April is commonly regarded as the season for General Meetings of Shareholders (“GMS”), as joint-stock companies typically hold their annual GMS during this period in compliance with legal requirements[1]. At this time, many enterprises are likely planning their annual GMS for the current year. One of the primary concerns when organizing a GMS is the meeting format, especially for public companies with a large and geographically dispersed shareholder base, including shareholders residing abroad. Choosing a meeting format that ensures sufficient shareholder participation to meet quorum requirements while allowing broad shareholder engagement in discussions is no easy task. In this context, holding a GMS online is a viable option that aligns with modern trends. However, based on publicly available information from listed companies, the authors have observed that most businesses have not yet adopted online GMS in 2024. The question arises: what are the reasons behind this hesitation, and is there a solution to transition from the long-standing traditional GMS format?
Source: Petro Vietnam
Legal basis for holding online GMS
A review of the 2020 Law on Enterprises reveals that it does not specify particular formats for holding a GMS. However, it does define the means by which shareholders may be considered as attending and voting at the GMS. Specifically, Article 144.3 of the 2020 Law on Enterprises stipulates that, in addition to attending and voting in person, appointing a proxy, or submitting voting ballots, shareholders may also participate and vote via online meetings, electronic voting, or other electronic means. This provision suggests that enterprises are legally permitted to hold online GMS and allow shareholders to vote electronically.
For public companies, this is even more explicit under Article 273.3 of Decree 155/2020/ND-CP, which states: “Public companies shall provide in their internal corporate governance regulations for the application of modern information technology to allow shareholders to attend and express opinions at the GMS through online meetings, electronic voting, or other electronic means as stipulated in Article 144 of the Law on Enterprises and the company’s charter.”
Thus, based on the aforementioned legal provisions, enterprises have a sufficient legal basis to conduct an online GMS. The specific methods for organizing such meetings must be outlined in the company’s charter, internal governance regulations, and GMS organization rules to ensure shareholders’ participation.
Compared to previous legal frameworks, particularly under the 2005 Law on Enterprises, the feasibility and clarity of online GMS organization have significantly improved. The 2005 Law on Enterprises neither explicitly addressed GMS formats (similar to the 2014 and 2020 versions) nor allowed for electronic voting. Instead, Article 103.5 of the 2005 Law required voting to be conducted via ballots collected at the meeting, making electronic voting infeasible. This posed a significant barrier to online GMS organization. However, with the subsequent amendments in corporate law, particularly Decree 155/2020/ND-CP, the decision to hold an online GMS is now entirely at the discretion of the enterprise.
What are enterprises concerned about?
Despite having a clear legal foundation, enterprises remain hesitant to conduct online GMS for several reasons. Based on the authors’ experience advising companies on GMS organization over the years, common concerns include ensuring broad shareholder access to the meeting, verifying the legitimacy of attendees, maintaining transparency, and safeguarding corporate and shareholder data.
Firstly, accessibility to online meetings can be an issue for many shareholders, especially older shareholders or those unfamiliar with digital technologies. For companies with a large proportion of such shareholders, transitioning to an online GMS format presents significant challenges. Without clear guidelines and technical support for shareholders, companies risk failing to meet the quorum requirements stipulated in Article 145 of the 2020 Law on Enterprises, which mandates attendance of at least 50% (for the first meeting) and 33% (for the second meeting) of the voting shares. If shareholders struggle to access the online GMS, there is a high likelihood that the meeting will need to be reconvened multiple times, which can negatively impact its effectiveness.
Secondly, verifying the legitimacy of attendees is another major concern. In physical meetings, shareholder identity verification is conducted directly by reviewing personal identification documents and proxies, allowing the credentials of attendees to be confirmed with high accuracy. However, in an online setting, this process cannot be carried out manually, necessitating alternative identity verification mechanisms. Given the increasing sophistication of document, image, and video forgery, businesses are rightly concerned about the integrity of the verification process.
Thirdly, transparency in meeting procedures remains a challenge. In physical meetings, shareholders can directly pose questions to the Chairperson and receive immediate responses, and the vote-counting process is conducted in their presence. In contrast, online meetings require question submissions and vote tabulation to be conducted digitally, potentially without direct shareholder oversight. This lack of visibility raises concerns about the accuracy of the process and the risk of undue influence by the company or third parties.
Finally, for non-public companies, GMS discussions may involve sensitive business information that the company wishes to keep confidential. The risk of information leaks during online meetings is a significant concern. Even for public companies, shareholder participation often requires the submission of extensive personal data, which, if inadequately protected, could be compromised, leading to substantial risks for both the company and its shareholders.
Source: BIDV
In conclusion, the above concerns represent only a fraction of the many issues enterprises consider when deciding whether to adopt online GMS. Despite having a clear legal basis for online GMS, many companies still opt for traditional physical meetings, incurring significant time and cost burdens. Nevertheless, given the rapid advancement of digital technology, businesses will inevitably need to adapt to this transformation, including transitioning to online GMS in the future.
Lawyer Nguyen Van Phuc - To Kien Luong
HM&P Law Firm
Read more: Một số vấn đề trong việc tổ chức họp đại hội đồng cổ đông trực tuyến tại các doanh nghiệp
[1] Clause 2, Article 139 of the Law on Enterprises 2020
