Shareholdingcompanies Bl Tuesday Afternoon

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Law on Enterprises 2005

Lecturer: Vo Tuong HuanCourse: Business Law


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Group members:

Nguyn Thanh Phng

Trn Minh Nam

Bi c Tn

Trn Ha Bnh

Lattaphone Vonglattana


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OUTLINE:

1. Introduction

2. Share and bond regulations

3. Organizational and management structure

4.

Board of management

5. Inspection committee


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1.INTRODUCTION TO

SHAREHOLDING COMPANIES


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An enterprise that has legal person

status, starting from the date of

issuance of its business registration

certificate.

Charter capital : divided into equal

portions that are known as shares.

Right to issue securities to raisefunds.


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Organization or individual; maximum 3

shareholders and no restriction on the

maximum.

Debt and other property obligation:

within the amount of capital that they

contributed to the enterprise.

May freely assign shares to others,

except in the cases in clause 3 art. 81 and

clause 5 art. 84 of LOE 2005.


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EXAMPLES:INTERFOOD SHAREHOLDINGCOMPANY

Established: on 16th November 1991

Charter capital: US$13,000,000

On 17 October 2006, The number of shares

listed totaled 5,729,472 Legal form: public limited company

Function: processing agricultural products,seafood to canned, dried, frozen, preservedand pickled products, fruit juices and fruit

juices with low alcohol content

Some other example: Binh Chanh ConstructionInvestment Shareholding Company, Phu Nhuan Jewelry

join stock company, etc


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2. SHARE AND BOND

REGULATIONS


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Classes of shares

Classes ofshares

Ordinaryshares

Preferenceshares

Votingpreference

shares

Dividendpreference

shares

Redeemablepreference

shares

Otherpreference

shares

(Clause 1 and 2, Art.78, LOE 2005)


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Right of ordinary shareholders

To attend and express opinions at the General Meeting of Shareholders and toexercise the right to vote directly or through authorized representative; eachordinary share shall carry one vote.

To receive dividends

To be given priority in subscribing for new shares offered for sale in proportion tothe number of ordinary shares each shareholder holds in the company.

To freely assign their shares to other shareholders and to non-shareholders.

To sign, look up and make an extract of information in the list of shareholders.

To sign, look up, make an extract or copy of the charter of the company, the bookof minutes of meetings.

Upon dissolution or bankruptcy of the company, to receive a part of the remainingassets in proportion to the number of shares contributed to the company.

Other rights stipulated in this Law and the charter of the company.

(Clause 1, Art.79, LOE 2005)


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Obligations of ordinary shareholders

To pay on full for the shares subscribed for as undertaken within 90 daysfrom the day of the business registration certificate; to be liable for debts andother property obligations within amount of capital contributed to thecompany; not withdraw the capital contributed by ordinary shares from thecompany in any form.

To comply with the charter and internal rules.

To perform other obligations as stipulated in the charter of the company.

Must bear personal responsibility when breaching the law, conduct businessor transaction for personal benefits, pay premature debts where thecompany is to be in financial danger.

(Art 80, LOE 2005)


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Preference shares and rights of preference shares

Voting

A share which carrymore vote than an

ordinary share

To vote on matterwhich fall within

authority of the GMOS

May not assign to otherpersons

dividend

Shall be paid at a ratehigher than ordinary

shares

Receive dividends

Upon dissolution orbankruptcy, receive a

part of remainingassets

Do not vote, attendGMOS or nominatecandidates to the

BOM, IC

redeemable

Shall be redeemable

by the company atany time upon

demand by its owner

Do not vote, attendGMOS or nominatecandidates to the

BOM, IC

(Art.81,82,83, LOE 2005)


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Ordinary shares of founding shareholders

Founding shareholders must:

Together register to subscribe at least 20% of the number ofordinary shares.

Within 90 days from the date of insurance of the business.

May be freely assigned to other founding shareholders within aperiod of the 3 year s from the date of issuance of the businessregistration.

(Art.84, LOE 2005)


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Offer for sale and assignment of shares

BOM determine time, method, price. The price sharesshall be offered not be lower than market price

The purchaser of shares shall become a shareholderofthe company

The company must issue and delivercertificates to thepurchaser

Share may be freely assigned

(Art.87, LOE 2005)


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Issue of bonds

May issue bonds,convertible bonds

and other classes ofbonds

BOM has the rightto make decisions

on the class ofbonds, total value

and timing of bonds

Report to the GMOS

at its nearestmeeting

(Art.88, LOE 2005)


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Redemption of shares upon demand by shareholders

A shareholder voting againstthe re-organization of the

company or against to the

rights and obligations ofshareholders stipulated in thecharter of the company may

demand the company toredeem its shares

The company must redeemshares upon demand by the

shareholder at the market price

or the price determined on thebasic of the principle stimulatedin the charter of the companywithin 90 days from the day of

receipt of the demand

(Art.90, LOE 2005)


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Redemption of shares pursuant to a resolution of the company

A company may redeem nomore than 30% of the total

number of the ordinary sharessold

The BOM shall decide on theprice for redemption of shares.

The price not be higher thanmarket price at the time of

redemption. In respect of otherclasses, the price for redemption

not be lower than the marketprice

(Art.91, LOE 2005)


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Payment of dividends

Dividends paid to preference shares shall be in accordancewith the conditions applied separately to each type ofpreference shares

Dividends paid to ordinary shares shall be determined on thebasis of the net profit performed and payment for dividends

shall be sourced from profits retained by the company

Dividends may be in cash, by shares of the company, or byother assets stipulated from the charter of the company.

Where shares are assigned between the completion of the list

of shareholders and the time of payment of dividends, theassignor shall receive dividends form the company

(Art.93, LOE 2005)


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3. ORGANIZATIONAL

AND MANAGEMENTSTRUCTURE


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GENERAL MEETING OFSHAREHOLDERS (GMS)

The General Meeting of Shareholdersshall include all shareholders which mayvote.

The highest decision-making authority ofa shareholding company.

(Clause 1, Art. 96, LOE 2005)


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RIGHTS & DUTIES OF GMS

To pass the development direction.

To make decisions on the classes, total number of shares ofeach class, to make decisions on the rate of annualdividend for each class of shares.

To elect, remove or discharge members.

To make investment decisions or decisions on sale of assets.

To make decisions on amendments of and additions to the

charterof the company.

To approve annual financial statements.

To make decisions on redemption.

To consider and deal with breaches.

To make decisions on re-organization and dissolution.

(Clause 2, Art. 96, LOE 2005)


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AUTHORITY TO CONVENEGENERAL MEETING OF SHAREHOLDERS

The GMS shall take place on an annual or ad-hoc basis at leastonce per year. The location of GMS must be in Vietnam.

The GMS must hold an annual meeting within 4-6 months after

the end of the financial year.

The BoM must convene an ad-hoc meeting of the GMS in thecases: benefits of the company; the number of the remainingmembers of the BoM is less than the number of membersrequired by law; Upon the request by shareholders (Clause 2,Art. 97, LOE 2005); Upon the demand by Inspection.

The convener must prepare a list of shareholders entitled toattend the GMS, provide information and deal with complaintsrelating to the list of shareholders, prepare the program,agenda and the documents of the meeting.

(Art. 97, LOE 2005)


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RIGHT TO ATTENDGENERAL MEETING OF SHAREHOLDERS

Shareholders being individuals or authorizedrepresentatives of shareholders which are

organizations, may attend the GMS in person orauthorize another person in writing to do so.

The authorization for a representative to attend theGMS must be made in writing on the form stipulatedby the company and must bear signatures inaccordance with Clause 2, Art. 101, LOE 2005.

(Art. 101, LOE 2005)


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CONDITIONS FOR CONDUCTINGGENERAL MEETING OF SHAREHOLDERS

The 1st GMS areconducted

The number of attending shareholdersrepresents 65% of the voting shares.

The 2nd GMS areconducted

The number of attending shareholdersrepresents 51% of the voting shares.

The 3rd GMS areconducted

irrespective of the number of attending shareholders,and irrespective of the percentage of shares withvoting rights of shareholders attending the meeting.


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PASSING OF RESOLUTIONS OFGENERAL MEETING OF SHAREHOLDERS

Resolution is approved by a number of shareholdersrepresenting at least 65% of the total voting shares of allattending shareholders.

In respect of resolutions on classes of shares and totalnumber of shares of each class which may be offered; onamendments of and additions to the charter of thecompany; on re-organization ordissolution of the company;in respect of investments or sale of assets equal to or morethan 50% of the total value of assets, the approval by anumber of shareholders representing at least 75% of thetotal voting shares of all attending shareholders shall be

required. Voting to elect members of the Board of Management and

of the Inspection Committee must be implemented by themethod of cumulative voting.

(Art. 104, LOE 2005)


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DEMAND FOR CANCELLATION OFRESOLUTIONS OFGENERAL MEETING OF SHAREHOLDERS

Right to request a court or an arbitrator to considerand cancel a resolution (within 90days):

The order and procedures for convening theGeneral Meeting of Shareholders did not complywith this Law and the charter of the company.

The order and procedures for issuing a resolutionand the content of the resolution breach the law or

the charter of the company.(Art. 107, LOE 2005)


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4. BOARD OF MANAGEMENT


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Definition: The Board of Management is the bodymanaging the company and shall have full authorityto make decisions in the name of the company and

to exercise the rights and discharge the obligations ofthe company which do not fall within the authority ofthe General Meeting of Shareholders.

(Article 108, Chapter IV, Law on Enterprises)


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Board of

management


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TERM OF OFFICE AND NUMBERS OF MEMBERS OF THE BOARDOF MANAGEMENT The Board of Management shall have at least three

members, and not more than eleven (11) members

The Board of Management of a term which has recentlyexpired shall continue to operate until a new Board ofManagement is elected and takes over the management

work.

In a case where an additional member is appointed or amember is appointed to replace a member who wasremoved or dismissed during a term of office, then the term

of office of such new member shall be the residual period ofthe term of office of the Board of Management.

A member of the Board of Management need notnecessarily also be a shareholder of the company.



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STANDARDS AND CONDITIONS FOR ACTING AS AMEMBER OF THE BOARD OF MANAGEMENT

1. Members of the Board of Management must:

(a) Have full capacity for civil acts, not belong to the category ofpersons prohibitedfrom managing an enterprise pursuant to this Law;(b) Be an individual shareholderwho owns at least 5% of the totalnumber ofordinary shares or be professional expertise and experience in businessmanagement or in the line of business which is the main business ofthecompany or satisfy other standards and conditions as stipulated in thecharter of thecompany.

2. In the case of a subsidiary company which is a company in whichthe State owns a total number of shares worth more than fifty (50) % ofthe charter capital, a member of the Board of Management may notbe a person related to a person


CHAIRMAN OF THE BOARD OF MANAGEMENT


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CHAIRMAN OF THE BOARD OF MANAGEMENT

The General Meeting of Shareholders or the Board of Management shall electthechairman of the Board of Management in accordance with the provisions of thecharter of the company. In the case where the Board of Management electsthe chairman of the Board of Management, then the chairman shall be electedfrom the members of the Board of Management. The chairman of the Board ofManagement may act concurrently as the director or general director of thecompany, unless otherwise stipulated in the charter of the company.


ARTICLE 115


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ARTICLE 115DISMISSAL, REMOVAL AND ADDITION OF MEMBERS OFTHE BOARD OF MANAGEMENT, CHAPTER IV, LAW ONENTERPRISES

1. A member of the Board of Management shall beremoved and dismissed in the following cases:

A) Not satisfying the criteria and conditions stipulatedin article 110 of this law.

B) Not participating activities of the Board ofManagement for 6 consecutive months, except forforce majeure

C) Written resignation notices

D) Other cases stipulated in the charter of company

2. In addition to cases stipulated in clause 1 of this

article, members of the Board of Management maybe dismissed at any time pursuant to a resolution ofthe General Meeting of Shareholders.

ARTICLE 115


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ARTICLE 115DISMISSAL, REMOVAL AND ADDITION OF MEMBERS OFTHE BOARD OF MANAGEMENT, CHAPTER IV, LAW ONENTERPRISES

3. Where the number of members of the Board ofmanagement is reduced by more than one third (1/3)of the number of stipulated in the charter of thecompany, the Board of Management must convene aGeneral Meeting of Shareholders within 60 days from

the date the number of members is reduced by morethan one third (1/3) to elect additional members ofthe Boar of Management

4. In other cases, The next General Meeting of

Shareholders shall elect new members of the Board ofmanagement to replace members of the Board ofManagement who have been removed or dismissed.


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DIRECTOR OR GENERAL DIRECTOR OF THE COMPANY

ARTICLE 116, CHAPTER 4, LAW ON ENTERPRISES

The Board of Management shall appoint one of its members oremploy another person as the director or general director. Where thecharter of the company does not provide that the chairman of theBoard of Management is the legal representative, the director orgeneral director shall be the legal representative of the company.

OR


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DIRECTOR OR GENERAL DIRECTOR OF THE COMPANY


The director or general director shall manage the day-to-day businessoperations of the company; shall be supervised by the Board ofManagement and shall be responsible to the Board of Managementand before the law for the exercise of his or her delegated powersand the performance of his or her delegated duties.

The term of the director or general directorshall not exceed fiveyears; with unlimited number of re-appointments.


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Criteria and conditions for a director or generaldirector shall follow provisions stipulated in Article 57 ,Chapter 3, Law on Enterprises:

(a) To have full capacity for civil acts and not to beprohibited from management of enterprises by this Law;

(b) To be an individual owning at least ten (10) per centof the charter capital of the company, or a non-member, who has professional qualifications andpractical experience in corporate management or in themain lines of business of them company, or other criteriaand conditions as stipulated in the charter of thecompany.

The director or general director shall not be director orgeneral director of another enterprise at the same time.

Director or general director of the companyArticle 116, Chapter 4, Law on Enterprises


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OBLIGATIONS OF MANAGERS OF THE COMPANY


1) Members of the Board of Management, the director, or generaldirector and other managers shall have the following obligation:

To exercise their delegated powers and perform theirdelegated duties strictly in accordance with this law,

relevant legislation, the charter of the company,resolutions of the General Meeting of Shareholders.

To exercise delegated powers and perform theirdelegated duties honestly, diligently to their bestability in the best lawful interests of the company andof the Shareholders of the company

To be loyal to the interests of the company andshareholders of the company, to not use information,secrets, business opportunities of the company, not toabuse their position and powers and assets of thecompany for their personal benefits or for the benefitof other organizations or individuals


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To timely, fully and accurately notify thecompany of enterprises which they or theirrelated persons own or have contributedcapital or controlling shares. This notice shallbe displayed at the head office andbranches of the company


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2) In addition, the Board of Management and

director or general director may not increasesalary and pay bonus where the company hasnot paid in full all the debt due and payable.

3) Other obligations in accordance with this lawand the charter of the company


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5. INSPECTION COMMITTEE

Structure and Criteria of IC

Conditions for member of ICRights and Duties of IC


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INSPECTION COMMITTEE

Structure and Criteria of IC

1. Structure:

3 to 5 members

-Chief Supervisor

-Member

2. Criteria:

-The title of IC usually lasts from 3 to 5 year term coincides with the term ofthe Board of Directors and must be elected by the Shareholders at the GeneralMeeting.

-Shareholder will elect the general member for IC.

-Member of IC elected to specific positions.

-The board, even though few people have at least one member withprofessional qualifications in accounting and auditing.

-IC members may be re-elected with unlimited number of terms.


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Conditions for member of IC

Members of the IC must :

-Be at least of 21 years of age, with a full capacity of civil acts andnot falling within the scope of subjects not permitted to establish andmanage.

-NOTbe wife or husband, father, adoptive father, mother, adoptivemother, children, adopted children, siblings of any member of theBoM, the director or general director of other managers.

-NOThold managerial positions of the company.

-Need NOT be a shareholder or the employee of the company.



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Rights and duties of IC:

1/Control of the financial system and the implementation of duties of the company

- To inspect the reasonableness, legality, truthfulness andprudence in management and administration of businessactivities, in organization of statistic and accounting workand preparation of financial statements,be responsibletothe GMoS for the performance of its assigned duties.

-To evaluate reports on business, semi-annual or annualfinancial statements and reports on evaluation of themanagement of the BoM.

- To review books of accounts and other documentsof thecompany, the management and administration of theactivities of the company at any time deemed necessary orpursuant to a resolution of the GMoS or as requested by ashareholder or group of shareholders.



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2/Inspectaion:-Upon a request by a shareholder or a group of

shareholders, the IC shall carry out an inspectionwithin a period of 7 working days for the date of

receipt of the request. The IC must submit a reportonresults of the inspection of the issues required to beinspected to the BoM and the requesting shareholderor the group of shareholders within a period of 15

days from the date of completion of the inspection-The inspections stipulated in this clause may not

disrupt the normal activitiesof the BoM and shall notinterrupt the administrationof the business operationsof the Company.




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3/Interfere with Company activities whennecessary

-To recommend to the BoM or the GMoS the changesand improvements of the organizational structure,

management and administrationof the businessoperations of the company

-Upon discovery of a member of the BoM, director orgeneral director who is in breach of the obligations of a

manager of the company, to give immediate writtennotice to the BoM and request the person in breach tocease the breach and take measures to remedy anyconsequences.



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Dismissal and removal of the IC:

1. A member of the Inspection Committee shall be dismissed or removedin the following cases:

- No longer meeting the criteria and conditions to be a member of theInspection Committee as stipulated in article 122 of this Law;

- Not exercising his or her rights and duties in six consecutive months,except in force majeure;

-Written resignation notice;

- Other cases as stipulated in the charter of the company.

2. In addition to the cases stipulated in clause 1 of this article, a member

of the IC may be dismissed at any time in accordance with aresolution of the General Meeting of Shareholders.

3. Where the IC seriously breaches its obligations, threatening to causedamage to the company, the BoM shall convene the General

Meeting of Shareholders to consider dismissal of the incumbent IC andelection of a new IC to replace it.



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