BUSINESS LAW ASSIGNMENT

Subject: “Vietnamese Law on Enterprises gives far too much power to the Board whilst giving the general meeting far too little power to control what the Board does, save in very limited circumstances.” Discuss.

LECTURER: Dr. Vu Van Ngoc

STUDENTS: Trần Đức Việt Lê Minh Hằng CLASS: EMBA 12C

Number of Words: 1984

1

and Circular No. [8] . and plans.To make decisions on medium term development strategies. particularly: . Circular No. [8] 2 . and on annual business plans of the company. [8] . The general meeting is principally responsible for election of the directors while directors are principally concerned with the management of the company. The power of board of directors and general meeting II. The question is whether Vietnamese Law on Enterprises gives far too much power to the board whilst giving the general meeting far too little power to control what the board does. the decision whether to merge the company with another one). decisions which are as close to investment decisions as they are to management decisions (for example.The Board of Directors is the body managing the company and shall have full authority to make decisions in the name of the company and to exercise the rights and discharge the obligations of the company which do not fall within the authority of the General Meeting of Shareholders. and decisions on matters where the directors are conflicted. All company laws are very cautious about allocating decision-making to the shareholders’ meeting on a mandatory basis.To recommend the classes of shares and total number of shares of each class which may be offered. 121/2012/TT-BTC. 121/2012/TT-BTC and their company’s charter. All these bodies have distinct powers and controls of the company provided for in Law Of Enterprise.Introduction Balance of power in the company raises the question of the relationship between the shareholders in general meeting and the Board of Directors.1 The power of board of directors Board of directors enjoy all the rights provided for in the law on enterprises. save in very limited circumstances. Company laws commonly take this step only in one of three situations: changes to the company’s constitution.

To make decisions on investment plans and investment projects within the authority and limits stipulated in this Law and the charter of the company. [8] 3 . sale.To make decisions on solutions for market expansion. to make decisions on raising additional fund in other forms. [8] . [8] . ( Article 108 Board of Directors) [8] . [8] .To make decisions on the organizational structure and internal management rules of the company..To appoint. dismiss or remove. and to sign contracts or to terminate contracts with the director or the general director and other key managers of the company as stipulated in the charter of the company. to make decisions on the establishment of subsidiary companies. borrowing. [8] .To make decisions on redemption of shares in accordance with the provisions in clause 1 of article 91 of this Law.To make decisions on the price of shares and bonds of the company offered for sale. to approve contracts for purchase.To supervise and direct the director or general director and other management personnel in their work of conducting the daily business of the company. or a smaller percentage as stipulated in the charter of the company. except for contracts and transactions stipulated in clauses 1 and 3 of article 120 of this Law (Article 108 Board of Directors) [8] . and to make decisions on the level of remuneration and other benefits of such persons.To make decisions on offering new shares within the number of shares of each class which may be offered for sale. to make decisions on salaries and other benefits of such managers. marketing and technology. the establishment of branches and representative offices and the capital contribution to or purchase of shares of other enterprises. [8] . lending and other contracts valued at fifty (50) or more per cent of the total value of assets recorded in the most recent financial statement of the company. to appoint an authorized representative to exercise ownership rights of shares or of capital contributed to other companies.

Circular No. [8] . [8] . 121/2012/TT-BTC and their company’s charter.To submit annual final financial reports to the General Meeting of Shareholders.To recommend re-organization or dissolution of the company. any member who opposed the passing of such resolution shall be exempt from liability. If the Board of Management passes a resolution which is contrary to law or contrary to provisions of the charter of the company causing damage to the company. [8] . to make decisions on the time-limit and procedures for payment of dividends or for dealing with losses incurred in the business operation.1 The power of general meeting Board of directors enjoy all the rights provided for in the law on enterprises. or to request bankruptcy of the company. a shareholder owning shares in a company for a minimum consecutive period of at least one year shall have the right to request the Board of Management to suspend implementation of a resolution as mentioned above.To recommend the dividend rates to be paid.To approve the agenda and contents of documents for the General Meeting of Shareholders. In such a case. [8] . [8] 4 . [8] II. the charter of the company and resolutions of the General Meeting of Shareholders. to convene the General Meeting of Shareholders or to obtain written opinions in order for the General Meeting of Shareholders to pass resolutions.The General Meeting of Shareholders shall include all shareholders which may vote and shall be the highest decision-making authority of a shareholding company. the Board of Management shall strictly comply with the provisions of law.To pass the development direction of the company.When implementing its functions and performing its duties. then the members who agreed to pass such resolution shall be personally jointly liable for that resolution and they must compensate the company for the damage. [8] .. particularly: .

To approve annual financial statements. [8] . [8] .To make decisions on re-organization and dissolution of the company.To make decisions on the classes of shares and total number of shares of each class which may be offered for sale.To elect.To make decisions on redemption of more than ten (10) per cent of the total number of shares of each class already sold. unless the charter of the company otherwise provides. Such an arrangement is more protective of centralised management than rules giving shareholders the power of initiative. [8] .To make investment decisions or decisions on sale of assets valued at fifty (50) or more per cent of the total value of assets recorded in the most recent financial statement of the company unless the charter of the company stipulates some other percentage. [8] Discussion Should any board decision which has sufficiently large impact upon the company’s business be treated as analogous to an investment decision and so require shareholder approval? Even in these cases. In such cases the shareholders have a veto right over certain classes of decision but no power to take the initiative.To consider and deal with breaches by the Board of Management and the Inspection Committee which cause damage to the company and its shareholders. remove or discharge members of the Board of Management and members of the Inspection Committee. shareholders in some cases acquire a decision-making role only if the management has proposed the decision in question. to make decisions on the rate of annual dividend for each class of shares. [8] . [8] . [8] .. except for adjusting the charter capital as a result of sale of new shares within the number of shares which may be offered as stated in the charter of the company.[3] 5 .To make decisions on amendments of and additions to the charter of the company. [8] .

Vietnamese law-makers should refine the procedures of the special committee as well as clarify the role of independent board members. + The founding shareholders contribute not enough and exactly registration of the shares purchased Violation of the aforementioned has created some negative consequences for the company its shareholders and all parties concerned . In The UK. among the largest U.S.. So. The US at least half of members in the board of directors are nonexecutive directors. One more thing..- In Vietnam Law of Enterprise. or has used its position as majority shareholder vote for their right to buy more with prices incentives when companies issue new shares . The composition of the board must balance between the executive members and non-executive members and ensuring that at least one third are non-executive directors.S. there are many board decisions which have sufficiently large impact upon the company’s business. Composition of the board : independent board members is still a relatively new concept in Viet Nam. 10. Verifying and ensuring the independence of directors is a challenge. 6 . The shareholder or group of shareholders stipulated in clause 2 of article 79 of this Law may recommend items to be included in the agenda of the General Meeting of Shareholders. The role of controlling shareholders adds to the problem.11: The public company should limit the number of members of the board of directors who concurrently hold posts in the executive apparatus of the company in order to ensure the independence of the board. decided to raise capital directly charter or transfer . in clause 2 of article 99. these violations include: + Major shareholders (especially state shareholders ) have abused their powers and their enforcement are not contrary to the provisions of law as to directly appoint their representatives as members of the Board of Directors . are not required approval by the General Meeting. In Circular 121/2012/QD-BTC. use company assets to serve its own interests or for other subsidiaries . “The item recommended does not fall within the decision-making authority of the General Meeting of Shareholders”. companies ( S & P 500 ) . approximately 83 % are members of board of directors are non-executive Director . many shareholders violated their powers and obligations in practice. But in clause 3 of article 99. And in the U. Art.

further refinement and adoption of codes of conduct should be encouraged. codes of ethics as well as guidelines for the conduct of boards. with the exception of Viet Nam. These codes and guidelines include corporate governance codes. especially minority shareholders . in decision-making process in the company is quite limited . while ignoring or even long-term benefits in exchange of the company's shareholders and is quite evident. have promulgated codes. The bodies issuing these codes and guidelines range from stock exchanges and securities commissions to professional associations and corporate governance institutes. All respondent jurisdictions. nondescript directly . However. the effect of the implementation of these powers . [5] In short . In order to ensure credibility of the system. 7 . Balance of power in the company raises the question of the relationship between the shareholders in general meeting and the Board of Directors is very important to corporate governance. report having codes or guidelines in place. promulgated by either private sector organisations or regulatory bodies. it is also essential that both shareholders and regulators must have means of verifying compliance and disclosure. The phenomenon of violation of powers and obligations of shareholders are quite varied form . the rights of shareholders under the provisions of general law in varying degrees has been done. with support from international technical-assistance providers when appropriate. All companies at the very least should issue annual corporate governance reports which provide details on items such as related-party transactions and the involvement of independent board members.” While most Asian jurisdictions with the exception of Viet Nam.- Codes of conduct can improve board member performance by publicly articulating the minimum procedures and effort that constitute “due diligence and care. The trend chasing immediate benefits .

globalcorporategovernance.1787/9789264096790-en 4.org/Instruments/ShowInstrumentView. OECD Publishing http://dx.com/TuVanLuat/Luat_kinh_doanh/8214012. http://www.org/10. Vietnamese Law on Enterprises.aspx?InstrumentID=151&Instr umentPID=147&Lang=en&Book= 8. Circular 121/2012/QD-BTC 3. THE OECD PRINCIPLES OF CORPORATE GOVERNANCE : http://acts.com/n_ap/270_275. National Assembly 8 .Bibliography 1.htm 5. Structure.aspx The law of enterprise 2005 2. Corporate Governance in Asia: Progress and Challenges. 2005. OECD Publishing.doi. “Bàn về quyền của cổ đông và đại hội đồng cổ đông: Thực trạng và vấn đề cần khắc phục” http://luatcongdong. 6. Paul L Davies. OECD (2011). Duties and Powers. Corporate Governance. The Board of Directors: Composition. 7.oecd.