Vietnam: What is a non-voting depository receipt? Are non-voting depository receipts ordinary shares?
Are non-voting depository receipts in Vietnam ordinary shares?
According to the provisions of Article 140 of Decree 155/2020/ND-CP as follows:
Non-voting depository receipt (NVDR) is a security issued by a subsidiary company of the Stock Exchange to foreign investors based on shares of a listed or registered company.
Accordingly, NVDR holders have the same economic interests and obligations as those of the underlying ordinary shares, except the right to vote.
The issuer is entitled to attend the GMS and vote in case the issuer of underlying shares needs to enquire shareholders about delisting but does not have other economic rights that are relevant to these shares.
On the other hand, Clause 6, Article 114 of the Enterprise Law 2020 provides as follows:
Types of shares
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6. Ordinary shares used as underlying assets to issue non-voting depository receipts are called underlying ordinary shares. Non-voting depository receipts have interest and obligations proportional to the underlying ordinary shares, except voting rights.
Thus, non-voting depository receipts in Vietnam are depository receipts issued on the basis of ordinary shares and are not shares. Therefore, owning non-voting depository receipts shall not cause changes in the percentage of capital held by investors in joint-stock companies and shall not affect the charter capital of joint-stock companies.
What are the rights of ordinary shareholders in Vietnam?
According to the provisions of Article 115 of the Enterprise Law 2020, ordinary shareholders in Vietnam have the following rights:
- Participate in and make comments at the General Meeting of Shareholders; exercise the right to vote directly or through authorized representatives or another method prescribed by law or the company's charter. Each ordinary share equals one vote;
- Receives dividends at the rate decided by the GMS;
- Be given priority to buy additional shares in proportion to their holding of ordinary shares in the company;
- Transfer their shares to other persons except for the cases specified in Clause 3 Article 120 and Clause 1 Article 127 of this Law and relevant laws;
- Access names and addresses on the list of voting shareholders; request rectification of incorrect information about themselves;
- Access, extract, make copies of the company's charter, minutes and resolutions of the GMS;
- Receive part of the remaining assets in proportion to their holdings in the company when the company is dissolved or goes bankrupt.
Besides, the shareholder or group of shareholders that holds at least 5% of the ordinary shares (or a smaller ratio specified in the company's charter) shall have the rights to:
- Access, extract the minutes of meetings, resolutions and decisions of the Board of Directors, mid-year and annual financial statements, reports of the Board of Controllers, contracts and transactions subject to approval by the Board of Directors and other documents except those that involve the company’s business secrets;
- Demand that a GMS be convened in the cases specified in Clause 3 of this Article;
- Request the Board of Controllers to investigate into specific matters relevant to the company’s administration where necessary. The request shall be made in writing and contain the full names, mailing addresses, nationalities, legal document numbers of shareholders that are individuals; names, EID numbers or legal document numbers, headquarters addresses of shareholders that are organizations; quantities of shares and time of shares registration of each shareholder, total quantity of shares of the group and their holdings in the company; the matter that needs investigating and the purposes of investigation;
- Other rights prescribed by this Law and the company's charter.
In what cases can ordinary shareholders in Vietnam convene a General Meeting of Shareholders?
According to the provisions of Clause 3, Article 115 of the Enterprise Law 2020 as follows:
- The shareholder or group of shareholders specified in Clause 2 of this Article is entitled to convene a GMS be convened in the following cases:
+ The Board of Directors seriously violates the shareholders’ rights, obligations of executives or issues decisions ultra vires;
+ Other cases prescribed by the company's charter.
- A request mentioned in Clause 3 of this Article shall be made in writing and contain the full names, mailing addresses, nationalities, legal document numbers of shareholders that are individuals; names, EID numbers or legal document numbers, headquarters addresses of shareholders that are organizations; quantities of shares and time of shares registration of each shareholder, total quantity of shares of the group and their holdings in the company; the reasons for convening the GMS. The request shall be enclosed with documentary evidence of the violations committed by the Board of Directors or the decision issued ultra vires.
- Unless otherwise prescribed by the company's charter, the shareholder or group of shareholders that holds at least 10% of the ordinary shares (or a smaller ratio specified in the company's charter) is entitled to nominate candidates for the Board of Directors and the Board of Controllers as follows:
+ The ordinary shareholders shall hold a meeting to nominate candidates for the Board of Directors and the Board of Controllers and inform the participating shareholders before the opening of the GMS;
+ The number of candidates depends on the quantity of members of the Board of Directors and the Board of Controllers and shall be decided by the GMS. In case the number of candidates nominated is smaller than the permissible number, the remaining candidates shall be nominated by the Board of Directors, the Board of Controllers and other shareholders.
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