assigned authority; the term of the Board of Directors exceeds 06 months and a new Board of Directors has not been elected to replace it; and (iii) Request the Board of Supervisors to inspect each specific issue related to the management and operation of the company when deemed necessary [20].
However, the additional provisions on shareholders' rights under the 2005 Enterprise Law as mentioned above have greatly helped shareholders in the process of protecting themselves. The increased supervision of shareholders over the management and operation of the company not only helps to increase the transparency of information of the joint stock company but also ensures the maximum rights of shareholders, especially minority shareholders. It is noteworthy that along with the expansion of rights for shareholders, the 2005 Enterprise Law has added the obligations of common shareholders: Common shareholders must bear personal responsibility when performing one of the following acts on behalf of the company in any form: (i) Violating the law; (ii) Conducting business and other transactions for personal gain or to serve the interests of other organizations or individuals;
(iii) Paying off debts that are not due before the financial risk that may arise for the company. These regulations partly have the effect of preventing major shareholders, helping to protect the interests of minority shareholders.
2.1.4. Self-defense mechanism under the Enterprise Law 2014
According to Article 110 of the 2014 Law on Enterprises, shareholders in a JSC can be organizations or individuals. The minimum number of shareholders to establish a JSC is three and there is no limit on the maximum number. This provision remains the same as in the 2005 Law on Enterprises and the 1999 Law on Enterprises.
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According to Article 114 of the 2014 Enterprise Law, ordinary shareholders have the following rights:
- Attend and speak at the General Meeting of Shareholders and exercise voting rights directly or through an authorized representative or in other forms as prescribed by law or the Company's Charter. Each common share has one vote;
- Receive dividends at the level decided by the General Meeting of Shareholders;
- Priority to buy newly offered shares corresponding to the common shares ratio of each shareholder in the company;
- Freely transfer his/her shares to others, except in the cases specified in Clause 3, Article 119 and Clause 1, Article 126 of this Law;
- Review, look up and extract information in the List of Shareholders with voting rights and request correction of inaccurate information;
- Review, look up, extract or copy the Company Charter, minutes of the General Meeting of Shareholders and resolutions of the General Meeting of Shareholders;
- When the company is dissolved or bankrupt, receive a portion of the remaining assets corresponding to the percentage of shares owned in the company [23, Article 114];
In case a shareholder or group of shareholders owns 10% or more of the total number of common shares for a continuous period of at least 06 months or another smaller percentage as prescribed in the Company Charter, they have the following additional rights:
- Nominate people to the Board of Directors and Board of Supervisors;
- Review and extract the minutes and resolutions of the Board of Directors, mid-year and annual financial reports according to the form of the Vietnamese accounting system and reports of the Board of Supervisors;
- Request to convene a meeting of the General Meeting of Shareholders in cases where required by law.
- Request the Board of Supervisors to inspect each specific issue related to the management and operation of the company when deemed necessary [23].
Thus, compared to LDN 2005, LDN 2014 does not increase new rights for shareholders. However, the specific content of the provisions has changed. Below is an analysis of the latest points of LDN 2014:
* Right to receive dividends
LDN 2014 clearly stipulates the time limit for enterprises to pay dividends to shareholders. Clause 4, Article 132 of the new Law adds the content " Dividends must be paid in full within 06 months from the date of closing the annual General Meeting of Shareholders" [23, Article 132] . This is a breakthrough provision. Previously, the dividend payment mechanism was decided by shareholders at the General Meeting of Shareholders. At the General Meeting of Shareholders, shareholders will decide on the dividend payment level and form by passing a resolution based on the proposal of the Board of Directors; in terms of time, the dividend payment deadline is often not mentioned or authorized to the Director/General Director or the Board of Directors to decide. Only a few resolutions of the General Meeting of Shareholders always fix the time of dividend payment, such as dividends must be paid before a certain date. This leads to a situation of dividend debt. The Board of Directors delays the decision to pay dividends for many months or has decided to pay dividends but has not yet paid to shareholders. The new regulations on dividend payment in the 2014 Enterprise Law will certainly help reduce this situation and increase investors' confidence when investing in shares of joint stock companies. In case a company violates the regulations on dividend payment, shareholders have the right to file a lawsuit to request the court to force the company to comply. If shareholders have evidence proving that the company violates the regulations on dividend payment, in addition to filing a lawsuit to request the court to force the company to pay dividends, shareholders also have the right to request the court to issue a judgment forcing the company to pay additional interest on late dividend payments to shareholders.
Another new point is that Clause 6, Article 132 of the 2014 Enterprise Law also stipulates the case of paying dividends in shares.
* Right to request the company to buy back shares
In case of failure to reach an agreement on the price, LDN 2014 has changed. Previously, LDN 2005 stipulated that “that shareholder can sell the shares to
Other people or parties may request a professional valuation organization to evaluate the value” . LDN 2014 has removed the provision that “shareholders can sell shares to others”. This is a strict provision of LDN 2014 because protecting minority shareholders is necessary but must be on a reasonable basis, the provisions of the law must still avoid causing disadvantages to major shareholders.
* Right to attend General Meeting of Shareholders
- Regarding the form of participation and exercising voting rights: According to Point a, Clause 1, Article 114 of the 2014 Enterprise Law, in addition to the form of participation and exercising voting rights directly or through an authorized representative, there are also "other forms" prescribed by law and the company's charter. Although "other forms" have not been clarified, this provision has given enterprises the initiative in organizing the General Meeting of Shareholders, ensuring the rights and interests of all shareholders. There are many joint stock companies, especially listed companies, with tens or hundreds of thousands of shareholders. Therefore, organizing a General Meeting of Shareholders with the presence of all shareholders or their representatives is very difficult and costly. The provision on "other forms" promises to solve this difficulty. Other forms here are understood as the flexible application of measures, tools, and electronic means such as live television, two-way direct connection, online meeting software, etc., suitable to the specific characteristics of each company. Previously, according to the 1990 and 1999 Laws, shareholders were only allowed to attend and exercise their voting rights directly; according to Article 79 of the 2005 Law, shareholders were allowed to attend and exercise their voting rights directly or through authorized representatives. However, this provision is still considered quite rigid, creating conditions for companies to limit the attendance and exercise of voting rights of minority shareholders. Later, although at Point b, Clause 1, Article 26 of Decree 102/2010/ND-CP, an additional form of participation was added, which is to send voting ballots by registered mail to the Board of Directors at least 01 day before the opening of the General Meeting of Shareholders, but
also does not effectively solve the above problem. Previously, many large companies have applied online meetings, online voting and agreed on the contents of the meeting, but according to LDN 2005, in order for the voting results to be recognized, shareholders still have to put them in a registered letter and send them to the Board of Directors, which is quite cumbersome and unnecessary.
- Regarding the conditions for holding meetings: The meeting attendance rate according to the 2014 Law on Enterprises has been reduced to conform to international practice. Article 141 of the 2014 Law on Enterprises stipulates that the first and second meeting attendance rates (when the first meeting does not meet the conditions) are: ≥ 51% and ≥ 33%, respectively. Previously, Article 102 of the 2005 Law on Enterprises stipulated that the first and second meeting attendance rates (when the first meeting does not meet the conditions) are: ≥ 65% and ≥ 51%, respectively. Reducing the rate of holding the General Meeting of Shareholders as in the 2014 Enterprise Law has created favorable conditions for the General Meeting of Shareholders to be held according to the enterprise's plan, avoiding the situation of having to convene a second or third time due to not meeting the conditions as in the 2005 Enterprise Law. With the regulations in the 2005 Enterprise Law, although the rights of minority shareholders to attend the meeting are better protected, it will create difficulties in holding the General Meeting of Shareholders if the minority shareholders disregard their rights and do not attend the meeting. If the rate of minority shareholders not attending is ≥ 35% (first time) and ≥ 49% (second time), the General Meeting of Shareholders will be cancelled. In fact, the postponement of the General Meeting of Shareholders during the period when the 2005 Enterprise Law was in effect due to minority shareholders not attending occurred quite often. This is a strict regulation of the 2014 Enterprise Law because protecting minority shareholders is necessary but must be on a reasonable basis, and legal regulations must still avoid causing disadvantages to major shareholders.
* Voting rights
- Regarding the voting ratio in the meeting: Article 114 of the 2014 Enterprise Law stipulates that 65% and 51% are the decisive share ownership ratios. This means that shareholders or groups of shareholders holding 35% or 49% or more will have the right to vote.
veto the decisions of the General Meeting of Shareholders and the Board of Directors related to the contents in Article 144 of the Law on Enterprises 2014. These ratios according to Article 104 of the Law on Enterprises 2005 are 75% and 65% respectively. Reducing the ratio of shares to pass resolutions of the General Meeting of Shareholders to be more consistent with international practices of the Law on Enterprises 2014 has contributed to strongly attracting foreign investors, creating favorable conditions for Vietnam in the process of international integration. Moreover, it also limits cases where only for the benefit of a minority shareholder in the company, major policies that benefit the majority of shareholders are prevented. In terms of protecting minority shareholders, the provisions of the Law on Enterprises 2014 seem to be more disadvantageous for minority shareholders than the Law on Enterprises 2005, because shareholders or groups of shareholders only need to have 65% or 51% of shares to be able to decide on the company's issues. However, in Article 144 of the 2014 Enterprise Law, to overcome this problem, it is also stipulated that the above rates are only minimum rates; in case the parties agree on a higher rate, that rate will be applied to pass the decision of the General Meeting of Shareholders and the Board of Directors. Therefore, in the initial negotiations, if small shareholders can reach favorable agreements in which the approved share rate is higher than the above figures, the agreement is still legal and will better protect the shareholders' rights.
- Regarding the form of collecting opinions in writing : there are also changes and the meaning is similar to that of the voting form. Clause 4, Article 144 of the 2014 Enterprise Law stipulates that "the resolution of the General Meeting of Shareholders is passed if it is approved by shareholders representing at least 51% of the total number of votes". This rate according to Clause 5, Article 104 is 75%.
- Regarding the election of members of the Board of Directors/Board of Supervisors. The new point of the 2014 Law on Enterprises is the regulation that whether or not to elect members of the Board of Directors and Board of Supervisors by cumulative voting depends on the company's initiative and is stipulated in the charter (Clause 3, Article 144). Previously, according to Article 104 of the 2005 Law on Enterprises, "the voting to elect members of the Board of Directors and Board of Supervisors must be carried out by the method of
cumulative voting”; while the 1999 and 1990 Laws only stipulate a single form of voting at the General Meeting of Shareholders, which is voting by the normal method. The change in the 2014 Law has given more autonomy to joint stock companies, but in terms of protecting the rights of minority shareholders, this provision somewhat limits the effectiveness of the “cumulative voting tool”. If joint stock companies are given the right to decide on the issue of cumulative voting, it may lead to the following cases: (i) When an investor purchases shares and becomes a shareholder of the company, the company’s charter stipulates that the principle of cumulative voting will not be applied from the beginning or (ii) In the case where major shareholders or groups of shareholders hold more than 65% of common shares or another ratio stipulated by the company’s charter, such shareholders or groups of shareholders may veto the application of the principle of cumulative voting even if the company’s charter already stipulates it.
* Right to request convening of General Meeting of Shareholders
Regarding this issue, the 2014 Law also stipulates some new contents such as: (i) expanding the scope of responsibility when not convening extraordinary meetings in accordance with regulations: both the Chairman of the Board of Directors and members of the Board of Directors must be responsible (not the Chairman of the Board of Directors as in the 2005 Law). And (ii) when the Supervisory Board is authorized to replace the Board of Directors to convene, the Supervisory Board does not convene in accordance with regulations, all members of the Supervisory Board must be responsible (not the Head of the Supervisory Board as in the 2005 Law) . This is one of the regulations that helps to better ensure the rights of
Shareholders, although the Law has no provisions on compensation for members of the Board of Directors/Board of Supervisors
determine the level of responsibility
Article 136 of the 2014 Enterprise Law also stipulates a number of additional contents such as: (i) The General Meeting of Shareholders can be held simultaneously at many different locations and the place where the chairman attends the meeting is determined as the location of the General Meeting of Shareholders; (ii) Issues
The agenda items discussed and approved at the annual General Meeting of Shareholders, supplemented with: The company's annual business plan; Self-assessment report on the performance of the Board of Supervisors and each Supervisor; (iii) The work of the convener: supplement the work of drafting resolutions of the General Meeting of Shareholders according to the expected content of the meeting; list and detailed information of candidates in case of election of members of the Board of Directors and Supervisors.
* Right to run for the Board of Directors/Board of Supervisors
Regarding the structure, standards and conditions for becoming a member of the Board of Directors, candidates must fully meet the standards and conditions in Article 151 of the 2014 Law on Enterprises. The new point of this Article is that it does not specifically stipulate the number of shares that shareholders must hold. This is a major improvement compared to Article 110 of the 2005 Law on Enterprises, which states: “A member of the Board of Directors must be an individual shareholder owning at least 5% of the total number of common shares”.
* Regulations on Contracts and transactions must be approved by the General Meeting of Shareholders or the Board of Directors.
Clause 2 and Clause 3, Article 162 of the 2014 Law on Enterprises specifically stipulate that contracts and transactions with a value of less than 35% of the total value of the enterprise's assets recorded in the most recent financial report must be approved by the Board of Directors; and transactions with a value greater than 35% will be under the authority of the General Meeting of Shareholders. Previously, in the provisions of Article 120 of the 2005 Law on Enterprises, the boundary ratio between the approval authority of the Board of Directors or the General Meeting of Shareholders was 50%. At the same time, according to the provisions of Articles 159 and 162 of the 2014 Law on Enterprises, contracts and transactions between the company and shareholders, authorized representatives of shareholders owning more than 10% of the total number of common shares of the company and their related persons; between the company and members of the Board of Directors, the Director/General Director and their related persons; between the company and enterprises in which the members of the Board of Directors, Supervisors, Directors/General Directors and other managers of the company own shares must be approved by the General Meeting of Shareholders or