PART 1: GENERAL MEETING OF SHAREHOLDERS – JOINT STOCK COMPANY
“With the development of market economy, working together to contribute business capital has become increasingly popular among individuals and organizations having the same purpose or simply because they want to invest their idle capital. Vietnamese authorities have issued legal regulations to manage these activities, including regulations on the types of companies with 02 or more owners in Vietnam, including Joint Stock Companies, Partnerships and Limited Liability Companies with 2 or more members. These regulations manage different aspects related to organizational structure as well as interests of owners.”
In fact, some owners only contribute capital to the company without being involved in the management of the day-to-day operations of the business or simply send their representatives to run the company. Therefore, there may be some cases where the owner does not know the status of the company’s business, or does not know how much capital he invested is utilized and profitable. In order to prevent this situation and help the owner minimize the risks that may occur, ‘Law on Enterprise’ has introduced regulations related to the owner’s meeting – where matters related to the company are reported or discussed in the presence of the business owner. Depending on the type of business, the meeting of the company owners will be called by different names. Within the framework of this article, the author will give an analysis of the legal provisions that allow the company’s owner(s) to exercise their rights during the owner’s meeting to give a better view of this process. In part 1, we will learn about the General Meeting of Shareholders of Joint Stock Company.
The General Meeting of Shareholders is the agency with the highest right in the company: Consisting of a number of owners, shareholders must include at least 3 individuals / organizations without a maximum limit. Thus, a joint-stock company can be considered as the type of enterprise with the most complex organizational structure prescribed in ‘Law on Enterprises’. In that structure, the General Meeting of Shareholders (GMS) is considered as the highest decision-making agency of a joint-stock company, composed of shareholders with voting rights (shareholders owning ordinary shares or the voting preference shares or other types of shares as prescribed by the company’s charter). The General Meeting of Shareholders of a joint-stock company takes place when the shareholders of the company are gathered to discuss, decide or consider any of the company’s issues. These details are specified in ‘Clause 3, Article 139’ and ‘Clause 3, Article 115’ of the ‘Law on Enterprises 2020’.
The General Meeting of Shareholders (herein referred to as GMS): According to Article 139 of the Law on Enterprises, the GMS must be held in the territory of Vietnam where the chairman of the meeting attends. However, there is no regulation that all shareholders attending the meeting must be present at the same location as the chairman or that all shareholders must be in Vietnam when the meeting takes place. Thus, it can be understood that the law allows the meeting to be held online (or other methods in accordance with the company’s charter) and some owners can participate in this meeting while they are situated abroad. This is also indirectly affirmed through the provisions on the forms of voting of shareholders when attending the meeting. Shareholders are specifically considered to attend and vote at the Meeting of Shareholders when “Attending and voting through online conferences, or other electronic forms”, according to ‘Article 144.3.c’ of ‘Law on Enterprises 2020’.
The GMS meeting is classified into 02 categories: annual meeting and extraordinary meeting with different provisions on the duration, competence of convening and content of the meeting. Below is a summary of some differences between these two types of GMS meetings:
|Criteria||Annual GMS||Extraordinary GMS meeting|
|Number of meetings in 1 year||01 time||There is no limit|
|When the meeting should take place?||Within 04 months from the end of the fiscal year (06 months in case of meeting extension) – Article 139.2|
When one of the following occurs (Article 140.1):
a) The Board of Directors considers it necessary for the benefit of the company.
b) The remaining number of members of the Management Board and Control Board is less than the minimum number of
members as prescribed by law.
c) At the request of shareholders or groups of shareholders specified in Clause 2, Article 115 of this Law.
d) At the request of the Control Board. (and)
f) Other cases as prescribed by law and the company’s charter.
|Authority to Convene Meeting||Board of Directors|
Shareholders or groups of shareholders owning more than 10% of ordinary shares for a continuous period of at least 6 months (in case the Control Board does not convene the meeting within 30 days).
The rights of shareholders: shareholders are entitled to attend, express their opinion and exercise their the voting rights at the GMS meeting. Thus, it can be said that the GMS meeting is an effective mechanism for shareholders of the joint stock company to take ownership of the company. However, due to the large nature of the number of shareholders, to ensure the attendance of all shareholders in the GMS meeting is very difficult.
Conditions for conducting the meetings: In order to conduct the GMS meeting, the number of shareholders attending the meeting must represent at least 51% of the total votes- the specific percentage is prescribed by the company’s charter. In case the percentage of votes of shareholders attending the Meeting of Shareholders is insufficient or less than 51%, the GMS meeting shall be postponed or not conducted. After the first meeting is postponed or cannot be held, the Board of Directors or the Control Board shall organize the second and third General Meeting of Shareholders. Each time a meeting is held, the percentage of votes of shareholders participating will be reduced to 33% and not depending on the number of votes of the attended shareholders.
As observed above, shareholders of joint-stock companies not only have the right to directly participate or authorize others to participate in the GMS meeting, or the right to propose and convene extraordinary meetings in the cases prescribed by law, but also have rights related to the process of preparing the meeting as well as participating in the meeting. The owner can exercise his/her rights by giving opinions to be considered and deciding on issues in the agenda of the meeting. Precisely, before going to the meeting, the person responsible for conducting the meeting must send the expected agenda of all matters (presented in the form of submissions) to be discussed at the meeting to shareholders along with the notice of invitation to the meeting. Shareholders can respond with any concerns they may have with the agenda, and its content may be changed accordingly and sent back. Besides, during the meeting, shareholders or their authorized representatives may give their opinions, and vote for or against the issues raised in the meeting. These issues are only passed when approved by a certain number of participants (Article 148 of the Law on Enterprises). In case shareholders disapprove or have other opinions on a certain issue – this content must be recorded in the minutes of the GMS.
The rights of the owner pertaining to GMS, not only extend to preparation and performance of the meeting, but also until the meeting ends. According to ‘Article 151’ of the ‘Law on Enterprises 2020’, within 90 days from the date of receipt of the resolution or minutes of the meeting of the shareholders’ meeting or the minutes of vote tally results of opinions of the shareholders’ meeting, shareholders or groups of shareholders who own more than 10% of ordinary shares for at least 6 consecutive months may request the Court or Arbitration to consider or annul the resolution or part of the resolution of the Shareholders’ Meeting as prescribed under the procedures for convening meetings and issue decisions of the Shareholders’ Meeting if there is serious violation of the provisions of this Law and the company’s charter.
Based on the above information, we can see that ‘Law on Enterprises’ in general, and the regulations on the GMS meeting of the joint stock company in particular, have very diverse regulations where shareholders/business owners can exercise their ownership rights. To learn more about how to prepare for and hold the GMS meeting, readers can go through Article 139 to Article 152 of the Law on Enterprises 2020.
Time of writing: May 31,2021
The article is based on the current law at the time of recording as above and may no longer be relevant at the time readers access this article due to changes in applicable law and specific cases that the reader wants to apply. Therefore, the article is for reference only.