Luat Viet

:: Question :: I am a member of Board of Management (BoM) of a Joint Stock Company that was equitised since 2007 and has less than 100 investors and less than VND10 billion of the charter capital. Since there, my company has transferred shares 03 times leading to 03 replacement of the Chairman of BoM. However, for each time of replacement I was not officially informed in writing. Do the laws have any obligatory regulations on asking members’ opinion when replacing the Chairman of BoM? What is the procedure if the Chairman or members of BoM transfer their shares when they are in office or the time limit of three years for restriction of share transfer is not due? ...

Question:

I am a member of Board of Management (BoM) of a Joint Stock Company that was equitised since 2007 and has less than 100 investors and less than VND10 billion of the charter capital. Since there, my company has transferred shares 03 times leading to 03 replacement of the Chairman of BoM. However, for each time of replacement I was not officially informed in writing.
Do the laws have any obligatory regulations on asking members’ opinion when replacing the Chairman of BoM?
What is the procedure if the Chairman or members of BoM transfer their shares when they are in office or the time limit of three years for restriction of share transfer is not due?

Answer:

Electing the Chairman of BoM
Clause 1, Article 111 of the Law on Enterprises stipulates that: “The General Meeting of Shareholders (GMS) or the BoM shall elect the Chairman of the BoM in accordance with the provisions stipulated in the charter of the company”. Therefore, the electing the Chairman of BoM shall be executed in compliance with the regulations stipulated in the charter of each company. There are 2 following options:
If the charter of your company regulates that: the electing of the Chairman of BoM belongs to the competence of GMS, GMS shall proceed to elect the Chairman of BoM without asking opinion of members of BoM.
In case where the charter of your company stipulates that BoM shall elects the Chairman of BoM, the Chairman of BoM shall be elected within the members of BoM. Therefore, the electing the Chairman of BoM must be compulsorily informed to the members of the BoM. The members of BoM shall elect the Chairman of BoM by voting at the meeting in accordance with the majority principle, asking opinion in writing or any other forms regulated at the charter of the company. Each member of BoM shall have a vote. In such case, the electing of the Chairman of BoM without asking opinion of the members of BoM is contrary to the regulations stipulated in the charter of your company and does not comply with the Law on Enterprises.
The Chairman and members of BoM transfer their shares prior to the expiry of their trems and within the first three years from the date of issuance of the Business Registration Certificate to the Company
Clause 5 Article 84 of the 2005 Law on Enterprises stipulates that:
“Within a period of three years from the date of issuance of the Business Registration Certificate to the company, ordinary shares of founding shareholders may be freely assigned to other founding shareholders, but may only be assigned to persons not being founding shareholders if approved by the GMS. In this case, shareholders intending to assign shares may not vote on the assignment of such shares and the assignee shall automatically become a founding shareholder of the company.
After three years from the date of issuance of the Business Registration Certificate to the company, all restrictions on ordinary shares of founding shareholders shall be lifted”.
Therefore, the permission or restriction on transfer of share of the Chairman and members of BoM depend on whether they are founding shareholders of the Company or not. In details:
If the Chairman and members of BoM are not founding shareholders of the Company, the 2005 Law on Enterprises has no regulations prohibiting or restricting the transfer of the share owning by them at anytime, whether the are in office or not.
If the Chairman and members of BoM are founding shareholders of the Company, they shall be restricted to transfer their ordinary shares in accordance with the above Clause 5 Article 84 of the 2005 Law on Enterprises. Therefore, within a period of three years from the date of issuance of the Business Registration Certificate to the company, ordinary shares of founding shareholders may be freely assigned to other founding shareholders, but may only be assigned to persons not being founding shareholders if approved by the GMS.
 

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