Under the Enterprise Law, the Shareholders Meeting of a joint stock company (JSC) has the authority to appoint and dismiss members of the Board of Directors (Board Member). Appointment of a Board Member must be conducted through cumulative voting. Under cumulative voting principle, whenever a JSC elects new Board Members, each shareholder will have a number of votes equal to the number of new Board Members to be elected times the number of voting shares held by such shareholder and such shareholder may cash all or some of his/her votes for any candidate.

Decree 102/2010 further provides that persons appointed to be Board Members will be determined based on a count from the highest number down to the lowest number of votes starting with the candidate with the highest number of votes until all the number of members as required by the company charter have been appointed. If two or more candidates receive the same number of votes for the last position of Board Member, there will be another vote taken on such two or more candidates or the Board Member will be appointed in accordance with the voting rules or the company charter.

Article 104.3 of the Enterprise Law provides that “a resolution of the General Meeting of Shareholders shall be passed in a meeting when all the following conditions are satisfied: (a) It is approved by a number of shareholders representing at least 65% of the total voting shares of all attending shareholders, the specific percentage to be provided in the charter; …(c) Voting to elect members of the Board of Directors and of the Inspection Committee must be implemented by the method of cumulative voting….” The wording of Article 104.3 of the Enterprise Law suggests that in addition to complying with cumulative voting principle, a resolution appointing a Board Member must also be approved by a number of shareholders representing at least 65% of the total voting shares of all attending shareholders.

On the other hand, Decree 102/2012 does not mention about the requirement of having approval by at least 65% of the voting shares for a resolution of the Shareholders Meeting appointing a Board Member. As such, some practitioners have taken the view that the 65% voting threshold under Article 104.3(a) of the Enterprise Law does not apply to the appointment of a Board Member using cumulative voting principle. This view seems to be in line with international practice on cumulative voting.

However, it is reported that a first instance court in Ho Chi Minh City has insisted that a resolution of the Shareholders Meeting appointing a Board Member must also comply with Article 104.3(a) of the Enterprise Law (i.e. the 65% voting threshold). If the view taken by the first instance court in Ho Chi Minh City is adopted by the court system then it would be more difficult for a JSC to comply with both cumulative voting principle and the 65% voting threshold under the Enterprise Law.