Does tender offer requirement apply to an indirect acquisition of a Vietnamese public company via acquisition of its private parent?

There is no clear answer to the question since there is no clarification of what constitutes “indirect ownership” under the Securities Law 2019. In particular, among other circumstances, according to Article 35.1(a) of the Securities Law 2019, the tender offer regulations are triggered when (emphasis added):

Any investor and its related persons (except in case the investor and its related persons are investment funds and fund management companies) intend to purchase voting shares which results in the direct or indirect ownership of 25% or more of the total outstanding voting shares of a public company.

It is not clear whether:

  • The first reference to “voting shares” refers to voting shares of the relevant public company (the target company) or could refer to voting shares of any company; and

  • Owning shares of a company which owns shares in the target company could be considered as indirect ownership of shares in the target company.

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Written by Nguyen Quang Vu On In ,

Can the Board of a joint stock company make a decision if it cannot maintain the meeting quorum at the time of voting?

Under Article 157.8 of the Enterprise Law 2020, a meeting of the Board will be conducted where three quarters (3/4) or more of the total Board directors are in attendance. However, it is not clear whether (1) this quorum only needs to be satisfied at the beginning of the meeting or (2) this quorum must be maintained from the beginning to the end of Board meeting. If interpretation (1) is adopted then a decision approved by more than half of attending Board directors at the Board meeting is still valid even when the quorum is lost during the meeting (e.g. a director leaves the meeting).

Arguments supporting interpretation (1) include:

  • Article 157.8 of the Enterprise Law 2020 could be interpreted to mean that the quorum applies only at the beginning of a Board meeting. The Enterprise Law 2020 only provides that a Board decision will be passed if it is approved by more than half of the attending Board directors. There is no specific requirement that the quorum must be satisfied at the time of the voting or throughout a Board meeting. 

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Written by Nguyen Quang Vu On In , ,

Can the agenda of a meeting of the Board of a Vietnamese Joint Stock Company be changed during the meeting?

Under the Enterprise Law 2020, the General Shareholder Meeting (GSM) of a joint stock company (JSC) can decide to change its agenda and approve the new agenda when the meeting commences. There is no such provision with regard to a Board meeting. Accordingly, it is not clear if the Board can decide to change the agenda of a Board meeting during the meeting. That said, it is reasonable that the Board should be entitled to do so.

In particular, the Board could decide to change the agenda of a Board meeting based on the following grounds:

  • the Enterprise Law 2020 does not prohibit the Board from changing the agenda of a Board meeting at the meeting;

  • it is reasonable that the provisions concerning a meeting of GSM could apply to a meeting of the Board by analogy. In such case, the Board should have the right to change the agenda of a Board meeting as the GMS does; and

  • in practice, allowing the Board to change the agenda of a Board meeting will make the operation of a JSC more efficient. Since instead of scheduling for another meeting, the Board could decide on the relevant matter immediately at the current meeting. 

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Written by Nguyen Quang Vu On In , ,

Potential Issues for Vietnamese Bondholders When Bond Issuer Are In Default

The recent credit crunch and anti-corruption campaigns in Vietnam have made many bond issuers in Vietnam fail to repay their outstanding bonds. According to a recent report, around 67 bond issuers are in default and the outstanding amount is around US$ 3.7 billion. Bond issuers, who wish to recover the principal and coupons and to enforce their rights, could face significant legal issues. In this post, we will discuss some of these issues:

·        Lack of documents and information: It may be difficult for a bondholder to have access to all the transaction documents of a bond including (1) detailed bond terms and conditions,  (2) agreements between issuers and other service providers such as bondholders’ representative, security agent, or registration agents, and (3) security agreements. This is because under the law, a bond issuer is not required to make public all these documents. Only a summary of key terms and conditions of the bonds is required to be published. And only for bonds issued after 1 January 2021, a bond holder is granted the right to request for documents and information relating to the bonds. In addition, in practice, many individual investors did not pay attention in collecting these documents when purchasing the relevant bonds.

·        Uncooperative agents: In a standard bond transaction, the bond issuer will usually engage various service providers to act as representatives for the bondholders (e.g., bondholders’ representative, security agents, or registration agents). Since these representatives are appointed and paid by the bond issuer, in practice, they may be reluctant to take actions against the bond issuers for the benefit of the bond holders if the bond issuers are in default.

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Written by Nguyen Quang Vu On In ,