Some legal issues arising in convening general meeting of shareholders of the publicly listed company (Part 1)
Convening a General Meeting of Shareholders (“GMS”) of a joint-stock company is not an unusual event in general and a publicly listed joint-stock company in particular. On the contrary, pursuant to the law of Vietnam, the GMS must be convened annually. Although it seems familiar, there are still some concerns arising out of the process, especially in the context of the publicly listed joint-stock Company, as it is regulated by particular statute laws and regulations. This article focuses on some legal issues derived from convening GMS of the publicly listed joint-stock Company and demonstrated in periodical. The first periodical consists of:
1. The requirement to notarize the power of attorney to attend and vote at GMS by the Company;
2. The compliance with the law of Vietnam to send the second and the third invitation in case of failure of the first meeting, and;
- The requirement to notarize or authenticate the authorization to attend and vote at GMS by the Company.
The convening of GMS in the publicly listed joint-stock Company fall into the scope of Law on Securities 2019, Law on Enterprise 2020 and some relevant subordinate legislation. Article 41 Law on Securities 2019 provided that the Board of Director (“BOD”), Board of Supervisor (“BOS”) and the convener shall gather the GMS in accordance with the Law on Enterprises 2020, the Company’s charter and its internal administration regulations. In other words, we should refer to the Law on Enterprise 2020 as binding rules to govern the procedures of convening GMS.
Article 144 Law on Enterprise 2020 provided that shareholders are entitled to participate in the GMS or authorize their right to attend and vote to a third party. The authorization of participants in the GMS shall be made in writing and in accordance with civil laws, whereas there are no provisions under Civil Code 2015 that require the notarization or authentication for the authorization to be valid. Thus, the authorization of shareholders to the third party does not have to be notarized or authenticated to be valid in this situation.
In case the Company requires shareholders to notarize or authenticate the authorization from shareholders to the third party, it is not reasonable under the law and in practice. It’s a waste of time, money and effort to shareholders, especially for shareholders being individuals. Moreover, casting out the authorized person of the shareholders from the meeting because of the failure to comply with the requirement is an expropriation of their rights to participate in the GMS. From our experience, where the Company made such requirement, it is considered as an impediment for shareholders exercising their rights. Shareholders can challenge this rule at the GMS or the inner administration body of the Company.
- The compliance with the law of Vietnam to send the second and the third meeting invitations in case of failure of the first meeting:
Under the circumstance where the Company combined the first, the second, the third invitations in one paper in which set out the time of second and the third meeting in two consecutive days later on the first meeting date then sent the paper to shareholders 23 days prior to the first meeting date, suppose the Company’s charter specified the same as Law on Enterprise, did the Company comply with Law on Enterprise?
In our opinion, the Company did not comply with the regulations of convening the GMS under Law on Enterprise 2020 due to the following reasons:
Firstly, Article 143 stipulated the invitations shall be delivered to all shareholders at least 21 days prior to the opening day. The article did not detail which invitation must be in compliance with the above-mentioned period. However, pursuant to clause 1 Article 146 on meeting and voting protocols of GMS, before the meeting is declared open, the shareholders who participate in the GMS must register their presence to the organization board. The registration of shareholders is compulsory to examine the number of votes represented by shareholders at the meeting. In other words, the conference is considered “open” since the conditions of the number of votes at the meeting is satisfied. Thus, the “opening day” under clause 1 Article 143 should be interpreted as the date of the meeting when the conditions for conducting the GMS is fulfilled, especially in the context of failure to conduct the first meeting pursuant to clause 1 Article 145. The opening day is the first meeting date, second meeting date or third meeting date, whichever the case may be. Therefore, the invitations subjected to Article 143 are all meeting invitations rather just the first meeting invitation.
Secondly, Article 145 only specified the period to send the second invitation, and the third invitation in maximum, which means the Company may issue the invitations the next day after the expected previously meeting date. As long as the deliveries of invitations are within the time limit prescribed in clause 2 and clause 3 Article 145, it is considered to be in accordance with the law. Along with Article 143 and Article 146 aforementioned, it can be interpreted that each meeting of GMS is separate and the period to deliver GMS invitations still must be at least 21 days prior or to such meeting.
In conclusion, the second and the third invitations should be issued separately after the expected meeting date and sent to shareholders at least 21 days prior to the meeting date correspondingly.
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