Luat Viet

:: Question :: Upon having been approved at principle on establishment by the State Securities Commission of Vietnam, a security company (“SC”) sold its shares to parties other than founding shareholders. After that, the SC could not be established as the founding shareholders did not continue to contribute their capital. In this case, how can we deal with those sold shares?

Clause 2 of Article 62 of the Law on Securities provides that “the founding shareholders or founding members must use their own capital funds to contribute capital to the establishment of the securities company”. Clause 4 of Article 84 of the Law on Enterprises also provides that “in the case the founding shareholders do not register to subscribe for all the shares offered for sale, the remaining shares must be offered for sale and sold out within a time limit of three years from the date of issuance of the business registration certificate to the company.”
From a legal perspective, the SC shall only be permitted to sell its shares offered for sales after obtaining the establishment and operation license (simultaneously being the business registration certificate). In the case SC sold its shares without obtaining the establishment and operation license, such sale and purchase is illegal in accordance with the provisions of the Law on Securities and the Law on Enterprises. The transactions relating to buying and selling such shares should be considered as null and void. The rights and obligations of the relevant parties shall be settled in accordance with the resolution principles applicable to the void and null civil transactions of the current Civil Code by reimbursing to each other all received. This means that such SC shall refund to the outstanding shareholders all the amounts gaining from buying shares to them.
In addition to that, for the purpose of determining the compensation for the damage caused (if any) according to principles of Civil Code, the level of mistakes of the SC and relevant shareholders leading to the invalidity of the civil transactions should be considered.
 

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