Legal issues and lack of anti-deadlock mechanisms in a recent shareholder dispute

In the recent controversial case of shareholder dispute in Vietnam, the appellate court of Ho Chi Minh City (Appellate Court) held that two following articles of a company charter conflict with each other and therefore the provisions of the Enterprise Law 2014 are applied to resolve the dispute:

· Article 10.1 of the company charter which provides a member’s right to request the redemption of its capital contribution portion if such member objects a resolution of the Members’ Council on some important matters of the company; and

· Article 23.1 of the company charter which requires a consensus of all members on some important matters of the company.

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Can members of an LLC determine their capital contribution ratios based on their contributed capital in USD?

1.         There are cases where foreign invested companies in form of a limited liability company (LLC) registered the charter capital in USD. The capital contribution ratios of members were also determined based on their contributed capital in USD as at the time of establishment. If such companies increase the charter capital by raising funds from new investors. The question is that whether the capital contribution ratio of new investors can be calculated based on their contributed capital in USD.

2.         Legally speaking, under the Enterprise Law 2020, the capital contribution ratios of members in an LLC are calculated based on the value in VND of the contributed capital or assets contributed by such members to the charter capital. That said, in this specific case, licensing authorities might consider accepting the determination of the capital contribution portions of new investors based on their contributed capital in USD on the ground of guidance of the Ministry of Planning and Investment (MPI) under Letter 5437/BKHDT-DKKD dated 12 July 2016 (MPI Guidance).

This post is written by Ha Thi Dung.

Please download the full pdf version Here.

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New Decree 31/2021 guiding the implementation of the Investment Law 2020 on the Market Entry of Foreign Investors

The Government has issued Decree 31/2021/ND-CP (Decree 31/2021) which becomes effective on the signing date, 26 March 2021. Decree 31/2021 provides certain appreciable provisions guiding the negative list approach and the application of market entry conditions of the Investment Law 2020. These implementing provisions (as discussed in this post) are expected to provide more certainty and transparency to foreign investors.

This post is written by Ha Thi Dung.

Please download the full pdf version Here

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