Luat Viet

:: Question :: In the Charter of Joint stock company C (“Company C”) that we are a shareholder, there is one regulation as below: “Shareholder A (being an organization) holding four per cent (4%) total amount of shares of the Company C shall have the rights: approving the Charter of the Company; supplementing, amending the Charter of the Company when necessary; making a decision on annual development strategy and business plant; making a decision on increasing the Charter capital of the Company. Please advise whether such regulation is in compliance with law?

Answer:
Organization A which is a shareholder of Company C shall have the rights of a shareholder in accordance with provisions stipulated in the 2005 Law on Enterprises (LOE) and the Charter of the Company (if the Charter complies with the laws and regulations of Vietnam).
Point dd clause 2 Article 96 of the LOE provides: General Meeting of Shareholders (GMS) has the right “to make decisions on amendments of and additions to the charter of the company; increase of charter capital of the company (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)”. GMS approves the decisions within the competent by way of voting at the meeting or obtaining written opinions. If there have no regulation in the charter of company, GMS’s decision on amendment and supplement of the charter of company must be approved by voting at the meeting of GMS according to point a clause 2 Article 104 of the LOE.
According to point a clause 2 Article 108 of the LOE, “making decisions on medium term development strategies, and plans, and on annual business plans of the company” belongs to competent of the Board of Management (BOM). BOM’s decision on the issues within its competent shall be passed by way of voting at meetings or obtaining written opinions, or otherwise as stipulated in the charter of the company according to Clause 3, Article 108 of the LOE.
With regard to provisions as above-mentioned, regulation in the Charter of your company “Shareholder A (being an organization) holding four per cent (4%) total amount of shares shall have the right: approving the Charter of company; amending, supplementing the Charter of the Company when necessary; making a decision on annual development strategy and business plant; making a decision on increasing the Charter capital” is totally contrary to the LOE, thus it is illegal.
 

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