Shareholders are individual or organization
that owns at least one share of the joint-stock company and also are owner of
the joint-stock company. Along with these roles, their interests are tied to
business operations although they may not directly manage the day-to-day
company affairs. In order to implement governance, the powers and
responsibilities of each interest group such as shareholders, the board of
directors, managerial personnel, etc. should be assigned based on the statutory
principles and procedures.
Litigation
dispute law firm in Vietnam
According to the regulations on shareholders
in the Law on Enterprise 2020, the rights of
shareholders can be categorized into the following groups:
economic rights, governance rights, information rights, and litigation rights.
Economic rights
Economic right is the right to gain all
pecuniary interest with respect to the shares. The purpose of starting a
business or investing in securities comes mainly from earning income or gaining
profits. Economic rights accordingly include:
-Right to entitlement to dividends
-Right to transfer ownership
-Priority right to acquire the newly issued
shares
-Right to entitlement to a portion of the
assets after dissolution or bankrupt
-Appraisal Right
Among these above rights, right to
entitlement to dividends and right to transfer ownership are the fundamental
economic rights of a shareholder.
Dividend of common shares is determined
according to the realized net profit and the dividend payment from the
company’s retained earnings. Despite right to entitlement to dividends,
shareholders are still subject to a number of limitations in law and in fact.
Dividend entitlement is determined by the General Meeting of Shareholders based
on the recommendation of the Board of Directors, after the company has
fulfilled tax obligations and other financial obligations, contributed to
reserve fund, paid for previous losses and met the solvency for all due debts
and other property obligations. Dividend is not required to be distributed
annually. Depending on the business situation, the General Meeting of
Shareholders may decide to retain profits for reinvestment.
Besides dividend entitlement from the
company’s operating results, shareholders can also gain profits by share
transfer. This kind of investment is popular with respect of shares or
securities of public companies, investors do not aim for corporate governance
rights as well as dividend, they intend to earn benefits by the difference of
the market values of stocks, especially when the stock value increases.
Governance rights
Modern corporate governance has two
principles, one is to separate ownership and governance and to separate
governance and management. It means that the major shareholders should not hold
senior managerial positions in the company and Chairperson of the Board of
Directors should not be assigned to other senior managerial positions such as
General Director and/or Director.
Shareholders may be an individual or
organization which they have their own different interests, goals and
abilities. The separation between ownership and management makes the situation
of whom the owner is and how the share get transferred not to affect the
business operation. In the meantime, the separation helps gather professional
managers to implement target intended by the company. According to the laws,
members of the Board of Directors of a public company concurrently holding several
executive titles must be reduced to the minimum to ensure the independence of
the Board of Directors, specially the Chairperson of the Board of Directors
shall not be the Director/General Director in a public company as of August
1st, 2020. There are no similar rules applicable to joint stock companies which
are not public company.
Attendance, speaking and voting at General
Meeting of Shareholders are fundamental in governance right of common
shareholders, applicable to all shareholders holding at least one share. ty. In
principle, being a shareholder who holds shares of the company regardless of
the number has equal rights to attend and vote at the General Meeting of
Shareholders. By the General Meeting of Shareholders, the shareholders holding
a certain number of shares can impact decisions on some matters such as
election, dismissal, and removal of members of the Board of Directors and
Controllers, amendment and supplementation of internal documents, major
transactions, and others as stipulated in law on enterprise or charter. In
addition to the above rights, the majority shareholders also have a number of
other rights related to governance as follows:
The shareholder or group of shareholders
holding at least 5% of the total number of common shares (charter may require a
smaller percentage) is entitled to:
-Call a General Meeting of Shareholders
-Request Board of Controllers to inspect each
specific matter relating to management, governance of company affairs if
necessary
-Recommend matters to be included in agenda
of General Meeting of Shareholders
-The shareholder or group of shareholders
holding at least 10% of the total number of common shares (charter may require
a smaller percentage) is entitled to nominate candidates for the Board of
Directors, Board of Controllers
Information rights
Shareholders have the right to access
documents and information of the company. In addition to the basic documents
such as the charter, list of shareholders, meeting minutes and resolutions of
the General Meeting of Shareholders, shareholders have the right to access to
reports related to the business affairs.
However, some information
is only reviewed by shareholders who own required percentage of share:
-Access and extract information on full name
and contact address as specified in list of shareholders having voting right
and list of shareholders having right to attend General Meeting of Shareholder;
request to adjust his/her inaccurate information
-Access, extract and scan charter of company,
meeting minutes of General Meeting of Shareholder and its resolution
-Access, extract and copy partial or whole
list of involved persons and their contracts, transaction of which the company
is other party, interests of Board of Directors, Controllers, Directors or
General Directors and other managerial positions of company
-Access and extract minutes and resolutions
of Board of Directors, annual or mid-year financial reports, reports of Board
of Controllers, contracts and transaction approved by Board of Directors and
other documents, excepting for documents related to company’s know-how and
trade secrets (applicable to shareholder and group of shareholders who own at
least 5% of total number of common shares, the charter may require a smaller
percentage)
-Access profit and loss statements, finacial
reports, governace and management assement reports; inspection reports of Board
of Controllers (applicable to shareholder who own shares at least 1 consecutive
year, the charter may require a smaller percentage)
Different to common joint stock company, a
public company must annouce fully, accurately and promptly the periodic and
extraordinary information on business, finance and governace. Other information
must be annouced if it influences share price and investment decisions of
shareholders and investors.
Litigation rights
The Law on Enterprises has provided a
mechanism to request the Court or Arbitration to rescind the resolution of the
General Meeting of Shareholders or sue the managerial personnels when they fail
to fully and properly implement their tasks, including:
The shareholder or group of shareholders
holding at least 5% of the total number of common shares (charter may require a
smaller percentage) is entitled to:
-Request to rescind resolutions of the General
Meeting of Shareholders when the orders and procedures of calling the meeting
and making resolution of the General Meeting of Shareholders seriously violate
the regulations of the Law on Enterprises and company’s charter
-However, the resolution of the General
Meeting of Shareholders adopted by 100% of the total number of voting shares is
legal and effective even when the orders and procedures of calling the meeting
and adopting such resolution violates regulations of the Law on Enterprises and
company’s charter.
-Request to rescind resolutions of the
General Meeting of Shareholders when its provisions violates the laws or
company’s charter
-The shareholder, group of shareholders
holding at least 1% of the total number of common shares is entitled to:
-Sue members of Board of Directors,
Directors, General Directors separately or jointly under certain circumstances
The Chairperson of Board of Directors or the
Director or General Director usually acts as the legal representative of the
company, representing the company to perform rights and obligations arising
from the company’s transactions, representing the company to take proceedings
before the court or arbitrator. However, when their interests conflict with
those of the shareholders, shareholders have the right to initiate a lawsuit
claiming benefits or compensation. The Law on Enterprise also permits
shareholders to sue on behalf of the company when the above managerital
personnels commit violations, causing damage directly to the company and indirectly
to shareholders.
Not all shareholders have the right to sue
for the above managerial personnels, only those who own at least 1% of the
total number of common shares. This restriction makes sense with respect of
public companies, in order to eliminate unfair competition actions conducted by
minority shareholders who is controlled by the rival companies because amount
of 1% in public company is not a small number.
Similar to a lawsuit against a manager,
shareholder or group of shareholders is also required to own at least 5% of the
total number of common shares to request rescission of the resolution of the
General Meeting of Shareholders if there is violation on substantive law and
procedural law. Accordingly, all resolutions of the General Meeting of Shareholders
violating the substantive laws or the company’s charter are rescinded at the
request of shareholders, but only serious procedural violations may be
rescinded. There is no specific instructions for serious procedural violations
at this time, the assessment will depend on personal perspective of the court
and arbitrator.
In order to seek further
advice, please contact us at ant@antlawyers.vn or call + 84 912 817
823. ANT Lawyers, your law firm in
Vietnam.
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