening of the General Meeting of Shareholders, designating and appointing or replacing members of the Board of Directors.

It is this administrative intervention that has caused many companies after equitization to get caught up in complex internal conflicts, such as the cases of Huu Nghi Hotel Joint Stock Company (Hanoi) and Phan Thiet Hotel Joint Stock Company.

3.2. SOME RECOMMENDATIONS TO IMPROVE THE LAW ON SHAREHOLDER PROTECTION IN UNLISTED JOINT STOCK COMPANIES IN VIETNAM

The Resolution of the 9th Party Congress and a number of resolutions of the Central Party Executive Committee Conference have set out important orientations for private joint stock companies and joint stock companies converted from state-owned enterprises.

The Law on Enterprises 2005, was born to create a legal framework to ensure the rights of shareholders in joint stock companies. The promulgation of the Decree on shares

The equitization of state-owned enterprises is also the institutionalization of the Party's Resolution, in which issues related to the rights of shareholders in joint stock companies after equitization are also given attention to a certain extent. However, the legal framework to protect the rights of shareholders in joint stock companies still has many points that need to be improved.

Moreover, the practice of implementing and protecting the basic rights of shareholders in joint stock companies in our country has posed an urgent need for the improvement of the law on the protection of shareholders in joint stock companies in Vietnam. The improvement of the law on the protection of shareholders in joint stock companies needs to be placed in the overall activities of building and improving Vietnamese law with the legal reforms that are taking place strongly in the current period.

3.2.1. Recommendations for the 2005 Enterprise Law

It is necessary to continue to improve legal regulations on shareholders in joint stock companies, focusing on the following issues:

- Ensure basic rights of shareholders such as the right to access information, establish mechanisms for shareholders to effectively exercise their rights;

- Prescribe measures to monitor self-interested transactions and require managers to publicly disclose their interests to prevent conflicts of interest;

- Strengthen the responsibility of the Board of Directors and the Board of Supervisors;

- Regulations requiring publicity and transparency for joint stock companies as for companies listed on the stock market.

- Regarding cases where shareholders have the right to request the company to buy back shares. This right to request a buyback contributes to protecting the interests of shareholders when they change their wishes. Clause 1, Article 90 stipulates: "Shareholders who vote against the decision to reorganize the company or change the rights and obligations of shareholders as stipulated in the Company Charter have the right to request the company

"buy back their shares". According to this provision, shareholders can only exercise this right when there is a basis specifically stipulated in the Enterprise Law. If the company's charter has provisions other than those prescribed by law, it will not have legal value. If such a provision is not sufficient, because the Law only stipulates cases that are really necessary, in addition, the operation of a joint stock company is also based on the company's internal commitments specifically stipulated in the charter. On the other hand, the laws of most countries recognize the principle that shareholders have the right to request the company to buy back shares if there is a basis prescribed by law or the company's charter.

3.2.2. Recommendations on legal regulations on equitization of state-owned enterprises

- Reform the method of selling shares in the direction of increasing the sale of shares to entities outside the enterprise in order to create a new management method as well as add more "eyes" to monitor the company's operations, increase the disclosure of information on the financial situation of the enterprise, information on share auctions so that investors are equal when buying shares;

- Ensuring the rights of share buyers during the period when the enterprise is equitized but has not officially transformed into a joint stock company as well as the rights of shareholders in the joint stock company after equitization, especially the right to transfer shares.

- The law on joint stock companies needs to establish a legal mechanism to ensure State intervention in joint stock companies in specific cases. A basic characteristic of joint stock companies formed from equitized State enterprises is the participation of the State as a shareholder. In fact, this is an issue that requires strict State regulation. In the author's opinion, it is necessary to clearly separate the function of being a shareholder from the State's management function in joint stock companies.

The State needs to transfer management authority to an agency with independent regulations, so that in equitized State-owned enterprises, the State's role will only be that of a shareholder with an independent status, equal to all other shareholders. Only then can the rights of other shareholders in the joint stock company be guaranteed, the equitization process be stimulated and high efficiency in their operations be created.

State intervention in joint stock companies is also reflected in the issue of representation of State capital in joint stock companies. There should be specific regulations on the maximum number of people who can represent State capital for each remaining capital ratio in a joint stock company. However, the issuance of this regulation must ensure that the dominant role of the State economy is maintained, while not affecting the freedom and equality of other shareholders in the joint stock company.

3.2.3. Recommendations on general issues to better protect shareholders' rights in joint stock companies

Protecting shareholders is not the sole task of the Enterprise Law. To effectively protect shareholders’ rights in joint stock companies, there needs to be a synchronous development of institutions such as the stock market, the corporate governance market, and the perfection of institutions such as the court, business registration agency, audit, accounting, etc. Specific solutions are:

- It is necessary to have legal adjustments to the over-the-counter (OTC) securities market to ensure shareholders' ownership and transfer of shares, and to perfect legal regulations on the transfer of shares on the centralized securities market (time of ownership transfer);

- Improve the organization and operation of business registration agencies, improve the qualifications of judges;

- Perfecting Vietnamese accounting and auditing standards according to international accounting and auditing standards; enhancing capacity and improving performance.

The capacity of auditing companies. If we compare the current accounting regime of Vietnam with the International Accounting Standards (IAS), we can see that the Vietnamese auditing regime has many points that need to be improved. The first thing that can be seen is that the auditing regime of Vietnam is more inclined towards serving state management work than serving the shareholders of the company.

As mentioned above, transparent information is a prerequisite for good corporate governance. Therefore, in order to apply good corporate governance principles in Vietnam, the following tasks need to be carried out in the near future:

There should be specific regulations on information disclosure for unlisted joint stock companies. This contributes to creating a healthy environment between listed and unlisted companies, encouraging businesses to be concerned with information disclosure, helping corporate administrators to be conscious of conducting business honestly and healthily... thereby better protecting the interests of shareholders.

Vietnam's Ordinance on Accounting and Statistics needs to be quickly changed and approached with international standards: First of all, to strengthen the legality and create a favorable environment for Vietnam to integrate into international and regional accounting, the Ordinance on Accounting needs to be upgraded to the Law on Accounting, in which the content of this document needs to be built in accordance with the integration process, in accordance with international standards, principles, practices and customs on accounting.

To enhance the responsibility in publicizing information, it is especially important that this document requires all types of enterprises to publicly disclose financial statements with the confirmation of independent auditors; regulations on financial statements must be strict in terms of content, time, basis, requirements, principles and responsibilities for making reports. At the same time, reduce the requirement to report unnecessary accounting information to simplify

streamline financial reporting procedures and make it easier for joint stock companies to fulfill their reporting responsibilities.

In addition, there should be appropriate sanctions for crimes in the securities sector. A characteristic of crimes related to securities market activities is that it is difficult or impossible to specifically identify the victims. For example, insider trading will directly harm the rights and legitimate interests of investors.

The current Vietnamese Criminal Code does not have any crime directly regulating activities in the securities market. However, scattered throughout the Code and in the chapter "Crimes against economic management order" there are a number of crimes that can be applied to the securities sector. However, securities is a special economic sector, so there should be specific financial sanctions to apply to crimes in the securities sector and the securities market.

Protecting the rights of shareholders in unlisted joint stock companies under Vietnamese law - 10

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