Can public companies lend money to shareholders that are individuals in Vietnam?
Can public companies lend money to shareholders that are individuals in Vietnam? What are regulations on responsibility for honesty and prevention of conflict of interest of executive officers in public companies in Vietnam?
May I ask if an individual can borrow money from a public company? In public companies, are the executive officers bound by any responsibilities?
Please advise.
1. Can public companies lend money to shareholders that are individuals in Vietnam?
According to the provisions of Article 293 of Decree 155/2020/ND-CP, transactions shareholders, executive officers and their related persons are as follows:
1. A public company must not provide loans or guarantee for shareholders that are individuals and their related persons unless the public company is a credit institution.
2. A public company must not provide loans or guarantee for shareholders that are organizations and their related persons, except in the following cases:
a) The public company is a credit institution;
b) The shareholder is a subsidiary company whose shares/stakes are not held by the State and has contributed capital in/purchased shares of the public company before July 01, 2015.
3. A public company must not provide loans or guarantee for related persons of shareholders that are organizations, except in the following cases:
a) The public company is a credit institution;
b) The public company and the organization that is a relate person of the shareholder are companies in the same corporation or group, and the transactions is approved by the GMS or the Board of Directors as prescribed by the company's charter;
c) Other cases prescribed by law.
4. A public company may only carry out the following transactions after they are approved by the GMS:
a) Provision of loans or guarantees for members of the Board of Directors, the Board of Controllers, the Director/General Director, other executive officers that are not shareholders, organizations and individuals that are related to them;
Provision of loans or guarantees for organizations that are related to members of the Board of Directors, the Board of Controllers, the Director/General Director, other executive officers of the public company that are in the same corporation or group as the public company is subject to approval by the GMS or the Board of Directors as prescribed by the company's charter;
b) Any transaction that is worth at least 35% of the total assets written in the latest financial statement or any transaction that causes the total transaction value in 12 months from the date of the first transaction reach at least 35% of the total assets written in the latest financial statement, or a smaller ratio specified in the company's charter, between the public company and one of the following entities:
- Members of the Board of Directors, members of the Board of Controllers, the Director/General Director, other executive officers and their related persons;
- Shareholders, authorized representatives of shareholders that hold over 10% of the company’s ordinary shares and their related persons;
- Enterprises that are related to the entities specified in Clause 2 Article 164 of the Law on Enterprises;
c) Loan or sale of assets that exceed 10% of the total assets in the latest financial statement between the company and any shareholder that is holding at least 51% of voting shares of that shareholder’s related person.
5. The Board of Directors shall consider approving the contracts and transactions specified in Point c Clause 4 of this Article if they are worth less than 35% of the total assets in the latest financial statement, or a smaller ratio or value specified in the company's charter.
A public company may not provide loans or guarantee for shareholders that are individuals and their related persons unless the public company is a credit institution in Vietnam.
Therefore, in case a public company is a credit institution, it is possible to lend money to individual shareholders.
2. What are regulations on responsibility for honesty and prevention of conflict of interest of executive officers in public companies in Vietnam?
Pursuant to the provisions of Article 291 of Decree 155/2020/ND-CP, responsibility for honesty and prevention of conflict of interest of executive officers in public companies is prescribed as follows:
1. Members of the Board of Controllers, the Board of Controllers, Director/General Director and other executive officers shall disclose their relevant interests in accordance with the Law on Enterprises and relevant legislative documents.
2. Members of the Board of Directors, the Board of Controllers, the Director/General Director, other executive officers and their related persons may only use the information obtained from their positions to serve the interests of the public company.
3. Members of the Board of Controllers, the Board of Controllers, Director/General Director and other executive officers shall send written notices to the Board of Directors and the Board of Controllers of the transactions between the public company, subsidiary companies, companies over 50% of charter capital of which is held by the public company with them or with their related persons as prescribed by law. The public company shall disclose information about the transactions that are approved by the GMS or the Board of Directors in accordance with regulations of the Law on Securities on information disclosure.
4. Members of the Board of Controllers must not vote on the transactions that bring interests to themselves or their related persons as prescribed by the Law on Enterprises and the company's charter.
5. Members of the Board of Directors, the Board of Controllers, the Director/General Director, other executive officers and their related persons must not use or reveal internal information for carrying out relevant transactions.
Therefore, executive officers in Vietnam must comply with the responsibilities specified above.
Best Regards!
