Can a small-size Vietnamese joint stock company operate without an inspection committee and an independent director?

Article 137 of the Enterprise Law 2020 provides that a joint stock company (JSC) can decide to organise itself in accordance with the two options below:

  • Option 1: A General Meeting of Shareholders, a Board of Directors, and an Inspection Committee and general director; and

  • Option 2: A General Meeting of Shareholders, a Board of Directors with at least 20% members being independent directors and a general director.

Under Option 1, the Enterprise Law 2020 further provides that if a JSC has less than 11 shareholders and the shareholders being organizations together own less than 50% of the charter capital of the company, then the company does not have to have an Inspection Committee. However, if a JSC selects option 1 and decides not to have an inspection committee, then on its face, such JSC is organised under option 2. Accordingly, it is not clear if the Board of such JSC must have at least 20% members being independent directors.

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Written by Nguyen Quang Vu On In

Foreign ownership limits in Business Cooperation Contracts in Vietnam

In certain business sectors (e.g., film projection service, or road transportation services), Vietnam undertakes to allow foreign investors to invest though setting up a joint venture or a business cooperation contracts (BCC) with capital contribution not exceeding certain limits. However, it is not clear if the ownership limit provided in these commitments apply to investment through a joint venture only or to both investment through joint ventures and BCCs.

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Written by Nguyen Quang Vu On In ,

Certain issues regarding taking security over listed shares in Vietnam

Under Decree 155/2020, from January 2021, registration of security interests over listed shares in Vietnam will be made at the Vietnam Securities Depositor Center (VSD) instead of the National Registration Agency of Secured Transaction (NRAST). Following the issuance of the Decree 155/2022, the Ministry of Finance (MOF) and VSD have issued detailed regulations on registration of security interests over listed shares. The detailed guidance has streamlined the registration and enforcement of security interests over listed shares. For example, the VSD is now able to transfer the listed shares without consent of the securing party as long as the security agreement clearly provides that the lender can take over or sell the secured shares without consent of the securing party. This is different from the previous procedures which requires written consent of the securing party in the transfer dossiers.

However, the regulations on taking security over listed shares do not appear to address the following issues properly:

· Security over associated rights: The regulations on taking security over listed shares (such shares, secured shares) do not clearly cover taking security over rights attached to listed shares (e.g., rights to receive dividend, rights to subscribe for new shares, or rights to vote). Technically, unless such rights are considered as “securities” under securities regulations, the regulations on taking security over listed shares may not apply to security interests created over such rights.

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Written by Nguyen Quang Vu On In ,

Decree 53/2022 implementing the Law on Cybersecurity in Vietnam

In August 2022, the Government issued Decree 53/2022 to implement various provisions of the Law on Cyber Security 2018 (LCS 2018). We summarise below certain key points of Decree 53/2022:

  • Data localization: Decree 53/2022 provides more detailed guidance on data localization in Vietnam. Please see our separate blog on this issue here.

  • Using cryptography (“mật mã”) to protect network information: If necessary for the national security, safety and order of society or protecting legitimate rights and benefit of others, the authority could request related individuals/organizations to encrypt information not considered as State secret before storing, transmitting on the Internet;

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Written by Nguyen Quang Vu On In ,