Can the Board of a joint stock company make a decision if it cannot maintain the meeting quorum at the time of voting?
Under Article 157.8 of the Enterprise Law 2020, a meeting of the Board will be conducted where three quarters (3/4) or more of the total Board directors are in attendance. However, it is not clear whether (1) this quorum only needs to be satisfied at the beginning of the meeting or (2) this quorum must be maintained from the beginning to the end of Board meeting. If interpretation (1) is adopted then a decision approved by more than half of attending Board directors at the Board meeting is still valid even when the quorum is lost during the meeting (e.g. a director leaves the meeting).
Arguments supporting interpretation (1) include:
Article 157.8 of the Enterprise Law 2020 could be interpreted to mean that the quorum applies only at the beginning of a Board meeting. The Enterprise Law 2020 only provides that a Board decision will be passed if it is approved by more than half of the attending Board directors. There is no specific requirement that the quorum must be satisfied at the time of the voting or throughout a Board meeting.
Under Article 157.11 of the Enterprise Law 2020, a Board director must fully participate in Board meetings. If the Board director leaves a Board meeting when the meeting is not completed, then the director could be violating his/her duty. Accordingly, allowing a Board director who violates his/her duties by leaving a Board meeting to block the Board from passing a decision is unreasonable; and
Under the Enterprise Law 2020, decision of the general shareholder meeting is calculated by reference to the number of votes of the shareholders who attend and vote on the relevant decision. Accordingly, when determining the voting threshold, the Enterprise Law 2020 seems to not take into account the quorum requirements at the time of voting. This is because the shareholders who attend but do not vote including those leaving before the meeting are excluded. This approach could apply by analogy to a decision of the Board.
This post is written by Luu Tuan Hung and Nguyen Quang Vu.