Transfer of large Vietnamese State-owned enterprises to Commission for the Management of State Capital at Enterprises

From 29 September 2018, under Decree 131/2018, the Government decides to transfer the management of 19 larges State-owned enterprises (SOEs) from various Ministries to the Commission for the Management of State Capital at Enterprises (CMSC). Brief details of each SOE are provided below:

Voting authorisation by a Board director in a Vietnamese joint stock company

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.

No acting in concert concept under Vietnamese securities regulations


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. 

Obstacles for a hostile takeover in Vietnam

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: