CONTROVERSIAL SHARE TRANSFER RESTRICTIONS UNDER NEW GOVERNMENT GUARANTEE REGULATIONS

Decree No. 15/2011/ND-CP on issuance and management of Government Guarantee ( Decree 15/2011 !"ic" came into effect on #$ri% 05& 2011& 'rings c"anges com$ared to re$ea%ed Decision 2(2/200)/*D-++g governing t"e same issue. ,ne of t"e c"anges is t"e restriction to s"are transfer rig"t. -t a$$ears t"at t"is c"ange& inter alia& triggers a num'er of %ega% issues !"ic"& from m. $oint of vie!& !i%% re/uire furt"er guide%ines and 'e not eas. to dea% !it". 1. Share tra !"er r#$ht %" !hareh%&'er! Decree 15/2011 $rovides t"at t"e com$an. (i.e. guaranteed $art. !i%% 'e on%. a%%o!ed to transfer its %oca% investors0 ca$ita% interests to foreign investors in $ro$ortion to t"e $ortion !"ic" "as 'een re$aid in fu%% '. its to %enders. 1egarding t"is restriction& !e s"ou%d ma2e c%ear a $oint t"at t"e com$an. does not o!n t"e s"are transfer rig"t. #ccording to t"e 3nter$rises 4a! 2005& t"e o!ners of t"is rig"t are t"e com$an.0s s"are"o%ders. 5o!ever& t"e !ording of Decree 15/2011 is terri'%. confusing. -t restraint t"e s"are transfer rig"t of %oca% investors '. governing t"e com$an.0s action. 6ean!"i%e t"e s"are"o%ders entit%es to free%. transfer its s"are. 1egard%ess of certain conditiona% s"are transfer c%ear%. regu%ated '. %a!& no regu%ation ena'%es t"e com$an. to restraint t"e s"are"o%ders0 t"e free%.-transfer of s"are. -t ma. 'e argued t"at no $ain& no gain. -n order to o'tain a Government guarantee& t"e com$an. "as to get an reso%ution du%. $assed '. t"e genera% s"are"o%ders meeting and at %east a$$roved '. a%% of %oca% s"are"o%ders to restrain t"e s"are transfer rig"t of %oca% s"are"o%ders under Decree 15/2011. 5o!ever& suc" $erfect reso%ution is not eas. to get& es$ecia%%. in res$ect of %arge 7oint stoc2 com$anies. -n %ig"t of confusing regu%ation and uncertaint. to get a $erfect reso%ution& ans!ers to t"e fo%%o!ing /uestions !ou%d ma2e t"e regu%ators and investors "eadac".. +"e first /uestion is t"at !"et"er t"e restraint of t"e %oca% s"are"o%ders0 s"are transfer rig"t '. t"e com$an. under Decree 15/2011 is %egitimate. -t a$$ears t"at t"is regu%ation is contrar. to t"e 3nter$rises 4a! 2005. +"e second /uestion is t"at if a reso%ution is on%. du%. $assed '. t"e sufficient vote of t"e genera% s"are"o%ders meeting 'ut not inc%uding a%% %oca% s"are"o%ders& !"et"er %oca% s"are"o%ders !"o did not vote or did not agree !it" t"e reso%ution are 'inding to suc" reso%ution. 8"ic" vie! !ou%d courts ta2e if suc" %oca% s"are"o%ders contend t"at t"e com$an. cannot restrain t"eir rig"t of free%.-transfer of s"ares under t"e 3nter$rises 4a! 2005. +"e t"ird /uestion !"ic" ma. 'e not t"e %ast is t"at ne! %oca% s"are"o%ders !"o !i%% 'ecome s"are"o%ders of t"e com$an. via receiving s"ares from foreign investors of t"e com$an. or via su'scri'ing ne! s"are issued '. t"e com$an.& are su'7ect to t"e restriction under Decree 15/2011. 2. Wh% (#&& ) 'erta*e #" a&& +a,%r! !hareh%&'er-! !hareh%&'# $ '%e! %t reach .5 /erce t s"are"o%ders "o%ding 5 $ercent or more of $aid u$ c"arter ca$ita% "ave to underta2e to "o%d toget"er at %east )5 $ercent of $aid u$ c"arter ca$ita% of t"e com$an.. +"e com$an. "as to register a %ist of suc" "o%ders !it" +"e 9toc2 3:c"ange or 9toc2 Centre in accordance !it" regu%ations of t"e 6inistr. of ;inance. #n. transfer of suc" "o%ders to a t"ird $art. re/uires t"e 6,;0s a$$rova%. 8"ere t"e com$an. issues ne! s"ares or raise its e/uit. ca$ita%& it "as to register ne! "o%ders to ensure t"e t"res"o%d of )5< 7oint%. "o%ding. -f tota% s"are"o%ding of a%% ma7or s"are"o%ders does not reac" )5 $ercent of $aid u$ c"arter ca$ita% !"et"er it can made u$ t"e insufficient $ortion '. ca%%ing t"e underta2ing from ot"er s"are"o%ders "o%ding %ess t"an 5 $ercent or it !i%% "as no c"ance to get an Government guarantee.