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6 Chapter Corporate Laws
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Shareholding company (Article 110)
A shareholding company is an enterprise that has legal entity status from the date of issuance of the enterprise registration certificate, may issue all classes of shares to raise funds and in which:- The charter capital is divided into equal portions called shares;
- Shareholders may be organizations or individuals; the minimum number of shareholders is three and there is no restriction on the maximum number;
- Shareholders are liable for the debts and other property obligations of the enterprise to the extent of the amount of capital contributed to the enterprise;
- Shareholders may freely assign their shares to other persons, except in the cases stipulated in this Law.
The advantages of this kind of company comparing to the limited company are that the liability of a shareholder of a shareholding company is limited within the value of the capital that he/ she has contributed to the company and can issue shares to raise funds for the company. Since there is no restriction on the maximum number of shareholders, it may have too many members and lead to be difficult to manage and operate.
- The charter capital is divided into equal portions called shares;
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Structure of the shareholding company (Article 134)
Shareholding companies may have a General Meeting of Shareholders, a Board of Management, a director or general director and an Inspection Committee. If a shareholding company has less than 11 shareholders being organizations which own less than 50% of the total shares of the company, it is not required to have an Inspection Committee, and in this case, at least 20% of the number of members of the Board of Management must be independent members and there must be an internal auditing committee under the Board of Management.If there is only one legal representative, the chairman of the Board of Management or the director or general director shall be the legal representative of the company. In case there is more than one legal representative, the chairman of the Board of Management and the director or general director shall automatically be the legal representatives of the company.
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General Meeting of Shareholders (Article 136)
The General Meeting of Shareholders shall convene annual meetings once per year within four months or not beyond 6 months (at request of the Board of Management to extend the time limit) from the end of the financial year or may convene extraordinary meetings. The location of meetings of the General Meeting of Shareholders must be within theThe cases that the Board of Management must convene an extraordinary meeting of the General Meeting of Shareholders
- The Board of Management considers that it is necessary to do so in the interests of the company;
- The number of the remaining members of the Board of Management or of the Inspection
- Committee is less than the number of members required by law;
- Upon request by a shareholder or a group of shareholders;
- Upon demand by the Inspection Committee;
- In other cases as stipulated by law and in the charter of the company.
VI.3.2.1 Rights and obligations of Shareholders (Article 114 & 115)
Ordinary shareholders have the following rights and obligations:
- To attend and express opinions at the General Meeting of Shareholders; to exercise the right to vote.
- To receive dividends;
- To be given priority in subscribing for new shares offered for sale
- To freely assign their shares to other persons;
- To sight, consult and make an extract of information on the list of shareholders with voting rights and to request amendment of incorrect information;
- To sight, consult and make an extract or copy of the charter of the company, minutes of meetings of the General Meeting of Shareholders and resolutions of the General Meeting of Shareholders;
- Upon dissolution or bankruptcy of the company, to receive a part of the remaining assets in proportion to the ratio of ownership of shares in the company;
- To pay in full and on time for the shares undertaken to be subscribed.
- To comply with the charter and the regulations on internal management of the company.
- To observe resolutions of the General Meeting of Shareholders and the Board of Management.
- To perform other rights and obligations in accordance with this Law and the charter of the company.
VI.3.2.2 Convene a General Meeting of Shareholders (Article 136.7)
To hold a meeting of the General Meeting of Shareholders, the convener must prepare a list of shareholders entitled to attend the meeting; prepare the program, agenda and documents for the meeting; draft a resolution of the General Meeting of Shareholders of the meeting; list and details of candidates in the case of election of members of the Board of Management or inspectors; determine the time and venue of the meeting; send a notice of invitation to the meeting to each shareholder entitled to attend the meeting.
The list of shareholders entitled to attend a meeting of the General Meeting of Shareholders shall be prepared based on the register of shareholders of the company and no earlier than five days prior to the date on which the notice of invitation to the meeting is sent, if the charter of the company does not stipulate a longer time-limit. The list of shareholders shall include the full name, permanent residential address, nationality and number of citizen's identity card, people’s identity card, passport or other lawful personal identification in respect of shareholders being individuals; name, enterprise code number or number of establishment decision, head office address in respect of shareholders being organizations; and number of shares of each class and number and date of registration of each shareholder.
VI.3.2.3 Requirements for conducting a meeting and passing resolutions of a General Meeting of Shareholders (Article 141 & 144)
In order to be conducted, the General Meeting of Shareholders needs to have the number of attending shareholders represents at least 51% of the total number of voting slips. If the meeting is not able to be conducted for the first time because of the condition stipulated in the law, the second meeting may be convened within 30 days from the first intended meeting where the number of attending shareholders represents at least 33% of the total number of voting slips. If the second meeting is also not able to be conducted, a third meeting may be convened within 20 days after the date of the second intended meeting with an irrespective voting slips’ number.
Resolutions of the General Meeting of Shareholders shall be passed within its power by way of voting in the meeting or collecting written opinions about following matters in the table below:
Requirements to pass resolutions of a General Meeting of Shareholders
Matter
Requirement
Attending shareholders
Passing resolution
· Amendment of or addition to contents of the charter of the company;
· Removal or discharge of members of the Board of Management & Inspection Committee;
· Approval of the annual financial statements;
51% of the total number of voting slips of all attending
shareholders51% of the total number of voting slips of all attending
shareholders· Classes of shares and total number of shares of each class;
· Change of lines of business and business sectors;
· Change of the organizational and managerial structure of the company;
· Investment or sale of assets valued at equal to or more than 35% of the total value of assets recorded in the most recent financial statements;
· Re-organization or dissolution of the company;
65% of the voting slips
· Electing members of the Board of Management & Inspection Committee.
The highest number of votes
By way of collection of written opinions, a resolution of the General Meeting of Shareholders shall be passed when it is agreed by a number of shareholders representing at least 51% of the total votes.
Within 15 days after the date of the approval, resolutions of the General Meeting of Shareholders must be notified to shareholders entitled to attend a meeting of the General Meeting of Shareholders. If the company has its own website, the resolutions may be published on the website of the company instead.
Minutes of the General Meeting of Shareholders (Article 146)
Meetings of the General Meeting of Shareholders shall be minuted and may be sound recorded or recorded and stored in other electronic forms. Minutes must be prepared in Vietnamese, may also be in a foreign language and have equal legal validity. If there is any difference in the contents of the minutes between the texts, the contents in the Vietnamese text shall prevail. The minutes must contain the following main details:
- Name, head office address, and enterprise code number;
- Time and location of the meeting of the General Meeting of Shareholders;
- Program and agenda of the meeting;
- Full names of the chairman and secretary;
- Summary of developments and opinions stated in the General Meeting of Shareholders;
- Number of shareholders and total number of votes of attending shareholders, appendix listing registered shareholders and representatives of shareholders attending the meeting with the total number of their shares and the corresponding total number of votes;
- Total number of votes for each issue voted on, specifying the method of voting, the number of valid or invalid votes, the number of votes for, against, and abstentions; and the corresponding percentage of the total number of votes of shareholders attending the meeting;
- Matters which were passed and corresponding percentage of votes for passing;
- Signatures of the chairman and secretary.
- The Board of Management considers that it is necessary to do so in the interests of the company;
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Board of Management
The Board of Management is the body managing and make decisions in the company. It shall have three to eleven members. The number of members shall be specified in the charter of the company. The term of office of members or independent members of the Board of Management shall not exceed five years; and they may be re-elected for an unlimited number of terms. (Article 150)To be a member of the Board of Management, a person must satisfy the following criteria and conditions: (Article 151)
- Have full capacity for civil acts, and not fall into the category of persons not permitted to manage an enterprise as stipulated in article 18.2 of this Law;
- Have professional expertise and experience in business management of the company and not necessarily be a shareholder of the company;
- A member of the board of management may concurrently be a member of the board of management of another company;
- In the case of a subsidiary company in which the State holds more than 50% of the charter capital, a member of the Board of Management must not be in any family relationship of the director or general director or other managers of the company, or must not be a related person of a manager or a person with the authority to appoint managers of the parent company.
The Board of Management shall have full authority exercise the rights and perform the obligations of the company which do not fall within the authority of the General Meeting of Shareholders as follow: (Article 149)
- To make decisions on medium term developmental strategies and plans, and on annual business plans of the company;
- To recommend the classes of shares and total number of shares of each class which may be offered;
- To make decisions on selling new shares; on raising additional funds in other forms; on the selling price of shares and bonds of the company; on redemption of shares;
- To make decisions on investment plans and investment projects within the authority and limits stipulated by law; decisions on solutions for market expansion, marketing and technology;
- To approve contracts for purchase, sale, borrowing, lending and other contracts valued at 35% or more of the total value of assets recorded in the most recent financial statements of the company;
- To elect, remove or discharge the chairman of the Board of Management; to appoint, remove, and sign contracts or terminate contracts with the key managers of the company; to make decisions on salaries and other benefits of such managers; to appoint authorized representatives to participate in the members' council or general meeting of shareholders of other companies, and to make decisions on the level of remuneration and other benefits of such persons;
- To supervise and direct the director or general director and other managers in their work of conducting the day-to-day business of the company;
- To make decisions on the organizational structure and the rules on internal management; decisions on the establishment of subsidiary companies, branches and representative offices and the capital contribution to or purchase of shares of other enterprises;
- To approve the agenda and contents of documents of and convene meetings of the General Meeting of Shareholders; to obtain written opinions in order for the General Meeting of Shareholders to pass decisions;
- To submit annual finalized financial reports to the General Meeting of Shareholders;
- To recommend the dividend rates to be paid, to make decisions on the time-limit and procedures for payment of dividends or for dealing with losses incurred in the business operations;
- To recommend re-organization or dissolution [of the company], or to request bankruptcy of the company;
- Other rights and obligations in accordance with this Law and the charter of the company.
- Have full capacity for civil acts, and not fall into the category of persons not permitted to manage an enterprise as stipulated in article 18.2 of this Law;
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Chairman of Board of Management
A member of the Board of Management shall be elected to be the chairman who may act concurrently as the director or general director of the company except for the case that the State holds more than 50% of the total number of votes. (Article 152)The chairman of the Board of Management has the following rights and obligations:
- To prepare working plans and programs of the Board of Management;
- To prepare the program, agenda and documents; to convene and preside over meetings of the Board of Management;
- To organize for resolutions of the Board of Management to be passed;
- To monitor the implementation of resolutions of the Board of Management;
- To chair meetings of the General Meetings of Shareholders and meetings of the Board of Management;
- Other rights and obligations in accordance with this Law and the charter of the company.
If the chairman of the Board of Management is absent or is not able to perform his or her duties, he or she shall authorize in writing another member to exercise the rights and perform the obligations of the chairman of the Board of Management. In case no person is authorized, the remaining members shall select one of them to temporarily hold the position of the chairman. The chairman of the Board of Management may be removed in accordance with a decision of the Board of Management.
- To prepare working plans and programs of the Board of Management;
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Director or general director
The Board of Management shall appoint one of its members or employ another person as the director or general director who shall manage the day-to-day business operations of the company; shall be supervised by the Board of Management, and is responsible to the Board of Management and before the law for the exercise and the performance of his or her delegated powers and obligations. The term of the director or general director shall not exceed five years and may be re-appointed for an unlimited number of terms.The director or general director has the following powers and obligations:
- To make decisions on all issues relating to the day-to-day business operations of the company without decisions of the Board of Management;
- To organize the implementation of resolutions of the Board of Management; business plans and investment plans of the company;
- To make recommendations with respect to the organizational structure and the rules on internal management of the company;
- To appoint, remove and discharge managerial positions in the company, except for those under the scope of authority of the Board of Management;
- To make decisions on salary and other benefits for employees of the company, including managers who may be appointed by the director or general director;
- To recruit employees;
- To make recommendations on methods of paying dividends and of dealing with business losses;
- Other powers and obligations in accordance with provisions of the law, the charter of the company and resolutions of the Board of Management.
- To make decisions on all issues relating to the day-to-day business operations of the company without decisions of the Board of Management;
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Inspectors
There shall be from three to five members in Inspection Committee; the term of an inspector shall be not more than five years and may be re-appointed for an unlimited number of terms. Inspectors shall elect one of them to be the head of the Inspection Committee who must be a professional accountant or auditor and must work full-time in the company except where the charter of the company provides for any other higher standards. More than half of the members of the Inspection Committee must reside permanently inMain rights and obligations of Inspector Committee: (Article 165)
- To supervise the Board of Management and the director or general director;
- To inspect business activities; accounting work and preparation of financial statements; review books of account, records of accounts and other documents of the company;
- To evaluate the completeness, lawfulness and truthfulness of reports on business, half-yearly and annual financial statements and reports on evaluation of the management of the Board of Management; and to submit evaluation reports at annual meetings of the General Meeting of Shareholders.
- If requested by a shareholder or group of shareholders, the Inspection Committee shall carry out an inspection within a period of seven working days from the date of receipt of the request and must submit a report on results of the required issues within a period of 15 days from the date of completion of the inspection.
- To have the right to attend and participate in discussions at meetings of the General Meeting of Shareholders and of the Board of Management and other meetings of the company.
- To supervise the Board of Management and the director or general director;
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Shares
A shareholding company must have ordinary shares and owners of ordinary shares shall be ordinary shareholders. In addition to ordinary shares, a shareholding company may have preference shares which shall be voting preference shares, dividend preference shares, redeemable preference shares, and other preference shares as stipulated in the charter of the company. Owners of preference shares shall be referred to as preference shareholders. (Article 113)Classes of shares
■Ordinary Share (Article 114)
Rights of ordinary shareholders:
- To attend and express opinions at the General Meeting of Shareholders and to exercise the right to vote directly or through an authorized representative. Each ordinary share shall carry one vote;
- To receive dividends at the rate decided by the General Meeting of Shareholders;
- To be given priority in subscribing for new shares offered for sale in proportion;
- To freely assign their shares to other persons, except in the cases stipulated in articles 119.3 and 126.1 of this Law;
- To sight, consult and make an extract or copy of information on the list of shareholders with voting rights and to request amendment of incorrect information; of the charter of the company, minutes of meetings of the General Meeting of Shareholders and resolutions of the General Meeting of Shareholders;
- Upon dissolution or bankruptcy of the company, to receive a part of the remaining assets in proportion to the ratio of ownership of shares in the company.
A shareholder or a group of shareholders holding 10% or more of the total ordinary shares for a consecutive period of six months or more, or holding a smaller percentage as stipulated in the charter of the company, has the following rights:
- To nominate candidates to the Board of Management and the Inspection Committee;
- To sight and make an extract of the book of minutes and resolutions of the Board of Management, financial statements, and reports of the Inspection Committee;
- To request the convening of a General Meeting of Shareholders;
- To request the Inspection Committee to inspect each issue relating to the management and administration of the operation of the company where it is considered necessary.
- Other rights in accordance with this Law and the charter of the company.
It is noticed that ordinary shares may not be converted into preference shares.
■ Preference Share
Voting preference shares and rights of voting preference shareholder (Article 116)
Voting preference share is a share which carries more votes than an ordinary share. The number of votes per voting preference share shall be stipulated in the charter of the company. Voting preference shareholders have the rights to vote on matters which fall within the authority of the General Meeting of Shareholders and other rights as ordinary shareholders, except as stipulated in clause 3 of this article. Voting preference shareholders may not assign such shares to other persons.
Dividend preference shares and rights of dividend preference shareholders (Article 117)
A dividend preference share is a share for which a dividend is paid at a rate higher than that paid for an ordinary share or at an annual fixed rate. Annually paid dividends shall include fixed dividends and bonus dividends. Fixed dividends shall not depend on the outcome of the business of the company. The specific rate of fixed dividends and method for determination of bonus dividends shall be stipulated in dividend preference share certificates. Preference shares may be converted into ordinary shares pursuant to a resolution of the General Meeting of Shareholders.
Dividend preference shareholders have the rights to receive dividends, to receive a part of the remaining assets in proportion to the ratio of ownership of shares in the company after the company has paid in full its debts and redeemable preference shares in case of dissolution or bankruptcy of the company, and other rights as ordinary shareholders. However, dividend preference shareholders do not have the right to vote, the right to attend General Meetings of Shareholders or the right to nominate candidates to the Board of Management and the Inspection Committee.
Redeemable preference shares and rights of redeemable preference shareholders (Article 118)
A redeemable preference share is a share the contributed capital of which is redeemed by the company at the demand of its owner or in accordance with the conditions stipulated in the redeemable preference share certificate. The rights of redeemable preference shareholders are the same as those of ordinary shareholders. Redeemable preference shareholders do not have the right to vote, the right to attend General Meetings of Shareholders or the right to nominate candidates to the Board of Management and the Inspection Committee.
- To attend and express opinions at the General Meeting of Shareholders and to exercise the right to vote directly or through an authorized representative. Each ordinary share shall carry one vote;
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Dividend
■Payment of dividends (Article 132)Dividends paid on preference shares shall be in accordance with the respective conditions applicable to each class of preference shares. Dividends paid on ordinary shares shall be determined on the basis of the realized net profit and payment for dividends shall be sourced from profit retained by the company. A shareholding company may pay dividends for ordinary shares only when the company satisfies all the following conditions:
- The company has fulfilled its tax obligations and other financial obligations in accordance with law;
- The company has made appropriation for all funds of the company and has made up fully for previous losses in accordance with law and the charter of the company;
- After payment of all intended dividends, the company will still be able to satisfy its debts and other property obligations which become due.
Where a payment for redeemed shares or dividends are paid other than pursuant of this Law, all shareholders shall surrender to the company the monies or other assets received; where a shareholder is not able to surrender same to the company, all members of the Board of Management shall be jointly liable for the debts and other property obligations of the company to the amount which can not be surrendered. (Article 133)
■Procedures of dividend payment (Article 132)
Within 6 months from the date of closing of the annual General Meeting of Shareholders, dividends must be paid. The Board of Management shall prepare a list of shareholders to be paid dividends, determine the rate of dividends, the time-limit and method of payment no later than 30 days prior to each payment of dividends. The notice on payment of dividends shall be sent to the shareholders no later than 15 days prior to the actual payment of dividends.
Dividends may be paid in cash, by shares of the company or by other assets of the company. Where payment is made in cash, it must be made in Vietnamese Dong and may be made by cheque, bank transfer or money order mailed to the permanent residential address or contact address of shareholders.
In the case of payment of dividends by shares, the company is not required to carry out the procedures for offer to sell shares but must register an increase of its charter capital corresponding to the total par value of shares used to pay for dividends, within 10 days from the date of completion of payment of dividends.
- The company has fulfilled its tax obligations and other financial obligations in accordance with law;
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Issue of bonds (Article 127)
A shareholding company may issue bonds, convertible bonds and other classes of bonds in accordance with law and the charter of the company. In case that a company which fails to pay in full for the principal and interest of issued bonds or for due debts in three consecutive preceding years shall not have the right to issue bonds, unless otherwise stipulated in the law on securities. The issue of bonds to creditors being selected financial institutions is not restricted. The Board of Management has the right to make decisions on the class of bonds, total value of bonds and timing of issue, but must report to the General Meeting of Shareholders at its next meeting. The report must be accompanied by documents and files to explain the resolution of the Board of Management on issue of bonds.Where a shareholding company issues bonds to be converted into shares, it shall implement same in accordance with the respective sequence and procedures for offer to sell shares. The company shall register any change to its charter capital within 10 days from the date of completion of conversion of bonds into shares.
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Change of charter capital (Article 111)
A company’s charter capital may be changed in the following cases:
- Pursuant to a decision of the General Meeting of Shareholders, the company shall return part of the capital contribution to the shareholders in proportion to their ratio of ownership of shares in the company if the company has conducted business activities for two consecutive years from the date of enterprise registration, and must ensure payment of all debts and other property obligations upon return to the shareholders;
- The company redeems issued shares;
- The shareholders fail to pay for the charter capital in full and on time.
The summary of Forms of Organizations
Item
2 or more members LLC
1 Member LLC
Shareholding company
Investor number/ Number of shareholders
2 – 50
1
3 or more
Investor
Organization or individual
Share issuance
No
No
Yes
Limit of responsibility
Within the scope of the paid up capital
The highest decision making authority
Members’ council
Meeting of members’ council
General meeting of shareholders
Availability of capital increase
Yes
Availability of capital decrease
Yes
No
Yes
Structure
· Members’ Council
· A chairman
· A director or general director
· An Inspection Committee (in case of more than 11 members)
· Chairman or members’ council
· Director of general director
· Inspectors
· General Meeting of Shareholders
· A Board of Management
· A director or general director
· An Inspection Committee (in case of more than 11 members)
Change of company organization
Can change to
One Member LLC
Can change to
Two or More Members LLC
Can change to LLC
- Pursuant to a decision of the General Meeting of Shareholders, the company shall return part of the capital contribution to the shareholders in proportion to their ratio of ownership of shares in the company if the company has conducted business activities for two consecutive years from the date of enterprise registration, and must ensure payment of all debts and other property obligations upon return to the shareholders;
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