Public companies confused in announcing Court judgments/decisions

The information disclosure of public companies in Vietnam shall comply with the provisions of Circular No. 96/2020/TT-BTC guiding the disclosure of information on the stock market dated November 16, 2020 of the Ministry of Finance[1]. A legally effective judgment or decision of the Court is also a type of information that enterprises are required to disclose according to regulations. However, the reality shows that listed enterprises have different ways of understanding and applying this regulation, leading to inconsistency in the way of information disclosure.

Image of the Hanoi People's Court. Source: The Supreme People's Court

Regulations on publication of judgments and decisions of courts

According to Point o, Clause 1, Article 11 of Circular No. 96/2020/TT-BTC, public companies are required to disclose abnormal information within 24 hours from the receipt of a legally effective judgment or decision of the Court related to the company's operation. This regulation does not distinguish the extent to which the judgment or decision affects business activities, finances, or the interests of shareholders. In addition, Point r, Clause 1, Article 11 also requires the disclosure of additional information if the judgment or decision causes material consequences to production and business activities or the company's governance situation.

Although the above regulation seems clear, the interpretation and implementation of listed enterprises are very diverse. Some businesses understand that they must publish the full content of the judgment, while others only publish a summary of relevant information. Meanwhile, some businesses are more "careful" when announcing the first-instance judgment that has not yet taken legal effect. This inconsistency has led to many different ways of disclosing information in the practice of businesses.

Different interpretations of public companies

Announcing the entire judgment or decision or only summarizing the content of the judgment

Some businesses believe that the regulation requiring the publication of "legally effective judgments and decisions" means that the entire content of the judgment or decision must be published. This understanding comes from the literal interpretation of the words "judgment" and "decision", that is, the entire legally valid document issued by the Court. Therefore, with this understanding, businesses often upload the entire judgment or decision to the information disclosure system of the Stock Exchange or the company's website[2].

However, this approach can cause some problems. First, court judgments or decisions often contain detailed information, including sensitive information such as personal data, trade secrets, or details that may affect a company's reputation. The publication of the entire content may violate the regulations on the protection of personal information or be detrimental to the company in other legal disputes. Secondly, the large volume of information from judgments can make it difficult for shareholders and investors to grasp important content, especially when the company participates in many litigations.

On the contrary, some businesses believe that the regulation only requires the disclosure of "information" related to the judgment or decision without having to publish the entire document. According to this understanding, businesses only need to provide a summary, including key information such as the content of the case, the Court's ruling, and the impact (if any) on the company's operations[3]. This approach is said to help save time, minimize legal risks related to the disclosure of sensitive information, and help shareholders and investors easily access core information.

However, this approach also has limitations. Summarizing information can lead to a lack of transparency if businesses deliberately omit important details. Additionally, there are no specific guidelines on how detailed the summary should be, leading to inconsistencies between businesses. Some businesses may only disclose formal information, while details related to financial or legal impact are ignored.

Is it just necessary to announce judgments and decisions that have a significant impact?

Another common interpretation is that businesses only need to publish judgments or decisions that have a material impact on business activities, finances, or shareholders' interests. This interpretation is based on the logic that small litigation, such as contract disputes with clients or tenancy disputes, usually do not have a significant impact and therefore are not necessary to be publicized. These businesses often invoke point r, clause 1, Article 11 to justify that only "high-impact" events must be announced[4].

However, this approach directly contradicts the provisions at Point o, Clause 1, Article 11, which does not distinguish the degree of influence of the judgment or decision. Arbitrarily choosing to publish only material judgments may cause enterprises to violate the law, leading to the risk of sanctions or loss of trust from shareholders and investors[5].

Is it necessary to publish an arbitral award or award?

Another controversial issue is whether arbitral awards or awards fall within the scope of publication under Circular No. 96/2020/TT-BTC. Some businesses believe that the regulations do not require it, so arbitral awards do not need to be announced. On the contrary, some other businesses believe that arbitral awards, especially those that have been recognized and enforced by the Court, should be considered equivalent to the Court's decision and should be published[6]. The lack of clarity in legal regulations has led to inconsistencies in the handling of arbitral awards, increasing uncertainty in practice.

CIC Group (CKG) was sanctioned for violating information disclosure obligations. Source: Securities News Express

Directions to solve obstacles for businesses

In fact, in Vietnam, listed enterprises apply very different approaches in disclosing information on court judgments and decisions. Some large enterprises, especially those with professional legal departments, often strictly comply with regulations and publish all or summarize judgments and decisions. Meanwhile, smaller businesses, or those with a large number of litigation cases such as banks, often tend to selectively disclose information or even ignore some judgments and decisions that are not considered material. To help public companies comply well with disclosure in this field, both regulators and businesses need to find effective solutions to solve problems.

Firstly, detailed guidelines for this procedure should be issued soon

The Ministry of Finance and the State Securities Commission should issue specific guidelines on how to disclose information on judgments and decisions, including clarifying the scope of application to arbitral awards and exceptions. This guidance should clearly specify the level of detail of the information to be disclosed (the entire judgment or summary) and the criteria for determining the materiality of the judgment, decision or award for the operation of the enterprise. We believe that the publication of court judgments/decisions or arbitral awards only applies to judgments/decisions/awards that have a material impact on business operations. For judgments/decisions/rulings that are ordinary and/or take place regularly in the business activities of enterprises, they should be exempted from publication. This is also perfectly in line with the trends and requirements of countries around the world.

Secondly, enterprises should strengthen training for persons in charge of information disclosure

Public enterprises need to be trained and conduct training for personnel in charge of information disclosure regulations. This helps ensure that businesses understand their legal obligations and apply them in practice in a uniform and complete manner.

Third, strengthen post-inspection from the management agency

Regulators need to strengthen supervision of compliance with information disclosure regulations and apply strict sanctions to non-compliant and inadequately compliant businesses[7]. This is a factor that helps Vietnam's stock market become modern, close to international standards.

The disclosure of information on the Court's judgments and decisions is an important requirement to ensure transparency and protect the interests of shareholders and investors. However, the differences in the understanding and application of this regulation among listed enterprises have created great challenges in the compliance practices of enterprises. Solving this problem is not difficult, but it is necessary to coordinate between management agencies and enterprises in issuing detailed guidelines, raising awareness of compliance of public enterprises in information disclosure.

Lawyer Nguyen Van Phuc

HM&P Law Firm

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