Director duties in Vietnam - Business judgement rules

In certain jurisdiction, a Board director is protected by the “business judgement rules” whereby an officer of a company is entitled to the presumption that he or she acted in good faith, and absolves the officer of personal liability unless it is established that he or she engaged in fraud, bad faith or an abuse of discretion. The business judgment rule protects officers from liability when they make good faith business decisions in an informed and deliberate manner.

Vietnamese law does not expressly provide for a “business judgment rules” for a Board director of a joint stock company (JSC). However, in the context of a Public JSC, Article 36.2 of the Public JSC Model Charter provides that “the company shall pay compensation to a person who has been, is or is likely to become a party involved in a claim, suit or legal proceeding … where such person was or is a member of the Board of Directors, a manager … provided that such person has acted honestly, carefully, and diligently in the interests or not contrary to the best interests of the Company, and on the basis of compliance with law and on condition that there is no discovery or confirmation that such person breached his/her obligations.” The wording of Article 36.2 of the Public JSC Model Charter suggests that a Director who makes a erroneous business decision may be protected from liability if he/she can prove that he/she has exercised his/her duty of care, and duty to act honestly. This is quite close to the business judgment rules except that the burden of proof belongs to the director (who must prove that he/she has acted with duty of care and honestly and complied with law) not the company. Arguably, the wording of Article 36.2 of the Public JSC Model Charter could be used in charters of both Public JSCs and non-Public JSCs to provide business judgement rules protection to Board directors of a JSC.

Can the Prime Minister authorise a direct sale of State shares in an unlisted joint stock company?

Under Decree 91/2015 and an Official Letter 10791 of the Ministry of Finance (MOF) in August 2016, it is no longer clear whether the Prime Minister can authorise the sale of shares held by the State in an unlisted joint stock company to a private investor without holding a public auction of such shares first. In practice, many investors (especially those who want to acquire control or a substantial stake in a joint stock company from the State) prefer to being able to deal directly with the State-seller rather than going through a complicated public auction process.

Possible new procedures for FIEs to apply for a Trading Licence

The inconsistencies between the new Investment Law 2014 and Decree 23/2007 have caused many lawyers confused about the process of  foreign invested enterprises (FIEs) to obtain a Trading Licence to operate in the sector of sale and purchase of goods (i.e. conducting export/import rights) and the related activities (e.g. distribution) (Trading Activities). Some temporary guidelines of licensing authorities recently could help clarify the situation.

According to an official correspondence in June 2016 of Ho Chi Minh City's Department of Planning and Investment (HCMC DPI) to a foreign investor applying for an investment project relating to Trading Activities, the foreign investor should conduct the licensing procedures in the following steps: