Can the agenda of a meeting of the Board of a Vietnamese Joint Stock Company be changed during the meeting?

Under the Enterprise Law 2020, the General Shareholder Meeting (GSM) of a joint stock company (JSC) can decide to change its agenda and approve the new agenda when the meeting commences. There is no such provision with regard to a Board meeting. Accordingly, it is not clear if the Board can decide to change the agenda of a Board meeting during the meeting. That said, it is reasonable that the Board should be entitled to do so.

In particular, the Board could decide to change the agenda of a Board meeting based on the following grounds:

  • the Enterprise Law 2020 does not prohibit the Board from changing the agenda of a Board meeting at the meeting;

  • it is reasonable that the provisions concerning a meeting of GSM could apply to a meeting of the Board by analogy. In such case, the Board should have the right to change the agenda of a Board meeting as the GMS does; and

  • in practice, allowing the Board to change the agenda of a Board meeting will make the operation of a JSC more efficient. Since instead of scheduling for another meeting, the Board could decide on the relevant matter immediately at the current meeting. 

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Written by Nguyen Quang Vu On In , ,

Potential Issues for Vietnamese Bondholders When Bond Issuer Are In Default

The recent credit crunch and anti-corruption campaigns in Vietnam have made many bond issuers in Vietnam fail to repay their outstanding bonds. According to a recent report, around 67 bond issuers are in default and the outstanding amount is around US$ 3.7 billion. Bond issuers, who wish to recover the principal and coupons and to enforce their rights, could face significant legal issues. In this post, we will discuss some of these issues:

·        Lack of documents and information: It may be difficult for a bondholder to have access to all the transaction documents of a bond including (1) detailed bond terms and conditions,  (2) agreements between issuers and other service providers such as bondholders’ representative, security agent, or registration agents, and (3) security agreements. This is because under the law, a bond issuer is not required to make public all these documents. Only a summary of key terms and conditions of the bonds is required to be published. And only for bonds issued after 1 January 2021, a bond holder is granted the right to request for documents and information relating to the bonds. In addition, in practice, many individual investors did not pay attention in collecting these documents when purchasing the relevant bonds.

·        Uncooperative agents: In a standard bond transaction, the bond issuer will usually engage various service providers to act as representatives for the bondholders (e.g., bondholders’ representative, security agents, or registration agents). Since these representatives are appointed and paid by the bond issuer, in practice, they may be reluctant to take actions against the bond issuers for the benefit of the bond holders if the bond issuers are in default.

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Written by Nguyen Quang Vu On In ,

Role of Bondholders’ Representative under Vietnamese Law

A bondholders’ representative (Đại diện người sở hữu trái phiếu) is defined in Decree 155/2020 as a depository member of the Vietnam Securities Depository or a fund management company which is appointed or selected to “represent” the bondholders’ interests. However, it is not clear whether the bondholders’ representative is a legal representative or an authorized representative of the bondholders.

The legal nature of the role of bondholders’ representative is quite important. For example, if the bondholders’ representative is the legal representative of the bondholders then the bondholders cannot directly exercise their rights under the bond terms. On the other hand, if the bondholders’ representative is only an authorised representative of the bondholders then technically, the bondholders could still directly exercise their rights under the bond terms.

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Written by Nguyen Quang Vu On In ,

The Crime of Fraud And Misuse of Bond Issuance Proceeds in Vietnam

In 2022, Vietnamese authorities brought charges against two principal shareholders of Tan Hoang Minh and Van Thinh Phat for the crime of fraud (Tội lừa đảo) under Article 174 of the Penal Code 2015. Newspaper reports suggest that the relevant individuals have undertaken fraudulent activities in issuing corporate bonds and appropriate the bond issuance proceeds from bondholders. However, to prove that an individual commits a crime of fraud, the authorities would need to produce more evidence to support their cases.

Article 174 of the Penal Code 2015 imposes criminal liability to an individual who appropriates others’ properties by fraudulent means. Based on comments from reputable scholars (link 1, and link 2), the crime of fraud has the following characteristics:

  • Only individuals could be convicted of the crime of fraud. Companies cannot be convicted of this crime. Accordingly, the entities issuing corporate bonds in the above cases cannot be convicted of the crime of fraud;

  • The criminal must have the intention to appropriate properties of other persons. To appropriate a property, the criminal must obtain all three elements of ownership right including right of possession, right to use and right to dispose the property. If the criminal only obtains one or two elements of ownership right then it is not a crime of fraud. In a similar provision, the Penal Code 2015 applies criminal liabilities to a person who borrows monies from other but, among other things, does not repay when the loan is due even though such person has the capacity to repay the loan. This provision suggests that if the loan is not due yet then the act of appropriation might not have occurred. Accordingly, if the bond issued by the relevant issuing entities are not due yet then it is not clear if the bond proceeds can be treated as being appropriated by the relevant individuals;

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Written by Nguyen Quang Vu On In ,