Relationship between Vietnamese State-owned enterprises (SOEs) under control of the “Super Committee.”

Since the end of 2018, the Commission for the Management of State Capital at Enterprises (CMSC) will become the new Owner Representative Agency (Cơ quan đại diện chủ sở hữu) of 19 large SOEs including State Capital Investment Corporation (SCIC), Petro Vietnam (PVN), Vietnam Electricity (EVN), Vietnam National Petroleum Group (Petrolimex). This change causes some SOEs to have CMSC as the common Owner Representative Agency, which may cause these SOEs to become related persons according to the Enterprise Law 2014, because:

Voting rights at the Member’s Council of a single-member limited liability company (Single LLC) in Vietnam

It is not clear whether voting rights of members of the Member’s Council of a Single LLC is based on (1) the amount of charter capital that such member represents, or (2) principle one person-one vote. Article 75.5 of the Enterprises 2014 provides that unless otherwise provided in the charter, each member of the Members’ Council of a Single LLC has one vote. This provision suggests that in the charter of the Single LLC, the owner of a Single LLC can allocate different voting rights to members of the Members’ Council who are usually the representatives of the owner in the Single LLC. The most common criteria is based on the amount of charter capital of the Single LLC represented by each member. The ability to allocate different voting rights to different members of a Single LLC is important since the owner of a Single LLC may have different shareholders who want to directly manage the Single LLC.

New points in latest proposed amendments to the Securities Law 2006

In the latest draft amendment to the Securities Law 2006, compared with the earlier draft, the following new points , among others, are introduced :

·        “Indirect ownership” of securities is defined to mean holding securities through a “related person” or an entrustment arrangement.

·        The criteria of a professional investor is reduced. A company with a paid-up charter capital of VND 100 billion (about US$ 4.5 million) instead of VND 1,000 billion  can now qualify as a professional investor. An individual with a portfolio of VND 2 billion (instead of a trading volume of VND 2 billion per month) or annual taxable income  of VND 1 billion can now qualify as a  professional investor.  Qualifying as a professional investor is important since only a professional investor or a strategic investor could participate in a private placement of shares by a public company.

·        Major customers or counterparties are no longer considered as a related person of a public company.

·        The latest draft amendment seems to allow for issuance of shares at a price below par value if the current trading price of the issuer is lower than par value.

Conversion of preference shares into ordinary shares in a Vietnamese joint stock company

The Enterprise Law 2014 does not have specific provisions on alteration of rights attached to a class of shares other than ordinary shares. Since the Shareholder Meeting has the right to create a class of shares, logically, an amendment to class rights should also be approved by the Shareholder Meeting. Under Article 113.6 of the Enterprise Law 2014,

·        ordinary shares may not be “converted” (chuyển đổi) into preference shares; and

·        preference shares may be converted into ordinary shares pursuant to a resolution of the Shareholder Meeting.

There is no definition of “conversion” in the context of Article 113.6. However, a conversion from one class of shares into another class of shares would likely result in the change of rights attached to the shares being converted. Therefore, arguably conversion of shares could qualify as an alteration of class rights. Each share in the charter capital of a JSC has the same par value. Therefore, logically, one preference share should be converted into one ordinary share only. If one preference share is not converted into one ordinary share then the charter capital of a JSC will be increased or reduced which may not be clearly permitted by law.