Concretize legal provisions to protect investors

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Vietnamese laws are increasingly focusing on protecting investors. Photo: collection

Many important changes

Talking about important points of the draft Law on Enterprise (amended), Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management (CIEM), said protecting shareholders or investors was the most important content of the legal framework on corporate governance. Good shareholder protection regulations would make an important contribution to creating a safe business tool for enterprises. Therefore, the draft Law on Enterprises (amended) had many important changes such as expanding the level and scope of shareholders' rights to create favourable conditions for shareholders to protect their interests and initiate lawsuits when managers abuse positions and powers to damage the company and shareholders.

For example, expanding shareholders' right to access information about the performance of the company; creating favourable conditions for shareholders to implement rights such as abolishing the content of restrictions on minimum time to own shares (to be able to exercise certain rights); supplement the right for the General Meeting of Shareholders to decide remuneration of the Board of Directors,decide to select independent audit; reduce requirement of share ownership from 10 percent to 1 percent for shareholders to exercise important rights.

In this regard, Prof. Dr. Nguyen Mai, Chairman of the Association of Foreign Investment Enterprises (VAFIE), said measures to protect investor interests were important factors in attracting investment, especially foreign investment. The provision on investment guarantee when there is a change in the law is stipulated in Article 13 of the Investment Law, however, this provision is only limited to the change of legal documents on investment incentives; while investors require much more, including: Assuring property rights, securing the transfer of assets and legal profits of investors abroad, securing investment in case of legal changes, investment guarantee for business investment activities. Therefore, the Chairman of VAFIE proposed an “investment guarantee" programme to specify all contents related to investors' interests, including security of property rights; ensure the transfer of legal properties and profits of investors abroad; investment guarantee in case of changes in laws and investors' interests in business activities.

Benefits will be guaranteed

According to the World Bank (WB) report, before the Enterprise Law 2005, Vietnam ranked 159/169 countries in the world in the investor protection index - the most important index in corporate governance. After passing the Enterprise Law 2005 and the Enterprise Law 2014, Vietnam's Investor Protection Index increased by 70 steps to 89/190 countries, and the World Bank has recorded a record of this change. However, since then, the Enterprise Law has not been amended, resulting in Vietnam falling to 97. Therefore, at present, not only the draft of the Enterprise Law (amended), the Investment Law (amended) are also provisions on protecting the rights of investors and shareholders.

However, many enterprises are also concerned about not only old regulations, but also new regulations in the draft laws, such as cutting the percentage of shareholding of shareholders or groups of shareholders owning from 1 percent of total ordinary shares or a smaller percentage as stipulated in the company's charter has the rights such as requesting the review and copy the report numbers and resolutions of the Board of Directors, financial statements and other reports of the Supervisory Board and requesting to convene an extraordinary General Meeting of Shareholders.

In this regard, Phan Le Hoang, Deputy General Director of Pacific Group (Pacific Corporation) expressed concern that regulations on reducing the percentage of share ownership of shareholders or groups of shareholders who own from 10 percent to 1 percent was not appropriate and does not guarantee a competitive environment for enterprises. Protecting the interests of small shareholders is the right thing to do, but to stabilise the company still needs a certain percentage to vote by the majority, to ensure the rights and responsibilities of major shareholders. So, he proposed maintaining the ownership rate of 10 percent of the total number of common shares or more of the shareholder or group of shareholders as prescribed in Clause 2, Article 114 of the current Enterprise Law.

But according to Phan Duc Hieu, the above-mentioned amendment would help expand the right of shareholders to access information about the operation of the company, creating more favourable conditions for shareholders to exercise their rights. In addition, many experts also say corporate governance in countries pays high shareholder rights. The tendency of countries is that people invest less capital but their benefits are guaranteed. However, enterprises still have to give their ideas to get the best regulations for investors as well as their rights in business activities.