ĐẠI HỌC QUỐC GIA THÀNH PHỐ HỒ CHÍ MINH TRƯỜNG ĐẠI HỌC KINH TẾ - LUẬT KHOA LUẬT KINH TẾ KHÓA LUẬN TỐT NGHIỆP SHAREHOLDERS’ AGREEMENTS – LEGAL ASPECTS AROUND THE WORLD AND RECOMMENDATIONS FOR VIETNAM GVHD: THS. TRƯƠNG TRỌNG HIỂU SVTH: NGUYỄN THỊ HỒNG MSSV: K195022035 Thành phố Hồ Chí Minh, 10/4/2023 ĐẠI HỌC QUỐC GIA THÀNH PHỐ HỒ CHÍ MINH TRƯỜNG ĐẠI HỌC KINH TẾ - LUẬT KHOA LUẬT KINH TẾ KHÓA LUẬN TỐT NGHIỆP SHAREHOLDERS’ AGREEMENTS – LEGAL ASPECTS AROUND THE WORLD AND RECOMMENDATIONS FOR VIETNAM Thành phố Hồ Chí Minh, 10/4/2023 DECLARATION The author affirms that she has created this thesis on her own accord. All sources used in developing it, whether through direct quotes or information, have been identified and itemized. Therefore, with the exception of these references, the entirety of this thesis is solely the author’s creation.
TABLE OF CONTENTS INTRODUCTION. Reasons for writing. Aims, Object, and range of study. Aims of the study.
The object of study. Rage of study. Contribution to the knowledge .11 CHAPTER 1: AN OVERVIEW OF SHAREHOLDERS’ AGREEMENTS. An overview of shareholders’ agreements.
Definition of shareholders’ agreements. The need of shareholder’s agreements. Relationship between the shareholders’s agreement and the charter. Common terms of shareholder’s agreements.
Terms on management of business. Right of First Refusal and Right of First Offer. Put Option and Call Option. Tag-along and Drag-along.
Deadlock and Reserved matter .24 CHAPTER 2: INTERNATIONAL EXPERIENCES IN GOVERNING SHAREHOLDER’S AGREEMENTS THROUGH LEGAL MEANS AND RECOMMENDATIONS FOR VIETNAM. Legal situations related to shareholders’ agreements. Matters regarding the right to freely transfer shares. The binding effect of shareholder’s agreements.
Forms of shareholders’ agreement. International experiences in governing shareholders’ agreements. Regarding the shareholder’s agreement containing provisions limiting the freedom to transfer shares. Regarding the validity of shareholder’s agreements.
Regarding the forms of shareholders’ agreements. Recommendations for legal framework of Vietnam. The Law governing shareholders’ agreements. Parties of shareholders’ agreements.
Forms of shareholders’ agreements. Validity of shareholder’s agreements. Reasons for writing The business market in Vietnam is increasingly vibrant with an expanding number of enterprises, with approximately 1,000,000 currently in operation.1 In addition, Vietnam has experienced strong development in attracting foreign investment, with a foreign capital investment of USD 31.15 billion as of the end of 2021.2 The strong business and investment activities in Vietnam have led to an increase in Mergers and Acquisitions transactions. In this context, there is a growing demand for the signing of agreements among shareholders, owners, and between foreign investors and existing shareholders/members of the company.
The purpose of these agreements is to unify issues regarding business control and to protect the rights and interests of all parties involved in the agreements.3 Such agreements are known as founders’ agreements, shareholders’ agreements or capital contribution agreements (collectively referred to as “shareholders’ agreements”). 1 As of the end of 2021, Vietnam has had nearly 860,000 active businesses. By the end of 2022, the total number of businesses joining and rejoining the market reached 208. Data source: -https://thanhnien.vn/viet-nam-se-co-15-trieu-doanh-nghiep- 1851508912.htm#:~:text=T%C3%ADnh%20%C4%91%E1%BA%BFn%20h%E1%BA%BFt%20n%C4%83 m%202021,ng%C6%B0%E1%BB%9Di%20d%C3%A2n%20c%C3%B3%201%20DN, accessed on 7 April 2023.vn/Pages/tinbai.aspx?idTin=56398&idcm=49, accessed on 7 April 2023.vn/thu-hut-fdi-nam-2021-du-bao-nam-2022/, accessed on 7 April 2023.
3 - Apolat Legal, “Giá trị của thỏa thuận cổ đông so với Điều lệ doanh nghiệp”, https://apolatlegal.com/vi/gia- tri-cua-thoa-thuan-co-dong-so-voi-dieu-le-doanh-nghiep/, accessed on 7 April 2023. - Huỳnh Công Tâm - Russin & Vecchi (Vietnam), “Thỏa thuận cổ đông… thực tiễn và sự cần thiết”, https://russinvecchi.vn/publication/thoa-thuan-co-dong-thuc-tien-va-su-can-thiet/, accessed on 7 April 2023. 2 Shareholders’ agreements are not a new issue in Vietnam. That’s because joint venture contracts4 have existed since foreign investment was permitted to enter Vietnam in 1986.
They were were later mentioned in the article “Thỏa thuận cổ đông: một nội dung mới cho pháp luật doanh nghiệp Việt Nam” by author Nguyen Quoc Vinh in 20095 and were even suggested for amendment in the Law on Enterprises 2014.6 However, until now they have yet to be regulated by any legislation, even with the existence of the Law on Enterprises 2020 and the Law on Investment 2020. This 4 - This is a type of contract signed between a foreign investor and a Vietnamese enterprise, which is a mandatory document for a foreign investor to enter the Vietnamese market.6 Law on Foreign Investment in Vietnam 1987 as amended and supplemented in 1990 and 1992. - Some researchers and lawyers believe that the essence of this contract is a shareholders’ agreement: See: Trần Phan Hoài Phương (2021), Pháp luật về thỏa thuận cổ đông, Master's Thesis in Economic Law. Trần Thị Ngân, “Một số vấn đề pháp lý về thỏa thuận góp vốn có yếu tố nước ngoài”, Tạp chí Nghề Luật, No.vn/tw/Lists/TaiLieuKHCN/Attachments/317508/CVv358S42021047.pdf, accessed on 07 April 2023.
Trương Hữu Ngữ (2023), Pháp lý M&A căn bản, Nxb. Công Thương, p. 5 Nguyễn Quốc Vinh, “Thỏa thuận cổ đông - thực tiễn và pháp luật trên thế giới và đề xuất cho Việt Nam”, Tạp chí Nghiên cứu lập pháp No. 21(157), in November 2009, http://www.vn/Pages/tintuc/tinchitiet.aspx?tintucid=211097, accessed on 07 April 2023.
6 See: - https://vibonline.vn/bao_cao/gop-y-du-thao-luat-doanh-nghiep-sua-doi-cua-ong-tran-thanh-tung-cong- ty-luat-phuoc-partners-hoi-thao-vcci-tp-hcm-ngay-1132014, accessed on 07 April 2023. - Despite having been suggested being included in the Law on Enterprises 2014, the Drafting Committee of said Law has determined that a shareholder’s agreement may be considered as a contract and that parties have the freedom to reach such an agreement provided that it does not contradict the laws governing business enterprises. As such, the Drafting Committee has deemed it unnecessary to explicitly regulate shareholder’s agreements in the Law on Enterprises 2014. Trương Nhật Quang (2016), Pháp luật về doanh nghiệp – Các vấn đề pháp lý cơ bản, Nxb.
3 has led to certain difficulties in drafting, implementing, and settling disputes related to shareholder’s agreements in practice. Prior to this thesis, some other authors had conducted research on shareholders’s agreements, but their approach to legal research only provided a summary of shareholders’ agreements and presented general solutions based on the legal frameworks of some countries. This thesis, on the other hand, explores the legal complexities that arise in practice due to the absence of provisions in Vietnamese law. Drawing upon these complexities, the author analyzes the corresponding regulations of European countries and the United States to offer legal recommendations for Vietnam.
Consequently, the thesis titled “SHAREHOLDERS’ AGREEMENTS - LEGAL ASPECTS AROUND THE WORLD AND RECOMMENDATIONS FOR VIETNAM” has been carried out to clarify the legal value of shareholders’ agreements and the necessity of including regulatory provisions for shareholders’ agreements in Vietnamese law. Literature review In the world, there are numerous studies related to shareholders’ agreements, including some significant researches, as follows: (i) “Shareholders agreement: Comparative and legal analysis of the legislation and legal doctrine of Ukraine, European Union (EU) countries and USA” by authors Yuriy Zhornokui, Olha Burlaka and Valentyna Zhornokui7 The authors conducted research on regulations regarding shareholders’ agreements in Ukraine, the United States, Russia, and Western European countries (Germany, Italy, Switzerland, and France). The research has identified three approaches to the subjects of shareholders’ agreements: exclusively between shareholders, shareholders and the company, and shareholders, the company, and a 7 Yuriy Zhornokui, Olha Burlaka & Valentyna Zhornokui (2018), “Shareholders agreement: Comparative and legal analysis of the legislation and legal doctrine of Ukraine, EU countries and USA”, Baltic Journal of Economic Studies, Vol. Besides, the article indicates requirements regarding the content and form of shareholders’ agreements and their impacts on the validity of shareholders’ agreements as well as measures for penalties in case of violation of shareholders’ agreements.
(ii) “Agreeing and impacting: The effect of the Shareholder’ Agreement on firms’ market value” by authors André Leonardo Pruner da Silva, Jeferson Lana, and Rosilene Marcon8 The study shows the impact of shareholders’ agreements on the market value of public companies in Brazil. The authors identified two common types of shareholders’ agreements based on their purposes, including restrictions on share transfers and voting agreements. The authors also presented experimental studies that demonstrate the positive value of shareholders’ agreements in enhancing the value of listed companies, as they have provisions that protect the rights of minority shareholders - a type of shareholders that hold a majority in public companies. (iii) “An analysis of Shareholder Agreements” by authors Gilles Chemla, Michel A.
Habib and Alexander Ljungqvist9 The authors focus on clarifying the economic impacts of certain basic provisions of shareholders’ agreements in joint venture and venture capital transactions, such as put and call options, tag-along rights, and drag-along rights. (iv) “Shareholder’s Agreements in Close Corporations and their enforcement in the United States of America” by Ricardo Molano-León10 8 Silva, A. 9 Gilles Chemla, Michel A. Habib & Alexander Ljungqvist, “An analysis of Shareholder Agreements”, Journal of the European Economic Association Vol.
10 Ricardo Molano-León, “Shareholder’s Agreements in Close Corporations and their enforcement in the United States of America”, Vniversitas. Bogotá (Colombia) N° 117: julio-diciembre de 2008, p. 5 The research concludes that shareholders’ agreements protect the rights of minority shareholders and establish a balance of power among shareholders with equal authority in a closely held company in the United States. The author notes that the purpose of shareholders’ agreements often relates to voting rights and management positions within the company.
Additionally, the author shows certain conditions for the enforceability of shareholders’ agreements, including the requirement of unanimous agreement of all shareholders (for certain special issues) and not compromising the interests of third parties (non-parties of agreement). (v) “Shareholders’ agreement as a tool to mitigate corporate conflicts of interests” by Paulius Miliauskas11 The article highlights that shareholders’ agreements are commonly used as a tool to minimize conflicts of interest in corporate governance. The article presents perspectives on shareholders’ agreements in the Republic of Lithuania, Belgium, and the United Kingdom. The author contends that for an agreement to be considered a shareholder’s agreement, it must involve shareholders participation and relate to corporate governance.
The author does not analyze shareholders’ agreements in general, but rather focuses on those with narrow scope and effectiveness in listed and public companies, such as Voting agreements, Transfer of voting rights agreements, Securities lending agreements, and Relationship agreements from a comparative legal perspective. In Vietnam, some relevant studies on shareholders’ agreements are as follows: (vi) “Thỏa thuận cổ đông: một nội dung mới cho pháp luật doanh nghiệp Việt Nam” by Nguyễn Quốc Vinh12 11 Miliauskas, P. (2013), “Shareholders’ agreement as a tool to mitigate corporate conflicts of interests”, Int. Private Law, Vol.
12 Nguyễn Quốc Vinh, ibid. 6 In this article, the author presented a new content related to Vietnamese law in 2009, which is the shareholder’s agreement. The author highlighted some common cases considered as a shareholder’s agreement/members’ agreement in the investment and business market in Vietnam at that time. As this is a relatively unfamiliar topic, the author did not delve into the specifics of the content, but rather provided a general overview of the shareholder’s agreement, identified some difficulties when settling disputes related to these agreements that Vietnamese law does not regulate.
Moreover, the author consulted regulations from some countries such as Russia, India, the United Kingdom, and the state of Michigan to give some general solutions that Vietnam can apply to this issue. (vii) “Pháp luật về doanh nghiệp – Các vấn đề pháp lý cơ bản” by Trương Nhật Quang13 The author presents various instances of the use of shareholder’s agreements and the impact of such agreements on shareholders, company management and share transfers. The author argues that shareholder’s agreements represent an existence that challenges the right to equal treatment of shareholders. The author also expresses personal assessment of the relationship between shareholder’s agreements and the charter.
The content on shareholder’s agreements in this book is based on the author's professional experience and is intended solely to provide insights, without making any proposals for improving the legal framework for shareholder’s agreements in Vietnam.