Common mistakes of enterprises in the process of collecting shareholders' opinions in writing

An increasingly developing economy, Vietnamese businesses are constantly expanding their scale and scope of operations. In order to maintain transparency, legality and efficiency in the decision-making process, joint stock companies need to strictly comply with legal regulations, especially the Law on Enterprises 2020. One of the important mechanisms to ensure shareholders' right to participate in governance without holding a face-to-face meeting is to collect shareholders' opinions in writing, specified in Article 149 of the Law on Enterprises 2020. This form allows the Board of Directors (BOD) to approve decisions under the jurisdiction of the General Meeting of Shareholders (AGM) flexibly, saving time and costs.

However, implementation practice shows that many businesses encounter errors in the process of implementing this procedure, leading to serious legal risks such as invalid resolutions, internal disputes or financial losses.

Legal Requirements for Obtaining Written Shareholder Opinions

According to the provisions of Article 149 of the Law on Enterprises 2020, the Board of Directors has the right to collect shareholders' opinions in writing to approve decisions under the jurisdiction of the General Meeting of Shareholders without holding a direct meeting. The resolution passed in this form has the same legal validity as the resolution passed at the General Meeting of Shareholders. In addition, Clause 2, Article 147 of the Law on Enterprises 2020 stipulates that the Board of Directors cannot organize a written collection of shareholders' opinions, but must collect opinions by voting of shareholders at the General Meeting of Shareholders in cases of 7 groups of issues such as (i) amending and supplementing the company's charter; (ii) Company development orientation; (iii) Type of shares and total number of shares of each type; (iv) Elect, dismiss and dismiss members of the Board of Directors and the Control Board; (v) Decision on investment or sale of assets valued at 35% or more of the total value of assets stated in the company's latest financial statements, unless the company's charter prescribes other ratios or values; (vi) Approve the annual financial statements; (vii) Reorganization or dissolution of the company. One note is that the company's charter has the right to provide for other provisions on this issue.

However, to ensure legality, the process of collecting shareholders' opinions in writing requires strict compliance with the order, deadline, content of the consultation, voting form and approval rate. Just a small mistake in any stage, the resolution can be declared invalid or the subject of litigation, seriously affecting the governance and reputation of the business.

Common mistakes of businesses

1. Errors in implementation competence and content of opinion collection

One of the most common mistakes is that the enterprise does not identify the right subject with the authority to carry out the procedures for collecting shareholders' opinions in writing[1]. According to regulations, the Board of Directors is the only agency that has the right to initiate and implement this process. However, in some cases, the General Director or the Executive Board carries out this procedure without a resolution to collect shareholders' opinions in writing from the Board of Directors, leading to acts beyond their competence. These cases often occur due to insufficient awareness of legal regulations or due to inadequate coordination between departments in the enterprise. As a result, the resolution may be considered invalid, cause disputes, or become legally invalid.

As mentioned above, the Law on Enterprises and the Charter only give an issue that is allowed to collect shareholders' opinions in writing instead of holding a General Meeting of Shareholders. However, some enterprises offer written opinions to shareholders that are not allowed to be consulted or contents that are not under the jurisdiction of the General Meeting of Shareholders, such as approving the remuneration plan for directors or issues under the jurisdiction of the Board of Directors. In addition, draft resolutions are sometimes unclear, inconsistent, or contain content that is contrary to the law or the company's charter, increasing the risk of the resolution being invalidated.

2. Errors in the process of submitting documents and voting

The process of sending documents and organizing voting is one of the most error-prone stages. Some common problems include:

1. Lack of accompanying documents. Enterprises send opinion polls but do not provide all relevant documents such as draft resolutions, reports or explanatory documents. This leaves shareholders without enough information to make the right decision, increasing the risk of objections or complaints.
2. The poll was unsatisfactory. Some enterprises drafted the opinion poll unclearly, did not specify voting options such as agreeing, disagreeing, not having opinions or incorrectly recording shareholder information such as names and number of shares. These errors can lead to controversy over the validity of the ballot.
3. Sending documents to the wrong address. Due to not updating the list of shareholders at the latest time, the enterprise may send documents to the incorrect address of the shareholder, causing shareholders to not receive information or be unable to participate in voting. In case there are some businesses that send documents by e-mail, in this case, it should be noted that the e-mail address must be officially provided by the customer and has been specifically confirmed in the document records kept by the company.

3. Errors in the deadline for sending ballots

The Law on Enterprises 2020 requires enterprises to ensure that at least 10 days before the deadline, shareholders must return the opinion poll to the enterprise. However, many businesses do not comply with this deadline or do not specify the end time of receiving votes. This leads to disputes over the validity of late ballots, affecting the final outcome of the resolution.

4. Errors in determining voting rights

Some businesses do not correctly identify the right to vote or the voting ratio needed to pass the resolution. Common mistakes include:

Collecting opinions of shareholders does not have the right to vote. Some enterprises send polls to shareholders who own preference shares without voting rights, leading to the wrong calculation of the voting rate. Therefore, when conducting the process of collecting shareholders' opinions in writing, enterprises need to carefully review the types of shares that the company's shareholders own, especially whether these shares have the right to vote when collecting opinions in writing or not so that they can properly conduct the process of collecting opinions in accordance with the law.

Misdetermination of the pass rate. According to regulations, a written resolution to collect opinions shall be passed if the number of shareholders owning more than 50% of the total number of votes of all shareholders with voting rights approves; the specific ratio shall be prescribed by the company's charter. However, many enterprises do not comply with this ratio or do not thoroughly check the company's charter, leading to resolutions that do not meet the legal requirements set by law and the company's charter.

5. Errors in vote counting and record keeping

The process of counting votes and storing records is also a stage prone to errors. Some of the problems include:

• Failure to make vote counting minutes: Some businesses do not make vote counting records or record vote counting results clearly and completely, making it difficult to prove the transparency of the process.
• Lack of proof of sending and receiving: Businesses do not keep evidence confirming the sending and receiving of ballots (such as emails, courier receipts), leading to difficulties in handling disputes or checking later.
• Failure to keep adequate records: The lack of records related to the shareholder consultation process can hinder the audit process or resolve legal disputes.

6. Errors in information disclosure with public companies

For public companies, the disclosure of information related to the process of collecting shareholders' opinions in writing must comply with the provisions of the securities law. However, many businesses do not fully or on time disclose relevant information, or are not transparent in summarizing and announcing voting results. These errors can lead to administrative penalties by competent authorities as well as loss of trust from shareholders and investors in the company[2]. Therefore, before and after organizing a written consultation with shareholders, enterprises must pay close attention to this issue.

HM&P's Managing Partner at the 2024 AGMS of Imexpharm Pharmaceutical Joint Stock Company

Legal consequences of errors

The above errors can lead to many serious legal consequences, including:

• Cancellation of resolution: According to Article 151.2 of the Law on Enterprises 2020, shareholders have the right to request the cancellation of the resolution if the opinion collection process violates the order, procedures or rights of shareholders. This can disrupt the operation of the business, especially when the resolution is related to important decisions such as capital increase,  share transfer or restructuring.
• Invalidation of related transactions: Transactions or decisions made based on invalid resolutions are at risk of being declared invalid, causing financial and legal losses to the business as well as shareholders.
• Internal disputes: Errors in the process can give rise to conflicts between shareholders, especially when some shareholders feel that their rights are being violated. This not only affects the reputation of governance but also reduces trust from investors.

Solutions for businesses

In order to avoid the above errors and improve the efficiency of the process of collecting written shareholder opinions, enterprises should consider implementing the following measures.

First, businesses should promulgate standardized internal processes

Businesses should develop a detailed internal process, clearly stipulating the implementation steps, responsibilities of each department, and specific deadlines. This process needs to be disseminated to all members of the Board of Directors, Executive Board, Administrators, Company Secretary and legal department (if any).

Secondly, thoroughness in preparation

Enterprises need to maintain and regularly update the list of shareholders with voting rights, ensuring that contact information (residential address, temporary residence address, email,..) is always accurate. At the same time, the logistics team needs to draft a form of opinion poll in a clear and easy-to-understand way, which clearly states the voting options and is fully accompanied by explanatory documents such as draft resolutions, reports and related documents. Businesses should also use the methods of sending certified documents (courier with a response receipt or possibly email) and keep sufficient records for inspection, audit, or dispute resolution later, if any.

In addition, the legal team of the enterprise needs to be regularly trained in relevant legal regulations. In case of necessity, businesses can hire professional legal advice to ensure compliance with regulations.

Third, businesses should consider applying technology early

The application of modern shareholder management tools, such as e-voting software or an online shareholder management system, can help businesses increase transparency, minimize errors and improve the efficiency of the process of collecting written shareholder opinions in particular and managing business operations in general in a professional and methodical way.

Collecting shareholders' opinions in writing is an important tool to help businesses make decisions flexibly, saving time and costs compared to organizing a direct General Meeting of Shareholders. However, to ensure legality and effectiveness, businesses need to carry out this process carefully, fully complying with the provisions of the Law on Enterprises 2020 and relevant laws.

Errors in the shareholder consultation process can lead to serious legal consequences, from the cancellation of the resolution to internal disputes or financial damages. Therefore, businesses need to be well aware of the importance of this tool and establish an appropriate internal management system, from standardizing processes, updating shareholder information to applying modern technology. These efforts not only help protect the interests of shareholders but also contribute to improving the governance efficiency and reputation of the enterprise in business activities and in the eyes of shareholders.