The Enterprise Law 2014 provides that in a meeting of the Board of a joint stock company (JSC), a Board director may authorise another person to attend if such authorisation is approved by the majority of members of the Board. However, the Enterprise Law 2014 is silent about the ability of a Board member to authorise another person to vote for such Board member if the Board decides to pass its decision by way of collecting written opinion of Board members.
In other jurisdictions, acting in concert is generally understood to mean the intentional cooperation between two or more parties to exercise control of a listed company. And persons deemed to be acting in concert will have their voting rights combined for the purpose of calculating whether or not a mandatory disclosure and/or tender offer is required. Vietnamese securities regulations do not clearly contemplate or nor regulate the concept of “acting in concert”. As such, it is quite common in Vietnam for technically-unrelated persons to coordinate their voting to control (or influence the control) of a public company without having to disclose the coordination or making a public tender offer. This practice could potentially cause damages to public investors who are not aware of the potential change of control of a public company.
The provision under Vietnamese law which is most relevant to the “acting in concert” concept is the definition of a related person under the Enterprise Law 2014. Under the Enterprise Law 2014, a group of persons agreeing to co-operate among themselves to takeover a share of capital contribution, a share or interest in the company or to control the issuance of decisions by the company will be considered as a related person of the company. However, the Enterprise Law 2014 only considers a group of concerting parties as a related person to the company that such parties are trying to control but not as related persons between themselves.
Update 30 April 2017 - Remove the sentence "In addition, it is not clear if the concept of “related persons” under the Enterprise Law 2014 would apply to a public listed company since the Securities Law 2006 has its own definition of related persons." since under Decree 71/2017, a related person includes both related persons under the Securities Law 2006 and Enterprise Law 2014.
Given the lack of clarity on tender offer rules and the difficulty in enforcing such rules in practice, it is not so difficult for an investor to accumulate significant stake in a public joint stock company (target company) in Vietnam. However, if such investor is not supported by the Board of the target company, then the unwelcomed investor may find a hard time to participate in the management of the target company even if the investor can acquire control of the target company at shareholder level. This is because:
In March 2018, the Government issued Decree 32/2018 containing major amendments to the regulations on sale of State capital in State-affiliated enterprises. The amendments will take effect from 1 May 2018. State-affiliated enterprises are joint stock companies (State-owned JSC) or limited liability companies with two members or more (State-owned LLC) a part of which is owned by the State or by a wholly State-owned enterprises (Wholly SOE). New amendments under Decree 32/2018 include:
Stricter pricing control
· Decree 32/2018 requires the State-seller to retain licensed valuer to value the State’s capital and to determine an asking price before commencement of the sale process even if the State-affiliated enterprises are listed companies. Under Decree 91/2015, it appears that if a State-affiliated enterprise is a listed company, then there is no need to retain a licensed valuer. Decree 32/2018 also provides that the asking price is only valid for a period of six months from the date of the valuation report. This suggests that a re-valuation is required if a sale is not completed within six months of the date of the valuation report.
· For a listed State-affiliated company, if the asking price determined by the valuer is lower than the average share price of the company during the period of 30 consecutive trading days before public announcement of the sale, then such average share price will be used as the asking price. It is not clear if the average share price is a arithmetic average or weighed average (which takes into account the trading volume each trading day).
· The licensed valuer when valuing the State’s capital must take into account the value of land leased by the State-affiliated enterprise and “history” of such State-affiliated enterprise. Decree 91/2015 only requires the value of land granted (not leased) to the State-affiliated enterprise to be taken into account. However, Decree 32/2018 does not specifically require the valuer to take into account whether the sale stake is a minority stake or a control stake.