JOINT STOCK COMPANIES
Organisational structures -
Shareholders’ rights and obligation
LLM. Bui Doan Danh Thao
1
Contents
• Organisational structure
I
• Shareholders’ rights and obligations
II
2
Joint stock companies can be structured as one of the following models:
(Article 137, the law on enterprises 2020)
1st model
Control
board
2nd model
Shareholders’
meetings
Shareholders’
meetings
Management
board
Management
board
Director/
general director
Director/
general director
Note: Control board is optional if the
company has less than 11 shareholders and
organisational shareholders owning less
than 50% of the company’s shares
Note:
- At least 20% of members of the
management board must be
independent members.
- Audit committee is a part of
3
management board
Shareholders’ meetings
4
Features of the shareholders’ meetings
(Article 138, the law on enterprises 2020)

Position: The highest decision making
body

Its composition: Shareholders with
voting rights

Operation form: meetings
5
Rights of the shareholders’ meeting
(Article 138, the law on enterprises 2020)
1.
Decide development
company
orientations
of
the
2.
Decide types and number of each type of
shares which will be offered, the rate of annual
dividends
3.
Elect, dismiss members of the management
and control board
4.
Decide to invest or sell assets valued at 35% or
more (unless the charter allows smaller
percent) of the total value of assets
5.
Decide to buy back more than 10% of the total
sold shares of each type
6.
Amend, supplement the charter
7.
Decide on reorganisation of the company
8.
…………..
6
Who can convene the meetings of shareholders?
(Article 140, the law on enterprises 2020)
1.
Annual meetings: (held once a year)
- The management board
2.
Irregular meetings:
-
The management board in case:

It is necessary for the benefit of the company at their discretion

The remaining number of the management and control board is less
than 3 members

The control board requests

Shareholders or group of shareholders owning consecutively 05%
and above of the total ordinary shares (unless the charter allows a
smaller percent)
-
The control board if the management board fails to
convene.
-
The above shareholders or group of shareholders if the
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inspection board fails to convene.
When will the meetings of shareholders be
conducted? (Article 145, the law on enterprises 2020)

1st convening:
Attending shareholders holding more than 50% of the total votes

2nd convening: (within 30 days after the proposed opening date for the first meeting)
Attending shareholders holding at least 33% of the total votes

3rd convening: (within 20 days after the proposed opening date for the second meeting)
Irrespective of the number of attending shareholder and the number of
votes held by attending shareholders
8
Where will meetings of the shareholders’
meeting be conducted? (Article 139, the law on enterprises 2020)
Within the territory of Vietnam
9
How many forms to pass decisions of the
shareholders’ meetings are there?
(Article 147, the law on enterprises 2020)
Vote at the meetings
Collect written
opinions
Apply in the following cases unless otherwise provided by the charter
•
•
•
•
•
•
Amend, supplement the charter
Decide the company’s orientation development
Elect, appoint, dismiss members of the management and control board
Types and the total number of each type of shares
Adopt annual financial statements
Decide to invest or sell assets valued at 35% or more (unless the charter allows
smaller percent) of the total value of assets
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• Reorganise, dissolute the company
When will a decision of the shareholders’ meeting
be passed? (Article 148, the law on enterprises 2020)
Collect written
opinions
Vote at meeting
Approved by
attending preference
shareholders
representing at least
75 % of the same
type of preference
shares
Approved by
shareholders
representing at least 65
% of the total votes of
all attending
shareholders
Approved by
shareholders
representing
more than 50%
of the total votes
of all attending
shareholders
Based upon
result of
cumulative
voting
Other cases
Elect
members of
the
management
and control
board
Approved by
shareholders
representing more
than 50% of the
total votes
- Decide types and the total
number of each type of
shares
A resolution on adverse
changes to rights and
obligations of preference
shareholders
- Change business lines,
traders and fields, or
organisational structure
- Reorganise, dissolve the
company
- Decide to invest or sell
assets valued at 35% or
more (unless the charter
allows smaller percent) of
the total value of assets
All cases
Except
A resolution on adverse
changes to rights and
obligations of preference
shareholders
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Ex: Cumulative voting
Elect 3 members of the management board out of 5 candidates
Holding 3000
voting shares
A
B
C
D
E
According to principle of cumulative voting, David will have 9000 votes
David
(David’s votes = number of the holding shares x number of to-be elected members of the management board)
12
Joint stock companies can be structured as one of the following models:
1st model
Control
board
2nd model
Shareholders’
meetings
Shareholders’
meetings
Management
board
Management
board
Director/
general director
Director/
general director
Note: Control board is optional if the
company has less than 11 shareholders and
organisational shareholders owning less
than 50% of the company’s shares
Note:
- At least 20% of members of the
management board must be
independent members.
- Audit committee is a part of
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management board
Management board
14
Features of the management board
(Article 153, the law on enterprises 2020)

Position and role: the management
body of the company

Function: full competence to decide
and exercise rights and obligations of
the company, which do not fall within
competence of the shareholders’
meeting, on behalf of the company

Operation form: meetings (can be
regularly or irregularly, but at least
once every quarter)

Each member will have one vote
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Rights of the management board?
(Article 153, the law on enterprises 2020)
1.
Decide on offering new shares within the number of
shares offered to sell
2.
Decide to buy-back no more than 10% of the total
shares of each type already sold within 12 months
3.
Decide on the selling prices of shares
4.
Decide on the time and method to pay devidends
5.
Approve contracts for sale, purchase, borrowing,
lending and other contracts valued at 35% or above
of the total value of assets (unless the charter allows a
smaller percentage) which do not fall within
competence of the shareholders’ meeting
6.
……………
16
Composition of the management board
(Article 154, the law on enterprises 2020)

Number of members: 3 to 11

Members will elect one to work as
the chairman of the management
board

Duration
of
members:
exceeding 5 years
not
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Who can be a member of the management board?
(Article 155, the law on enterprises 2020)
Individuals meet all the following requirements:
Not being independent members
Being independent members
Not forbidden to manage enterprises by the Not working or worked for the company or its parent
article 18.2
company, and its subsidiary within at least the last 3
consecutive years
Having professional qualifications and Not being entitled to salaries and remunerations
experience in Business administration unless from the company
otherwise provided by the charter
Can be a member of the management board Not be the spouse, natural father and mother,
in other companies
adoptive father and mother or natural and
Not be relatives of the other managers, or of adoptive child or sibling of the company’s large
the manager and people with competence of shareholder, manager of the company or its subsidiary
appoint managers of the mother company
(For state owned enterprises and their Not directly or indirectly owning at least 1% of the
subsidiary companies)
voting shares
Not being a member of the management or control
board within at least the last 5 consecutive years 18
When will members of the management
board be dismissed? (Article 160, the law on enterprises 2020)
Members of the management board will be dismissed in the
following cases:
Not fully meet all the requirements
stated at the Article 155
Having not participated in the
management board for 6 consecutive
months except force majeure cases
Submitting a resignation letter
Other cases regulated in the charter
19
The chairman of the management board
(Article 156, the law on enterprises 2020)

Cannot work concurrently as a
director/general director if the
company is a public company or
stated owned company

Duties:
-
Convene
meetings
management board
-
Assign a secretary to assist the
management board
-
Monitor the implementation of
resolutions of the management board
-
……………..
of
the
20
Who can convene meetings of the
management board? (Article 157, the law on enterprises 2020)

The chairman of the management
board in case of
-
Regular meetings
-
Irregular meetings
-
Being requested by:
•
Control board and Independent members
•
Director/general director or at least 5 other
managers
•
At least 2 executive members of the
management board

Requesters if the chairman fails to
convene
21
When will the meetings of the management
board be conducted? (Article 157, the law on enterprises 2020)
1st convening
• ¾ the total members attend
2nd convening
(within 7 days after
the proposed opening date for the first
meeting
• More than half of the total
members attend
22
How will decisions of the management
board be passed? (Article 157.12, the law on enterprises 2020)
More than half of attending members approve
23
How many forms to pass decisions of the
management board? (Article 153.3, the law on enterprises 2020)
Vote at the meetings
Collect written
opinions
Other forms
provided by the
charter
24
Joint stock companies can be structured as one of the following models:
1st model
Control
board
2nd model
Shareholders’
meetings
Shareholders’
meetings
Management
board
Management
board
Director/
general director
Director/
general director
Note: Control board is optional if the
company has less than 11 shareholders and
organisational shareholders owning less
than 50% of the company’s shares
Note:
- At least 20% of members of the
management board must be
independent members.
- Audit committee is a part of
25
management board
Audit Committee
(Article 161, the law on enterprises 2020)



Position: a part of the management
board
Composition: at least 2 members
Decision making:
◦ Forms: vote at meetings, collecting
written opinions, or other types as
regulated by the charter
◦ Each member has one vote
◦ Resolution ratification: more than half of
attending members. In case of equality of
votes, the opinion having the chairman’s
vote will be prevail

Rights and obligations:
◦ Inspect the accuracy of financial
statements
◦ Supervise the company’s internal audit
unit
◦ others
26
Joint stock companies can be structured as one of the following models:
1st model
Control
board
2nd model
Shareholders’
meetings
Shareholders’
meetings
Management
board
Management
board
Director/
general director
Director/
general director
Note: Control board is optional if the
company has less than 11 shareholders and
organisational shareholders owning less
than 50% of the company’s shares
Note:
- At least 20% of members of the
management board must be
independent members.
- Audit committee is a part of
27
management board
Director/general director
28
Features of the Director/general director
(Article 162, the law on enterprises 2020)
Manage day to day operation of the
company
Be appointed from a member or hired by
the management board
Be monitored by the management board
Duration: not exceeding 5 years
Be responsible before the management
board
29
Who can be hired or appointed as a
director/general director? (Article 162, the law on enterprises 2020)

In public companies, state-owned enterprises and their
subsidiaries, directors/general directors must:
Not be forbidden to manage an enterprise by
article 17.2, the law on enterprises 2020.
Not be relatives of managers and controllers
of the company and its parent company, and
relatives of representatives for the state
capital in the company or its parent
company
Hold professional qualifications
and experience in business
administration
30
What are the rights and obligations of a
director/general director?(Article 162, the law on enterprises 2020)
1.
Organise the performance of
decisions of the management board.
2.
Decide on all matters related to day
to day business operations.
3.
Decide on wages and other benefits
for employees and managers
4.
Appoint, dismiss managers unless
the competence falls into the
management board
5.
Recruit employees.
6.
Other rights and obligations.
31
Joint stock companies can be structured as one of the following models:
1st model
Control
board
2nd model
Shareholders’
meetings
Shareholders’
meetings
Management
board
Management
board
Director/
general director
Director/
general director
Note: Control board is optional if the
company has less than 11 shareholders and
organisational shareholders owning less
than 50% of the company’s shares
Note:
- At least 20% of members of the
management board must be
independent members.
- Audit committee is a part of
32
management board
Control board
33
Features of the control board
(Article 168, the law on enterprises 2020)

Having from 3 to 5 members elected by the
shareholders’ meeting

Duration: not exceeding 5 years

The head of the board, who works full-time,
will be elected from the control board by
majority rules

The head of the board must have a qualification
in economics, finance, accounting, auditing,
law, business administration, or a major related
to the company’s business

More than half of members must reside in
Vietnam
34
Who can be a controller?
(Article 169, the law on enterprises 2020)
Individuals must meet all the following
requirements:
• Not being a person specified in Article 17.2, the
law on enterprises 2020
• Not being relatives of members of the
management board, the director/general director,
or other managers
• Not working as a manager of the company.
• Not required to be a shareholder or employee of
the company
• Having a qualification in economics, finance,
accounting,
auditing,
law,
business
administration and a major related with the
company’s business
35
What are the rights of the control board?
(Article 170, the law on enterprises 2020)
Supervise the management board, director/general
director in management of the company
36
Summary: Structure of join stock companies
Shareholders’ meeting
Control board
-
- Function: Supervise and
inspect the management
board and director/general
director
- Composition: 3 - 5
members elected by the
shareholders’ meeting
- Duration: not exceeding 5
years
-
Position: the highest decision making body
Composition: shareholders holding shares with voting rights
Operation forms: meetings
Who can convene meetings: the management board, the inspection board, or
shareholders or group of shareholders owning at least 10% of the total ordinary
shares within at least 6 months
Meeting conducted when: shareholders holding at least 51% of the total votes
attend
Decisions passed when: usually approved by shareholders representing at least
51% of the total votes of all attending shareholders
or
optional
Management board
If the company has less than 11
shareholders and organisational
shareholders owning less than
50% of the company’s shares
Independent
members of the
management board
- Number: at least 20 %
members of the management
board
-
Position: the management body
Composition: 3 – 11 members elected by the shareholders’ meeting
Duration: 5 years
Operation forms: Meetings
Who can convene meetings: chairman of the board, its independent
members, inspection board, director/general director, 5 managers, at
least 2 of its executive members
- Meeting conducted when: at least ¾ members attend
- Decisions passed when: majority of attending members approve
Director/general director
- Function: Manage day to day business operation
- Duration: 5 years
- Can be hired or appointed from its member by the
management board
37
Who will be a representative in law of the
company? (Article 137, the law on enterprises 2020)
Cases
Representative in law
The chairman of the management board
or
Director, general director
Having one representative in law
(The charter should provide this)
The chairman of the management board
(If the charter does not provide otherwise)
Naturally:
Having more than one
representative in law
The chairman of the management board
and
Director/ general director
38
Contents
• Organisational structure
I
• Shareholders’ rights and obligations
II
39
(Article 113, and 115 - 119, the law on enterprises 2020)
Rights
Receive dividends
Free to transfer shares to others
Shareholders holding voting shares
can join shareholders’ meetings
and vote
Shareholders holding voting shares
can
convene
or
nominate
candidates for the management or
inspection board
Shareholders holding voting shares
can request for buyback of their
shares or together decide on buy
back no more than 30% of sold
ordinary shares, a part or all sold
dividend reference shares
Obligations
Pay on time and in full the amount
of shares registered to buy
Comply with the charter
Execute
resolutions
of
shareholders’
meeting
management board
the
and
Founding shareholders must buy at
least 20% of the total ordinary
shares
40
Rights to transfer shares to others
Shareholders are free to transfer their shares to others.
Except:
1.
Within the first 3 years of establishment, founding shareholders can not transfer
their shares (registered at the time of establishment) to others rather than the
remaining founding shareholders unless approved by the shareholders’ meeting.
2.
Voting preference shareholders
3.
The charter restricts the transfer
41
Rights to request for buyback of shares
Shareholders holding voting shares can request the company to buy back
their shares in the following cases:
1.
Disagree with reorganisation of the company
2.
Disagree with amendment of the charter’s contents relating to rights
and obligations of shareholders
Note:
The company only buys back the shares if it is still able to pay off in full
its debts and other financial obligation after buying back.
42
Rights to decide together buyback of
shares
 The shareholders’ meeting will decide buyback of:
1.
No more than 30% of the sold ordinary shares
2.
A part or all sold dividend reference shares
Except:
Buyback of no more than 10% of each type of above shares
will be decided by the management board.
43
Rights to request courts to cancel
resolutions of the shareholder’s general
meeting and the management board
(article 151 and 153, the law on enterprises 2020)


Ordinary shareholders or a
group of ordinary shareholders
who holds at least 5% of
ordinary shares can request
court to cancel resolutions of
the general meeting of
shareholders
Shareholders can request court
to
cancel
or
suspend
implementation of resolutions
or decision of the management
board
44
Rights to sue the company’s
managers (Article 166, the law on enterprises 2020)
Shareholders or a group of shareholders who hold at least 1% of total
ordinary shares can sue members of the management board or
director/general directors in case:

Fails to fulfil perform article 165

Fails to comply with or fully and punctually perform their rights and obligations as
prescribed by law, the company's charter, resolution or decision of the management
board;

Abuses power and position or uses the enterprise’s information, secrets, business
opportunities and assets for personal gain or serve any other organization’s or
individual’s interests;

Other cases
45
Obligations to pay on time and in full the
amount of shares registered to buy
Must pay in full the amount of shares registered to buy within
90 days after being granted an enterprise registration
certificate
• Consequences of failure to perform the obligation:
- Cease to be a shareholder of the company if failing to pay in full and can not
transfer the right to buy the shares to another
- Having rights and obligations respective to the paid shares if failing to pay in
full.
- The company must register for adjustment of the charter capital and founding
shareholders within 30 days from the last due date.
- Be liable for all financial obligations arising after being granted an enterprise
registration certificate within the amount of shares registered to buy until the
company’s registration certificate is changed.
- The unpaid shares will be considered as unsold shares
46
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