1. Time limit for the Annual General Meeting of Shareholders

The General Meeting of Shareholders is the most powerful organ of a joint-stock company, with the right to decide important issues related to the existence and development of a joint-stock company. According to Clause 2, Article 139 of the Enterprise Law in 2020 stipulates:

“The General Meeting of Shareholders must hold an annual meeting within 04 months from the end of the fiscal year. Unless otherwise provided for in the company’s charter, the Board of Directors shall decide to extend the Annual General Meeting of Shareholders in case of necessity, but not exceeding 06 months from the end of the fiscal year”.

Thus, in case the deadline for the company’s Annual General Meeting of Shareholders will be held in April every year or there may be a later meeting decided by the Board of Directors. During this meeting, many issues will be discussed and approved, including the annual financial statements of joint stock companies.

At the same time, Clause 1, Article 176 of the Enterprise Law 2020 also stipulates:

“A joint-stock company must send annual financial statements approved by the General Meeting of Shareholders to competent state agencies in accordance with the law on accounting and other relevant laws.”

Thus, the organization of the Annual General Meeting of Shareholders to approve the annual financial statements is a mandatory condition for the company to fulfill its obligation to submit financial statements to competent state agencies as prescribed.

2. Conditions for conducting the meeting and passing resolutions of the General Meeting of Shareholders

The Enterprise Law 2020 stipulates that the condition for conducting the General Meeting of Shareholders is to have the number of shareholders attending the meeting representing more than 50% of the total number of votes. In case the first meeting is not eligible, the second meeting only needs to have the number of shareholders attending the meeting of 33% or more of the total number of votes to proceed to the General Meeting of Shareholders. This regulation helps a joint-stock company overcome the situation that the General Meeting of Shareholders has to convene a second or even third time due to insufficient conditions for the percentage of shareholders attending the meeting.

3. Grounds for requesting cancellation of resolutions of the General Meeting of Shareholders

According to the provisions of the Enterprise Law 2020, a resolution or part of a resolution of the General Meeting of Shareholders may be considered for cancellation by the Court or Arbitrator at the request of shareholders or groups of shareholders owning 05% or more of the total number of ordinary shares. The grounds for requesting the cancellation of a resolution or part of a resolution of the General Meeting of Shareholders include:

• The order and procedures for convening meetings and making decisions of the General Meeting of Shareholders seriously violate the provisions of the Enterprise Law 2020 and the company’s charter.
• Orthe content of the resolution violates the law or the company’s charter.

Practice shows that many joint-stock companies, especially in family companies or with not too large capital scale, shareholders often convene and conduct the General Meeting of Shareholders in a sketchy way to save costs and time. As a result, it leads to many cases when affecting interests, shareholders or groups of shareholders rely on the reason that the General Meeting of Shareholders violates the order and procedures in convening the meeting or in conducting the meeting to request the Court or Arbitrator to consider canceling the entire resolution of the General Meeting of Shareholders or part of the resolution General Meeting of Shareholders. Therefore, the Enterprise Law 2020 stipulates that not any case of violation of the order and procedures for the General Meeting of Shareholders is also a basis for requesting the cancellation of the entire resolution of the General Meeting of Shareholders or part of the resolution of the General Meeting of Shareholders, but only cases of serious violations of the provisions of the Law or the company’s charter.

4. Competence to annul resolutions of the General Meeting of Shareholders

The power to annul a resolution or part of a resolution of the General Meeting of Shareholders rests with the Court or Arbitrator. In fact, due to disputed issues within enterprises, there is a significant impact on the reputation and production and business. Therefore, businesses often choose the path of settlement by Arbitration more. Because when choosing a Court, the settlement must follow a hard procedure such as: publicizing the content of the dispute, must comply with the proceedings … At that time, enterprises will have to disclose information that is unfavorable to the business (business know-how, industrial property, revenue, capital …). In addition, the settlement by the Court route will prolong the time due to the need to comply with the order and procedures, thus, it will cause a lot of damage to the business.

5. Effect of resolutions of the General Meeting of Shareholders

The Enterprise Law 2020 stipulates the effect of a resolution of the General Meeting of Shareholders that takes effect “from the date of adoption or from the effective time stated in that resolution”. In case a resolution of the General Meeting of Shareholders is requested by a shareholder or group of shareholders to request the Court or Arbitrator to consider annulment, “such resolution shall remain in effect until the decision of the Court or Arbitrator to annul such resolution takes effect”. It can be seen that this regulation helps enterprises remove many difficulties and stabilize the production and business situation when disputes arise related to resolutions of the General Meeting of Shareholders.

6.Sanctions related to the organization and implementation of the general meeting of shareholders

• No Annual General Meeting of Shareholders held

For public companies, according to the provisions of Clause 12 Article 1 of Decree 145/2016/ND-CP, a fine from VND 70,000,000 to VND 100,000,000 will be imposed for violations of the law on corporate governance on convening, organizing meetings and approving decisions of the General Meeting of Shareholders.

Thus, enterprises should pay attention to the organization of the General Meeting of Shareholders at the annual meeting once a year in accordance with the law. In case an enterprise needs to extend the meeting time, it must send a letter of application for extension to the Department of Planning and Investment of the provinces/cities, but the extension period must not exceed 6 months from the end of the fiscal year.

• Violation of the time of the general meeting of shareholders

When the board of directors, the supervisory board, the convener of the General Meeting of Shareholders violates the provisions on a reasonable time limit specified in the Law on Securities in 2019, it will be considered a serious violation of the order and procedures for convening the General Meeting of Shareholders, therefore, will be subject to a number of sanctions.

– The first is to be sanctioned for administrative violations. Asstipulated in Circular 96/2020/TT-BTC dated 16-11-2020 of the Ministry of Finance, the notice of meeting invitation is a mandatory document to disclose information about the General Meeting of Shareholders, therefore, when violating this regulation, the company will be administratively sanctioned in the field of securities, Specifically, the act of non-disclosure of information subject to disclosure in accordance with the law (not guaranteed for at least 21 days), with a fine from 70 to 100 million VND.

– Next is the risk of a situation where shareholders request to cancel the resolution of the General Meeting of Shareholders that has been passed. Specifically, within 90 days from the date of receipt of the resolution or minutes of the General Meeting of Shareholders, shareholders or groups of shareholders owning 05% or more of the total number of ordinary shares or another smaller percentage under the company’s charter have the right to request the court or arbitrator to consider, annulment of the resolution or part of the resolution due to violation of the order and procedures for convening meetings.

– Finally, there is the risk of compensation for damages. Accordingly, shareholders can initiate a lawsuit for personal liability, joint liability for members of the board of directors to claim compensation for damage caused by performance contrary to the provisions of law.

Therefore, in order for the board of directors, the supervisory board and the convener of the General Meeting of Shareholders to comply with the provisions of the Law on enterprises, the Law on securities, the company’s charter, and the company’s internal governance regulations on the reasonable time limit for convening the General Meeting of Shareholders (must ensure at least 21 days before the opening date of the General Meeting of Shareholders), it is necessary to apply maximum care while exercising assigned rights and obligations, avoiding legal risks for the company, as well as its personal liability. Thereby, improving transparency and standards in corporate governance, increasing the value of shares of shareholders.

Above is the content of KALF’s advice on Issues related to the organization and implementation of the General Meeting of Shareholders and some related legal issues. All of our above advice opinions are based on applicable legal provisions. If you have any questions or requests about legal issues, please contact us for timely answers.