The charter plays a crucial role and is considered the "constitution" of a listed company. In addition to the law, the charter is a document that guides the company throughout its operations. A charter that complies with the law and is consistent with the nature of the company's operations and the shareholders' strategy is the goal of many investors. Therefore, the drafting of a charter has always been an important task for any company, especially for listed companies, as this instrument is widely accessible. However, the reality shows that many listed companies still make errors when drafting charters. In this article, the author will mention some typical errors in the charters of listed companies that can lead to disputes in practice.
Source: The Saigon Times
Errors in the determination of the valid votes for the calculation of the voting thresholds
Voting thresholds are one of the most important issues of a listed company as many shareholders invest in the company. For this reason, the Law on Enterprise has prescribed minimum voting thresholds for the adoption of the company's resolutions in any given situation. However, to calculate the exact number of votes, it is necessary to determine the number of shareholders who attended the meeting and voted.
Under Clause 1 and Clause 2 of the Article 148 Law on Enterprise 2020, the number of votes in favor is based on the number of votes of shareholders who attended the meeting. The above provisions have been adopted in the charter of many listed companies. However, since 01/3/2022, such provisions have been amended pursuant to Clause 5 Article 7 of Law No. 03/2022/QH (“Amended Law on Enterprise”). Accordingly, the voting thresholds are calculated on the basis of the votes of the shareholders present and voting at the meeting.
Although the Amended Law on Enterprises has been in effect for some time, the author notes that many listed companies have yet to amend the relevant provisions in their charter.
Under the old law, the votes of shareholders who attended the meeting are included in the percentage of valid votes to pass the resolution. The above provisions will lead to the following problems:
First, shareholders attend the meeting but do not vote or cast an invalid vote. This is a common situation where many shareholders (especially small shareholders) attend the meeting but either vote or simultaneously disagree and agree on the same matter.
Second, in some cases, shareholders may attend the meeting but not have the right to vote. For example, in the case where a founding shareholder transfers its shares within 03 years from the date of the company's establishment pursuant to Clause 3 of Article 120 of the Law on Enterprises 2020, the transferee does not have the right to vote. Or, in the case of approving transactions with related persons under Article 167 of the Law on Enterprise 2020, the shareholder who has related interests will also not be allowed to vote.
Therefore, if the voting thresholds are based on the number of votes of the shareholders present, it will lead to inaccurate results. The new law has resolved the above issues by providing that only the votes of shareholders who simultaneously attend and vote at the meeting (the validity of the votes will also be taken into account) will be used to calculate the voting thresholds for passing the resolution.
In this situation, the listed company has no choice but to amend its charter to ensure compliance with the applicable laws and to avoid legal risks in applying provisions that have not been amended. 
Errors in determination of the voting thresholds for the adoption of resolutions of the company
In addition to the provisions on the valid votes for calculating the voting thresholds, another mistake that many listed companies make is the voting thresholds required to pass the company's resolution.
Clause 1 and Clause 2 Article 148 Law on Enterprise 2020 has laid down different thresholds depending on the matter to be decided by the company.
In particular, resolutions on important matters such as types of shares or total number of shares, business fields and management structures will only be passed if 65% or more of the total votes of all shareholders present and voting at the meeting are in favor (the specific ratio will be determined by the company's charter). In other words, if the company's charter does not stipulate a ratio higher than 65%, such ratio will be accepted and a resolution on important matters of the company will be passed if at least 65% of the total votes are in favor. Meanwhile, the resolution on fundamental matters will be adopted if more than 50% of the total votes of all shareholders present and voting at the meeting are in favor (the specific ratio will be provided by the company's charter). Therefore, if the charter does not provide for a ratio higher than 50%, such a ratio will not be sufficient to pass the resolution. The same issue arises in the case of passing a resolution in the form of collecting shareholders' opinions in writing in Clause 4 Article 148 of the Law on Enterprises 2020.
Due to the discrepancies between the ratios in Clause 1 and Clause 2 of Article 148 of the Law on Enterprises 2020, many listed companies have made mistakes regarding these provisions. In particular, some companies misuse the phrases "(from) 65% or more" and "over 65%". Although these errors may be due to wording and typographical errors, they may result in an inaccurate determination of the percentage of votes in favor. Such errors will significantly impact listed companies with many shareholders and a high degree of share dilution.
In addition, if the company makes an error in determining the approval rate as "(from) 50%" instead of "more than 50%" as required by law in the case of approving resolutions at meetings on other matters (other than matters included in Clause 1 Article 148 of the Law on Enterprises 2020) or in the case of approving resolutions in the form of soliciting shareholders' opinions in writing, disputes may arise if a resolution of the company is passed when the approval/disapproval ratio is 50/50.
Therefore, in order to avoid the potential risk of disputes, listed companies need to review and amend their charter in a timely manner.
In conclusion, the provisions on shareholder voting thresholds in the Law on Enterprises 2020 have been amended to reflect practice. However, many listed companies have not yet updated the new provisions. The mistakes mentioned in this article are typical mistakes made by listed companies. In order to strengthen legal compliance and risk management, the author believes that it is necessary for listed companies to comprehensively review their charters, which will help to ensure that the provisions of the charters comply with the law and that the company operates properly.
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The article was written by Lawyer Nguyen Nhat Duong, from HM&P Law Firm and was published in The Saigon Times No. 30 on July 25, 2024. Read more at: https://thesaigontimes.vn/sai-sot-nghiem-trong-trong-dieu-le-cua-mot-so-doanh-nghiep-niem-yet/
