Verdict No. 52/2019/KDTMPT dated September 11, 2019 regarding dispute over corporate and project ownership under a business partnership agreement

PEOPLE’S HIGH COURT OF HO CHI MINH CITY

VERDICT NO. 52/2019/KDTMPT DATED SEPTEMBER 11, 2019 REGARDING DISPUTE OVER CORPORATE AND PROJECT OWNERSHIP UNDER A BUSINESS PARTNERSHIP AGREEMENT

During September 10 – 11, 2019, the appeal against the preliminary ruling on the commercial business case No. 89/2018/TLPT-DS accepted on December 18, 2018 regarding “Dispute over corporate and project ownership under a business partnership agreement” is tried in public at the courthouse of the People’s High Court of Ho Chi Minh city.  Owing to the fact that the preliminary ruling on the commercial business case No. 1500/2018/DSST dated October 25, 2018 of the People’s Court of Ho Chi Minh city is appealed. 

According to the Decision to try the case No. 1485/2019/QD-PT dated July 12, 2019 between litigants:

Plaintiff: N Development and Trading Joint Stock Company

Head office: 36, Bui Thi Xuan street, B Th ward, District 1, Ho Chi Minh city

Representative: Mr. Dinh Truong C – President of Board of Directors and legal representative (present)

Defendant: DWS company

Head office: Dohwa-dong, Ch B 522-ho, 86 Mapo- daero, Mapo- gu, Seoul, South Korea

Legal representative: Mr. Lin Kuo W; Title: Director

Authorized representative: Mr. Tran Thanh Nh, born in 1984 and Mr. Pham Chinh T (present)

(According to the Power of Attorney dated October 30, 2018 signed by Mr. Lin Kuo Wei)

Persons protecting legitimate rights and interests: Attorney Bui The L and Attorney Ha Thi X – Members of the Hanoi’s Bar Association (present)

Other interested persons:

1. Nh V N- H Q Planning and Development Co., Ltd.

Head office: 2BIS-4-6, Le Thanh Ton Street, Ben Nghe Ward, District 1, Ho Chi Minh City.

Contact address: 6th Floor, Lottery Tower Building, No. 77, Tran Nhan Ton Street, Ward 9, District 5, Ho Chi Minh City.

Legal representative: Mr. Jong Suk L; Title: Director General.

Authorized representative: Mr. Nguyen Ngoc Q (present).

(According to the power of attorney granted on January 25, 2018 by Mr. Jong Suk Lee)

Person protecting legitimate rights and interests: Attorney Nguyen Thi Ngoc Loan - a member of Bar Association of Ho Chi Minh city (present)

2. Department of Planning and Investment of Ho Chi Minh city

Head office: 32, Le Thanh Ton Street, Ben Nghe Ward, District 1, Ho Chi Minh City.

Representative: Mrs. Le Thi Huynh M; Title: Director.

Authorized representative: Mr. Nguyen Trung A; Title: Head of Investment Registration Division (filing an application for his absence from the trial).

3. Business Registration Division – Department of Planning and Investment of Ho Chi Minh city

Head office: 32, Le Thanh Ton Street, Ben Nghe Ward, District 1, Ho Chi Minh City (filing an application for its absence from the trial).

CASE DETAILS

On March 10, 2007, Nh Development and Trading Single-member Limited Liability Company, now N Development and Trading (briefly called HDT), and 2 foreign companies which are K P&D Co., Ltd. (briefly called P&D) and Lucky Vietnam Construction company (briefly called LVC), have entered into a Business partnership Agreement to establish Vietnam Housing Planning and Development Co., Ltd. – South Korea (briefly called VK H) to carry out the Project on construction of a commercial and residential complex (now called The Mark high-rise building) at the land plot under HDT's ownership (covering an area of 29.310m2).   

On August 30, 2007, HDt, P&D and LVC received the Investment Certificate No. 411022000109 from People’s Committee of Ho Chi Minh city, certifying that 3 companies are permitted to invest in establishment of VK H company (with Mr. Jong-Suk, Lee, Director General, as its legal representative) to carry out the aforesaid project.  

According to the Investment Certificate, involved parties must register their in-kind capital contribution made by using land use rights with the Division of Registration of Land Use Rights, must commence construction in May of 2008, and must complete the construction project by February of 2010. In fact, by June 2016, the project has not yet been carried out while several legal issues affecting business activities have arisen, specifically including:

On July 22, 2015, P&D and LVC were declared bankrupt by the Court of South Korea. According to the decision on bankruptcy declaration issued by the Court of South Korea, on March 16, 2016, an asset management officer who is authorized by the Court of South Korea acted on behalf of P&D and LVC to sign agreements to dispose of all of capital contributed by P&D and LVC to VK H to DWS company (briefly called DWS).   

Based on the aforesaid transfer agreements, on March 23, 2016, DWS contacted VK H to carry out procedures for change of shareholding member.

On April 20, 2016, VK H filed application for change in corporate registration of VK H:

Changing the company’s members from HDT, P&D and LVC into HDT and DWS.

Changing the legal representative from Mr. Jong-Suk, Lee into Yeh Kuo, Shun-Kuai.

On April 21, 2016, the Business Registration Division controlled by the Department of Planning and Investment of Ho Chi Minh city issued the Enterprise Registration Certificate (the 2nd change) to VK H according to submitted information and requirements.

On April 29, 2016, the Department of Planning and Investment of Ho Chi Minh city issued the Investment Registration Certificate No. 2162333062 in place of the Investment Certificate No. 411022000109, certifying the owners of the The Mark high-rise building project are HDT and DWS. 

Affirming that transfer of contributed capital by P&D and LVC to DWS violated terms and conditions of the business partnership agreement and regulations of the Law on Enterprises under which HDT is granted the privilege of buying shares of contributed capital. In addition, under terms and conditions of share transfer agreements dated March 16, 2016, they will be valid only if the Court of South Korea agrees to such transfer and the Court of Vietnam gives approval. Although share transfer agreements had not yet been accepted by the Court of South Korea and had not yet been recognized by the Court of Vietnam, DWS submitted falsified application to be granted the Investment Certificate and the Enterprise Registration Certificate. In response to such fraudulent act, HDT filed an accusation of fraudulent documents used for illegally seizing property to a police authority; filed an appeal to the Business Registration Division controlled by the Department of Planning and Investment of Ho Chi Minh city for revocation of the Enterprise Registration Certificate (the 2nd change) of VK H owing to such deliberate falsification, and take legal action to request the Court:   

Not to recognize effect of share transfer agreements dated March 16, 2016;

To revoke the Investment Registration Certificate No. 2162333062 and the Enterprise Registration Certificate (the 2nd change) of VK H.

After the Court accepted the case, HDT filed an additional petition for initiation of legal proceedings to request the Court to declare termination of the business partnership agreement signed on March 10, 2007 between the plaintiff, on one side, and, P&D and LVC, on the other side, about establishment of VK H, and request the Court to force each of P&D and LVC to pay the plaintiff USD 1,000,000 as a penalty for breach of the agreement in force on March 10, 2007.

On May 4, 2017, the Investigation Police Agency under the control of the Ministry of Public Security issued a Written Notice No. 334/C45-P8 informing the Department of Planning and Investment of Ho Chi Minh city that it formed sound and sufficient grounds for concluding that documents submitted to apply for adjustments in business and investment registration information of VK H related to DWS are falsified.

On September 29, 2017, the Business Registration Division affiliated to the Department of Planning and Investment of Ho Chi Minh city issued the Decision No. *790103/17* to revoke the Enterprise Registration Certificate (the 2nd change) of VK H and restored the effect of the Investment Certificate No. 411022000109 with Mr. Jong-Suk, Lee as a legal representative.

Affirming that HDT was the only one member contributing capital to VK H while P&D and LVC went bankrupt. During the previous period of business administration, Mr. Jong-Suk, Lee, as VK H’s legal representative reinstated according to the Decision No. *790103/17*, committed financial violations from the date on which P&D and LVC went bankrupt till now, and left Vietnam already.   Despite being removed from the post of VK H's legal representative, Mrs. Yeh Kuo, Shun-Kuai, continued to act as VK H's legal representative who hired Hoang Vuong Gia Security Services Company to guard the land plot, build fences and security guard booths.  In order to prevent Mrs. Yeh Kuo, Shun-Kuai from illegally abusing this land plot to call for investments to perform fraudulent acts and appropriation of investment funds, on November 22, 2017, HDT filed a written request to the Court to seek its decision on interim injunctions under which HDT was temporarily authorized to manage this land plot before the Court's final judgement on this case.

On December 20, 2017, Ho Chi Minh city People’s Court issued the decision on interim injunctions No. 298/2017/QD-BPKCTT stating “Before the Court's final judgement on the case, HDT is charged with temporarily managing the land plot within the project's boundaries".

Civil Enforcement Department of Ho Chi Minh city took actions to enforce the Decision on interim injunctions No. 298/2017/QD-BPKCTT, but was locked out by Hoang Vuong Gia Security Services company.

On January 12, 2018, Civil Enforcement Department of Ho Chi Minh city issued a written Notice informing the Court about this and requested the Court to name any person or organization subject to the Decision to allow HDT to temporarily manage that land plot in order to enable its law enforcement.  

On January 16, 2018, HDT requested the Court in writing to add the following information to the Decision on interim injunctions: “It is mandatory for VK H, DWS, Hoang Vuong Gia Security Services company and any other person or entity involved to move out of the land plot and let HDT temporarily manage the land plot".

In a meeting, the Hoang Vuong Gia Security Services company provided the Court a security service contract signed between Mr. Lin Kuo Wei – Director, as VK H’s legal representative, and Hoang Vuong Gia Security Services company on October 25, 2017 (Mrs. Yeh Kuo, Shun-Kuai was no longer VK H’s legal representative at this time).  However, after consulting VK H's statutes in terms of its organization structure, Director General, Deputy Director General, Chief Financial Officer and Chief Account (except Director) were listed.  Therefore, on January 23, 2018, the People’s Court of Ho Chi Minh city issued the Decision on change in interim injunctions No. 30/2018/QD-BPKCTT that compelled Hoang Vuong Gia Security Services company, DWS, VK H and other person or entity that was occupying or appropriating (if any) the land plot to move out and hand over the land plot to HDT for its temporary custody before receiving the Court's final judgement on the case. In order not to affect execution of the investment project by involved parties, the Decision on change in interim injunctions No. 30/2018/QD-BPKCTT contained the section “Issues related to implementation of The Mark high-rise building project will be negotiated by contracting parties, will conform to legislative regulations and will not be subject to this Decision".

After receipt of the Decision on interim injunctions from the Court, Mrs. Yeh Kuo Shun-Kuai, as VK H’s legal representative, filed an appeal to the Court and requested the Business Registration Division affiliated to the Department of Planning and Investment of Ho Chi Minh city to restore the Enterprise Registration Certificate (the 2nd change) of VK H.

After receipt of the Decision on change in interim injunctions No. 30/2018/QD-BPKCTT from the Court, Mr. Jong-Suk, Lee – VK H’s legal representative – authorized Mr. Nguyen Ngoc Quy to get involved in this court proceedings and file an appeal against this Decision. The Chief Justice of the People’s Court of Ho Chi Minh city issued his decision to reject such appeal.

After being informed that Mrs. Yeh Kuo, Shun-Kuai was requesting the Business Registration Division controlled by the Department of Planning and Investment of Ho Chi Minh city to restore enterprise registration changed for the second time for VK H, HDT requested the Court in writing to apply an interim injunction to suspend this. Pursuant to Article 137 of the Civil Procedure Code, on February 26, 2018, the Ho Chi Minh city People’s Court issued the Decision on interim injunctions No. 61/2018/QD-BPKCTT temporarily suspending changes in business registration contents that VK H had restored in the Decision No. *790103/17*.

Based on the newly updated address of DWS shown in the Power of Attorney dated October 28, 2016 that DWS granted to its representative to take part in another case that the People's Court of Ho Chi Minh city accepted to try, the People’s Court of Ho Chi Minh city carried out judicial entrustment procedures to inform acceptance of trial for the case, submission of evidence and summons for the meeting for inspection of submission of, access to and public disclosure of evidence, mediation and convening of the preliminary hearing in accordance with laws to the defendant but the defendant did not appear in the court according to the summons; the plaintiff and other litigants failed to negotiate about how the case was settled.   

On expressing its opinions on the request for initiation of the court proceedings made by the plaintiff, VK H supposed that such request was not supported by sound and sufficient grounds because the fact that Property Management Officer sold contributed capital of P&D and LVC to DWS was to offset the amount that P&D and LVC owed to DWS upon DWS’s request. In the Minutes of the meeting of the Board of Directors held on March 23, 2016, one hundred percent of shareholders agreed on acquisition of DWS. As none of shareholders gave dissenting opinions, transfer of capital from P&D and LVC to DWS was not in breach of clause 3 of Article 54 in the 2014 Law on Enterprises and Article 10 in the company’s statutes.

On expressing their opinions on the request for initiation of the court proceedings received from the plaintiff, the Department of Planning and Investment of Ho Chi Minh city supposed that, based on the Enterprise Registration Certificate (the 2nd change) issued by the Business Registration Division, as the Department had issued a new certificate to VK H, actions that the Department applied was conformable to law; in terms of such request, the Department gave no opinion.

On expressing its opinions on the request for initiation of the court proceedings received from the plaintiff, the Business Registration Division controlled by the Department of Planning and Investment of Ho Chi Minh city confirmed that the enterprise had to bear responsibility for accuracy of their enterprise registration application. Pursuant to regulations of law, the Business Registration Division issued modified registration to VK H. After receipt of a police authority’s written document stating that VK H’s registration application was falsified, the Business Registration Division issued the Decision No. *790103/17* to withdraw VK H’s Enterprise Registration Certificate (the 2nd change) and restore the effect of the Investment Certificate No. 411022000109. The representative of the Business Registration Division requested the Court to try the case in absentia, and would take charge of enforcing the Court's legitimate verdict or judgement.

On August 1, 2018, the Ministry of Justice issued the written Notice No. 2508/BTP-PLQT informing the Court according to the Court’s written Request No. 1324/TATP-TKT, issued the Diplomatic Note No. 805/CH-BTP requesting the regulatory authority in South Korea to inform results of judicial trust given by Vietnam. As the Ministry of Justice did not receive any response, the Ministry of Justice had to inform the People’s Court of Ho Chi Minh city.

On October 11, 2018, HDT issued a written request to the Court for addition of the request for initiation of the court proceedings in which the Court was petitioned to decide to grant the company the right to manage VK H as a shareholder in relation to P&D’s and LVC’s contributed capital before a legal heir or beneficiary of these shares of contributed capital was found; concurrently, withdraw the request for initiation of the court proceedings in which the Court was petitioned to declare termination of the business partnership agreement signed between HDT, on one side, and, P&D and LVC, on the other side, on March 10, 2007 and the request for initiation of the court proceedings in which the Court was petitioned to compel each of P&D and LVC to pay HDT USD 1,000,000 as a penalty.

In the preliminary commercial business verdict No. 1500/2018/KDTMST dated October 25, 2018, the People’s Court of Ho Chi Minh city decided: 

To accept the request for initiation of the court proceedings from the N Development and Trading Shareholding Company (briefly called HDT) in which the Court was petitioned not to recognized agreements on transfer of shares in Vietnam - South Korea Housing Planning and Development Limited Liability Company (briefly called VK H) from O&D K Co., Ltd. (briefly called P&D) and Lucky Vietnam Construction Company (briefly called LVC) to DWS Company (briefly called DWS).  Declaring that the agreement on transfer of shares signed between P&D and DWS on March 16, 2016 and the agreement on transfer of shares signed between LVC and DWS on March 16, 2016 on transfer of all of shares owned by P&D and LVC at VK H to DWS was null and void agreements to which involved parties are not bound.

Accepting the request for initiation of the court proceedings from HDT in which the Court was petitioned to revoke its administrative decision on change in share ownership interests at VK H transferred from P&D and LVC to DWS. Declaring that the Minutes of the meeting of the Board of Directors No. HDTV 29-2016 dated March 23, 2016, the Letter of Confirmation No. 01/2016/GXN-VP dated April 20, 2016, the Letter of Confirmation No. 02/2016/GXN-VP dated April 20, 2016 and the Decision No. HDTV 30-2016 dated April 23, 2016, all of which were issued by VK H, were null and void civil transactions which were not in effect; revoking the Enterprise Registration Certificate (the 2nd change) issued by the Business Registration Division under the jurisdiction of the Department of Planning and Investment of Ho Chi Minh city to VK H on April 21, 2016 and the Investment Registration Certificate No. 2162333062 dated April 29, 2016 issued by the Department of Planning and Investment of Ho Chi Minh city.

During the period when there was none of heirs to or beneficiaries of P&D's and LVC's shares at VK H, HDT was given the right to manage the aforesaid shares at VK H like its shareholders. 

In addition, the preliminary hearing court made its judgement on revocation of the decision on interim injunctions, court fees and right of appeal in accordance with laws.

In the Decision No. 40/QDKNPT-VKS-KDTM on appeal for judicial review No. 40/QDKNPT-VKS-KDTM dated November 22, 2018 of the Chief Prosecutor of the high People’s Procuracy of Ho Chi Minh city with respect to appeal for judicial review to be made according to appellate trial procedures, the High People’s Court of Ho Chi Minh city was petitioned to hold an appeal hearing with a view to revoking the preliminary verdict.

On October 29, 2018, Vietnam – South Korean Housing Planning and Development Co., Ltd. (VK H) filed an appeal against the preliminary verdict.

On October 30, 2018, DWS Star Bridge Limited Liability Company filed an appeal against the preliminary verdict.

In the appeal trial, the representative of DWS and VK H retained the appeal requesting revocation of the preliminary verdict and suspension of the lawsuit due to serious violation of law on legal procedures. 

The representative of the Procuracy retained the protest or request for revocation of the preliminary verdict as it seriously violated legal procedures regulations.

In the argument, the person protecting legitimate rights and interests of DWS and VK H argued for the request for revocation of the preliminary verdict and suspension of the case by following reasons:

- HDT was not qualified for initiation of the court proceedings as share transfer agreements signed on March 16, 2016 with appendices were documents created and certified by foreign bodies, but whose Vietnamese copies were not authenticated or certified as true copies, did not obtain the consular legalization, and did not provide documents or other evidence proving capital contribution transactions with foreign companies, which resulted in failure to meet requirements for the lawsuit to be accepted.

- The plaintiff HDT did not have the right to file a case to Vietnamese Court and the Vietnamese Court did not have the right to settle HDT’s claim because terms and conditions of the agreement prescribed the Seoul Central District Court had jurisdiction to try such case. By this fact, according to regulations laid down in Article 472 in the Civil Procedures Code in Viet Nam, the Vietnamese Court had to reject the request for initiation of legal proceedings and suspend settlement of claims related to the aforesaid 2 agreements, and in case of initiation of court proceedings, the Vietnamese Court did try the case ultra vires.

- HDT did not have the right to request revocation of the enterprise registration certificate or the investment registration certificate as there was none of evidence that application for change in corporate registration contents was falsified and, as HDT did not initiate the court proceedings, revocation of the second registration certificate was in breach of the Administrative Procedures Law in Viet Nam and went beyond the request for initiation of the court proceedings.

- HDT did not have the right to request revocation of the minutes of the meeting of the VK-Housing’s Board of Directors on changes in shareholders and share certificates of DWS because the 90-day period expired and such transaction was not civil. However, HDT's statement that the civil transaction was null and void was not correct and went beyond the request for initiation of court proceedings.

- The fact that the court refused to recognize DWS as a shareholder transferring shares of LVC and P&D and having the right to inherit shares was unfounded.

- The fact that, as LVC and P&D only opened bankruptcy procedures, similarly prescribed in the Law on Bankruptcy of Vietnam in Viet Nam, and did not have any evidence that LVC and P&D closed their business, they let VK.Housing temporarily manage their business as a shareholder, was unfounded.   

Besides, as the Preliminary Hearing Court not yet collected documents and evidence related to LVC and P&D declared bankrupt; serving the court’s summons and writ to foreign litigants was illegitimate, the trial in absentia took place and affected their legal procedure rights and obligations.  Therefore, requesting the Trial panel to revoke the preliminary verdict and suspend the case.

The representative of HDT expressed dissent against such revocation as documents and evidence of the request for initiation of court proceedings were already translated and authenticated at the competent authority. Since transfer of DWS’s shares was in breach of the Law on Enterprises and VK.Housing’s statutes, the Court was requested not to recognize such transfer. In this case, the agreement of transfer of shares of DWS had to be recognized by the Vietnamese Court. It was prohibitory that not any foreign documents be accepted to enter Vietnam.

The representative of the Procuracy stated that the legal procedures of the Trial panel and litigants conformed to regulations of the Civil Procedures Code. In terms of the case contents, as the agreement on transfer of shares was signed and carried out abroad by foreign parties, the People’s Court of Ho Chi Minh city was not granted jurisdiction to settle the request:    “refusal to recognize the agreement on transfer of shares”. In addition, since judicial entrustment and collection of insufficient evidence, time limit for the protest made by the foreign party which was 15 days was in breach of legal procedures regulations, the Trial panel was petitioned to accept the appeal by the Trial panel and accept part of the protest of DWS and VK H, and revoke the preliminary verdict to resettle the case.

COURT’S JUDGEMENTS

1. In light of the protest of VK H and DWS:

1.1. Court procedures:

In terms of legal relationships between disputing parties, based on the agreement on transfer of shares from P&D K Co., Ltd. Lucky Vietnam Construction Co. to  DWS star Bridge Limited Liability Company; the minutes of the meeting of the Board of Directors and letter of confirmation of capital contribution, DWS was a new shareholder substituting P&D K Co, Ltd and Lucky Vietnam Construction Co., at VK H Company according to the enterprise registration certificate revised for the second time or the investment registration certificate.

On November 30, 2016, as a shareholder of VK H, HDT Company filed lawsuit against DWS for the dispute related to the agreement on transfer of shares and requested revocation of the enterprise registration certificate revised for the second time, revocation of the investment registration certificate. This was the dispute between shareholders in relation to the transfer of shares and the abovementioned revocations.

Trial court’s determination of the dispute regarding ownership between DWS company and HDT company was not correct. However, during its trial, the trial court’s settlement of the dispute between HDT and DWS on capital contribution and request for revocation of the enterprise registration certificate revised for the second time and the investment registration certificate was relevant to legal relationships in dispute.

During trial, the trial court carried out procedures for serving a valid summons or writ to litigants.  After the preliminary trial, litigants were granted the rights to submit protests according to appellate hearing procedures and appear at the appellate court.

Therefore, determination of the right to participate in the court proceedings, serve a summons or writ to litigants by the trial court did not affect procedural rights and obligations between parties involved, and did not seriously violate regulations on legal proceedings.

1.2. Case contents:

VK H is a joint venture company, is established as a multiple-member limited liability company, is the Vietnamese legal entity entering into the business partnership agreement on March 10, 2007 between 3 companies, including N Development and Trading Company, the foreign party which is P&D K Co., Ltd. and Lucky Vietnam Construction Company, and appoints Mr. Jong-Suk, Lee—Director General – as the legal representative according to the enterprise registration certificate No. 0305339044 issued on August 30, 2007.

VK H company is operated under the investment certificate and is subject to the Law on Enterprises of Vietnam.

According to the Investment Certificate No. 411022000109 dated August 30, 2007 of the Ho Chi Minh City People’s Committee, revised for the first time on December 4, 2009 and issued to the Vietnam – South Korea Nh Planning and Development Co., Ltd. to execute the SAIGON-CASTLE high-rise building project with total investment of VND 1,264,000,000,000 equivalent to USD 79,000,000.  Including total contributed capital accounting for 30%: VND 381,895,214,200 equivalent to USD 23,868,440. This funding was composed of the followings:

- N Development and Trading Joint Stock Company: Land use right making up 20% (VND 76,379,042,840 equaling USD 4,773,688.8) which is the value of land use right of the 29,310 m2 land plot located at Tan My residential zone, Nguyen Luong Bang street, Tan Phu ward, District 7, Ho Chi Minh city.

- Foreign parties: 80% (VND 305,516,171,360 equaling USD 19,94,751.2), including 62% of funding provided by P&D K Co., Ltd. and 18% of funding provided by Lucky Vietnam Construction Co.  Parties contributed their capital within 02 months from August 30, 2007.

The life of the project is 50 years from 200 and the project has been implemented from end of 2007 to April 2010. In fact, by 2016, the project has not been carried out on schedule.

* With respect to transfer of contributed capital:

This conformed to point c of clause 3 of Article 54 in the Law on Enterprises in Viet Nam:

3. Shares of contributed capital was redeemed or transferred under the provisions of Article 52 and 53 in this Law in the following cases:

c) Shareholders were closed or bankrupt.

Clause 1 of Article 53 in the Law on Enterprises regulates that:

“1. Except for the case in Clause 3 Article 52, Clause 5 and Clause 6 Article 54 of this Law, every member of multi-member limited liability company are entitled to transfer part or all of his/her stake to another person as follows:

a) Offer the stakes to other members in proportion to their stakes in the company under the same conditions;

b) Only transfer the stake under the same conditions applied other members prescribed in Point a of this Clause to persons other than members if the members do not buy or do not buy completely within 30 days from the offering date.”

Paragraph 8.6 of Article 8 in the Business Partnership Agreement and VK H’s statutes prescribes that: “All transfers in breach of contractual terms and conditions as well as transfer procedures prescribed in this Agreement shall not be bound to parties or the company".

According to documents provided by foreign parties, joint venture parties, including P&D Co., Ltd. and Lucky Vietnam Construction Co., have already been bankrupt under the judgement of the Court of South Korea issued in 2015.

After bankruptcy, in March 2016, Asset Management Officer in South Korea signed the agreement on transfer of shares of P&D K Co., Ltd. (62%) and Lucky Vietnam Construction Co. (18%) at VK H company to DWS, which was not the company’s shareholder.

Transfer of shares was accepted by parties involved and carried out through the agreement on transfer of shares dated March 16, 2016 which is translated and authenticated in accordance with regulations in force. Therefore, such transfer was considered to check whether it conformed to laws.

In such case, P&D company and LVC company were declared bankrupt and had to transfer their shares without requiring VK H company to buy back their shares and did not offer shares to HDT. This was in breach of VK Housing's statutes and Law on Enterprises, did not constitute conformity to requirements for transfer of shares to non-members, specifically including DWS. Owing to this fact, as they did not have the right to transfer shares, the agreement on transfer of shares dated March 16, 2016 between P&D company on one side and LVC and DWS on the other side became void and null in accordance with regulations laid down in Article 128 in the Civil Code 2005 in Viet Nam, which is Article 123 in the Civil Code 201 in Viet Nam now. 

* With respect to the minutes of the meeting of VK H’s Board of Directors: In the Meeting's Minutes No. HDTV 29-2016 dated March 23, 2016 of VK H’s Board of Directors with the presence of interested parties and the resolution of the Board of Directors approved by all shareholders participating in proportion to their shares in accordance with the company's statutes. 

Regarding the contents, although the agreement to transfer contributed capital of P&D K Co., Ltd. and Lucky Vietnam Construction Company to DWS did not assure conformity to transfer requirements; they did not have the rights to transfer shares, violated VK H's Charter and the Law on Enterprises, VK H's Board of Directors still issued a resolution with the content of accepting DWS as a new shareholder accounting for 80% of the equity, including 62% of P&D and 18% of LVC, and changing the legal representative of VK H Company. In this situation, decisions of the Board of Directors of VK H company at this meeting were not legally valid.

In addition, according to the agreement on transfer of shares of P&D K Co, Ltd and Lucky Vietnam Construction to DWS, although the transfer of shares must “i. apply for endorsement of this agreement from the Court of Vietnam”, the Board of Directors continued to approve their capital contribution. This led to the shareholding status of DWS in breach of the agreement on transfer of shares. 

Therefore, the trial court’s revocation of the Minutes No. HDTV 29-2016 dated March 23, 2016, other decisions of the Board of Directors and certificate of shares of DWS in VK H was based on legal bases and laws.

* In terms of corporate registration changes:

On April 21, 2016, the Business Registration Division controlled by the Department of Planning and Investment of Ho Chi Minh city issued the Enterprise Registration Certificate (the 2nd change) to VK H according to the Minutes of the 29th meeting of the Board of Directors dated March 23, 2016, including the following contents: VK H company changed enterprise registration, substituting P&D K Co, Ltd and Lucky Vietnam Construction company holding 80% of shares by DWS as a shareholder at VK H and substituting Mr. JONG SUK, LEE by Mrs. YEH KUO, SHUN-KUAI, VK H’s legal representative. 

On April 29, 2016, the Department of Planning and Investment of Ho Chi Minh city issued the Investment Registration Certificate No. 2162333062 in place of the Investment Certificate No. 411022000109, certifying the owners of The Mark high-rise building project are HDT and DWS. 

On September 29, 2017, the Business Registration Division affiliated to the Department of Planning and Investment of Ho Chi Minh city issued the Decision No. *790103/17* to revoke the Enterprise Registration Certificate (the 2nd change) of VK H and restored the effect of the Investment Certificate No. 411022000109 with Mr. Jong-Suk, Lee as a legal representative.

Therefore, the decisions on issuance of the enterprise registration certificate revised for the second time and the investment registration certificate were deemed particular in accordance with Article 34 in the Civil Procedures Code. 

Particular decisions on change in enterprise registration and issuance of the investment registration certificate by the Business Registration Division and the Department of Planning and Investment of Ho Chi Minh city were made upon request of VK H company based on contents of the minutes of the 29th meeting of the Board of Directors dated March 23, 2016 with changes in enterprise registration agreed by the Board of Directors on the basis of the agreement on transfer of shares from P&D K Co, Ltd. and Lucky Vietnam Construction company to DWS.

However, VK H's Board of Directors' approval of changes in enterprise registration was not correct as that agreement did not form good grounds for such transfer, did not bind involved parties and did not specify any right and obligations of contracting parties.  Therefore, the Minutes No. HDTV 29-2016 dated March 23, 2016 of VK H‘s Board of Directors, containing substituting DWS as a new shareholder, transfer of shares (80%), including 62% of P&D and 18% of LVC, and change in the legal representative of VK H, was not legally valid.

On September 29, 2017, the Business Registration Division’s withdrawal of enterprise business certificates revised for the 2nd time was conformable to clause 1 of Article 63 in the Government’s Decree No. 78/2015/ND-CP dated September 14, 2015 on enterprise registration; point a of clause 1 of Article 211 in the 2014 Law on Enterprises.

In the Notice No. 5662 dated August 26, 2019 of the Business Registration Division – the Department of Planning and Investment of Ho Chi Minh city - regarding enterprise registration of VK H Co., Ltd., the Business Registration Division was not yet implementing the Decision on withdrawal of the registration for change in enterprise (the 2nd time) because they expected the Court's decision and obeyed it.  Therefore, the trial court's revocation of the enterprise registration certificate revised for the second time was founded.

According to such decision, the trial court's decision on revocation of the minutes, the Board of Directors’ resolution dated March 23, 2016 and the certificate of share of 80% of DWS’s capital contribution at VK H company was conformable to Article 8 of VK H’s statutes and clause 3 of Article 54 and 63 in the Law on Enterprises 2014; the trial court’s decision on revocation of the investment registration certificate dated April 29, 2016 was founded and legitimate.   

2/ Considering the appeal by the People’s High Procuracy of Ho Chi Minh city:

In terms of authority, as P&D K Co, Ltd and Lucky Vietnam Construction company were foreign involved parties establishing VK H Joint Venture Company to carry out the SAIGON-CASTLE high-rise building Project (now The Mark building), the dispute over the agreement on transfer of shares of P&D K Co, Ltd and Lucky Vietnam Construction company in VK H to DWS was a civil case related to rights over property which was real estate in Vietnam. Besides, according to agreements laid down in clause 5 of Article 3 in the agreement on transfer of shares, the transferee had to carry out necessary procedures, such as "i. applying for endorsement of this agreement from the Court of Vietnam". Hence, the Court of Vietnam had the particular jurisdiction over settlement of this dispute in accordance with point a of clause 1 of Article 470 in the Civil Procedures Code. 

With respect to the right to file the appeal, the decision on modification of the preliminary verdict No. 541/2018/QD-SCBSBA dated November 22, 2018 added the sentence “DWS has the right to file an appeal within 12 months after the Court’s issue of its judgement” and DWS managed to file its appeal within this duration according to the appeal letter dated October 30, 2018. This did not cause loss of DWS's right to file an appeal.

3/ Authorizing the rest of other shareholders in HDT to manage VK H company: 

P&D Co., Ltd. and Lucky Vietnam Construction Co. have already been bankrupt under the judgement of the Court of South Korea issued in 2015.

The remaining amount of shares of these companies in VK H company were disposed of in accordance with Article 52, 53 and 54 in the Law on Enterprises. The action taken to dispose of these shares included the request made by P&D K Co, Ltd and Lucky Vietnam Construction company for VK H’s redemption or offering of shares to other shareholders.

Because VK H company had only one shareholder, it did not meet requirements for continuation of its business according to its business type. The trial court’s decision to temporarily authorize HDT company as a shareholder to exercise the right to manage VK H company during the period of looking for heirs or beneficiaries of shares of P&D K Co, Ltd and Lucky Vietnam Construction was proper.

By the aforesaid reasons, the Trial panel rejected the appeal of DWS, VK H and the protest made by the Chief Prosecutor of the People’s High Procuracy of Ho Chi Minh city, and maintained the trial court's verdict.

DWS company and VK H company must pay all legal costs incurred from trial for the appeal against the trial court’s verdict on the commercial business case in accordance with laws.

In light of the aforesaid;

Pursuant to point a of clause 1 of Article 87 in the 2015 Civil Procedures Code;

HEREBY DECIDES

Reject the appeal of DWS company and VK H company, the Protest No. 40/QDKNPT-VKS-KDTM dated November 22, 2018 of the Chief Prosecutor of the People’s High Procuracy of Ho Chi Minh city, and retain the trial court’s verdict.

- Accept the request for initiation of the court proceedings from the N Development and Trading Shareholding Company (briefly called HDT) in which the Court was petitioned not to recognized agreements on transfer of shares in Vietnam - South Korea Housing Planning and Development Limited Liability Company (briefly called VK H) from O&D K Co., Ltd. (briefly called P&D) and Lucky Vietnam Construction Company (briefly called LVC) to DWS Company (briefly called DWS). Declaring that the agreement on transfer of shares signed between P&D and DWS on March 16, 2016 and the agreement on transfer of shares signed between LVC and DWS on March 16, 2016 on transfer of all of shares owned by P&D and LVC at VK H to DWS was null and void agreements to which involved parties are not bound.

- Accepting the request for initiation of the court proceedings from HDT in which the Court was petitioned to revoke its administrative decision on change in share ownership interests at VK H transferred from P&D and LVC to DWS. Declaring that the Minutes of the meeting of the Board of Directors No. HDTV 29-2016 dated March 23, 2016, the Letter of Confirmation No. 01/2016/GXN-VP dated April 20, 2016, the Letter of Confirmation No. 02/2016/GXN-VP dated April 20, 2016 and the Decision No. HDTV 30-2016 dated April 23, 2016, all of which were issued by VK H, were null and void civil transactions which were not in effect; revoking the Enterprise Registration Certificate (the 2nd change) issued by the Business Registration Division under the jurisdiction of the Department of Planning and Investment of Ho Chi Minh city to VK H on April 21, 2016 and the Investment Registration Certificate No. 2162333062 dated April 29, 2016 issued by the Department of Planning and Investment of Ho Chi Minh city.

- During the period when there was none of heirs to or beneficiaries of P&D's and LVC's shares at VK H, HDT was given the right to manage the aforesaid shares at VK H like its shareholders.

- DWS company and VK H company must pay all legal costs incurred from trial for the appeal against the trial court’s verdict on the commercial business case in accordance with laws. Each must pay VND 2,000,000 according to the receipts of advance payment on legal cost No. 0045668 dated November 16, 2018 and No. 0045615 dated November 8, 2018 issued by the Civil Enforcement Department of Ho Chi Minh city.

- Other parts of the trial court's verdict not subject to such appeal or protest shall be in force from the date of expiry of such appeal or protest.

- The Appellate Court’s verdict shall enter into force from the date of announcement of this verdict.


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Verdict No. 52/2019/KDTMPT dated September 11, 2019 regarding dispute over corporate and project ownership under a business partnership agreement

Số hiệu:52/2019/KDTMPT
Cấp xét xử:Phúc thẩm
Agency issued: Tòa án nhân dân cấp cao
Field:Kinh tế
Date issued: 11/09/2019
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