Vietnam securities regulations do not have specific regulations governing a proxy contest where a shareholder or group of shareholder actively seeks to obtain proxies from other shareholders in order to influence the decision of the Shareholder Meeting (e.g. electing new Board directors or approving certain important corporate matters). In particular, a shareholder, who seeks to obtain proxies from other shareholders in a Public Joint Stock Company (Public JSC), is not required to make any public disclosure or filing about its intention for the proxies obtained.

Under the Enterprise Law 2014, a person who is has obtained a proxy from a shareholder only needs to present the authorisation when such person registers for the meeting. Therefore, management or unrelated shareholders of a Public JSC may find it difficult to know if there is an ongoing proxy contest which may have material changes to the operation or organisation of the Public JSC. That being said, managers or unrelated shareholders may be able to “detect” that there is an ongoing proxy context via the following disclosures or mechanism:

• if the shareholder, who initiates a proxy contest, also acquires shares in the Public JSC exceeding 5% ownership interest then such shareholder will have to make a mandatory substantial shareholder reporting; or
• if the proxy contest involves election of a new Board director, then at least 10 days before the proposed date of meeting of the Shareholder Meeting, a list of candidates for the Board director must be disclosed to the public; or
• if the Charter of the Public JSC allows the Board to organise registration for meeting much earlier than the actual meeting time, then the Board may know about the proxy arrangement in advance of the meeting time.

The lack of regulations on proxy solicitation is a material shortcoming in Vietnam securities regulations since many of management changes in large Public JSC in Vietnam in recent years seem to have been effected through proxy contest rather than a tender offer.

This post is an extract from Principles of Vietnam’s Enterprise Law which is on sale here and here.