Free download of Vietnamese law books for one day

My recent two books: A Brief Introduction On Vietnam's Legal Framework and Equitisation of Vietnamese State-owned Enterprises are available for download for free from Amazon Kindle Store. The free promotion will start on 12:00 AM Pacific Standard Time tomorrow (15 Jan 2013) and last for one day. If you are interested and have an active Amazon account, you may try to download the books into your Kindles, smartphones, Ipads or other Android tablets or may read the books online using web browsers such as Google Chrome or Firefox. 

Boiler plate clauses for Vietnamese law contracts?

Boiler plate clauses deal with common issues in most contracts (e.g. severability, counterparts, entire agreement). In Vietnam, most commercial lawyers use boiler plate clause precedents from contracts drafted by international law firms. These precedents are generally useful and in many cases are relevant in Vietnamese context. However, I believe that there should be specific boiler plate clauses developed for contracts governed by Vietnamese law. Below are two examples:

• Article 282 of the Civil Code provides that, among other things, the subject matter of civil obligations must be tasks which can be performed and must be defined precisely. As such, to avoid potential future arguments between the contracting parties about whether a contractual obligation satisfies the requirements of Article 282 of the Civil Code, a statement in this regard should be included in every contract.
• Article 408 of the Civil Code provides that if the terms and conditions of the appendices contradict the terms and conditions of the contract, the former terms and conditions shall be ineffective unless otherwise agreed. It is common for a commercial contract to have schedules and appendices. As such, a draftsman should have a clause addressing the potential inconsistencies between schedules and appendices of a contract and the body of such contract.

Is “business transfer” a “share transfer”, “project transfer” or “assets transfer”?

A business transfer can generally understood as the transfer of, among other things, the assets, employees, contracts, clients and goodwill associated with a particular business. However, “business transfer” is not clear legal concept under Vietnamese law. In Vietnam, when one mentions "business transfer", it is not clear whether it refers to the transfer of (1) shares of the company that runs such business or (2) the assets and other components that constitute such business.

In case of (1), then a business transfer should probably better called as a share transfer transaction. In case of (2), commercially, a business transfer could be structured as the transfer of an “investment project” (see earlier post here) as provided under Article 66 of Decree 108/2006. However, there is no clear procedures under Decree 108 for a "project transfer" transaction which does not involve the transfer of shares of the project company. In particular,

• Article 66.2 of Decree 108 provides that in the case of assignment of a project of an economic organization not associated with the termination of operation of the assigning economic organization, the assignment of the project will comply with the conditions and procedures for assignment of capital;
• Article 66.3 of Decree 108 provides that in the case of assignment of a project of an economic organization associated with the termination of operation of the assigning economic organization, the assignment of the project shall comply with the conditions and procedures for merger with or acquisition of an enterprise;
• Article 66.4 of Decree 108 provides that in the case of assignment of an investment project associated with the termination of operation of the assigning organization and the assignee establishing an economic organization to continue implementation of the project, the investment procedures stipulated by this Decree must be carried out.

A “project transfer”, which is not a share transfer, is not associated with the termination of the assigning organization so Articles 66.3 and 66.4 of Decree 108 are not applicable. However, Article 66.2 of Decree 108 requires a transfer of project not associated with the termination of the assigning organization to follow procedures for assignment of capital. It is not clear how a project transfer by way of selling assets could comply with the procedures for assignment of capital.

As such, in case of (2), to avoid all the complications of a project transfer regulations, the parties can just structure a business transfer as a transfer of assets and other components of the transferred business.

Pre-emptive rights of existing shareholders over new shares issued by a joint stock company

It has never been clear whether an existing shareholder of a joint stock company (JSC) has pre-emptive rights over new shares issued by the JSC. However, in the past, under Decision 12/2007 of the Ministry of Finance on corporate governance rules applicable to public listed JSCs, “shareholders may refuse to exercise their priority right to purchase new shares. This right of refusal shall be clearly stated in the relevant resolution of the  general meeting of shareholders.” Many legal practitioners have relied on this provision of Decision 12/2007 to take the view that in case a public listed company issues new shares to a strategic investor by way of private placement,

• a collective waiver of pre-emptive rights recorded in the Shareholder resolutions of the target company approving the transaction is sufficient; and
• there is no need for the target company to collect individual waiver from each individual shareholder regarding their potential pre-emptive over the new shares to be issued to the strategic investor.

This view was particularly helpful to parties who want to expedite the deal process.

Decision 12/2007 has now been repealed by Decision 121/2012, which does not contain the provision on collective waiver of pre-emptive rights. On the contrary, Decision 121/2012 just basically repeats the provision in the Enterprise Law, which serves as the basis for pre-emptive rights of existing shareholders. While the model charter attached to Decision 121/2012 still contains a provision similar to the provision under Decision 12/2007, the legal arguments for not obtaining individual waiver from each individual shareholder regarding their potential pre-emptive over the new shares to be issued to the strategic investor have clearly become weaker.