Do holders of participating preference shares in Vietnam have the right to vote, participate in the General Meeting of Shareholders?

Do holders of participating preference shares in Vietnam have the right to vote, participate in the General Meeting of Shareholders? (Internet image)

Regarding this matter, LawNet would like to answer as follows:

1. Do holders of participating preference shares in Vietnam have the right to vote, participate in the General Meeting of Shareholders? 

According to Article 117 of the Law on Enterprises 2020, regulations on participating preference shares and rights of their holders in Vietnam are as follows:

- Participating preference shares are shares that provide their holders with higher dividends than those of ordinary shares or with stable annual dividend. Annual dividend includes fixed dividend and extra dividend. Fix dividends do not depend on the company’s business performance. Fix dividend and method for determination of extra dividend shall be written on the certificates of participating preference shares.

- Holders of participating preference shares have the rights to:

+ Receive the dividend prescribed in Clause 1 of Article 117 of the Law on Enterprises 2020;

+ Receive part of the company’s remaining assets in proportion to their holdings in case the company is dissolved or goes bankrupt after the company’s debts and redeemable preference shares are fully paid;

+ Other rights of ordinary shareholders, except the cases specified in Clause 3 of Article 117 of the Law on Enterprises 2020;

- Holders of participating preference shares do not have the right to vote, participate in the General Meeting of Shareholders (GMS), nominate candidates for the Board of Directors and the Board of Controllers, except the cases specified in Clause 6 Article 148 of the Law on Enterprises 2020.

A resolution on adverse changes to rights and obligations of preference shareholders may only be ratified if it is voted for by a number of preference shareholders that participate in the meeting and hold at least 75% of the same kind of preference shares. In case of questionnaire survey, it needs to be approved by a number of preference shareholders that holding at least 75% of the same kind of preference shares.

2. Does the company have the right to repurchase dividend preference shares that have been sold according to the law in Vietnam?

According to Article 133 of the Law on Enterprises 2020, the company is entitled to repurchase up to 30% the total ordinary shares, all or part of the participating preference shares that have been sold. To be specific:

- The Board of Directors is entitled to decide repurchase of up to 10% of the total shares of each type which are sold within 12 months. Other cases of share repurchase shall be decided by the GMS;

- The Board of Directors is entitled to impose the repurchase price. The repurchase price for ordinary shares must not exceed their market price at the time, except the cases specified in Clause 3 of Article 133 of the Law on Enterprises 2020. Repurchase prices of other types of shares must not be lower than their market prices unless otherwise prescribed by the company's charter or agreed upon by the company and relevant shareholders;

- The company may repurchase shares of each shareholder in proportion to their holding in the company as follows:

+ The notification on the company’s decision to repurchase shares shall be sent by express mail to all shareholders within 30 days from its ratification date. The notification shall contain the company’s name and headquarters address, total number and types of shares repurchased, repurchase prices or pricing rules; procedures and deadline for paying, procedures and deadline for shareholders to sell their shares to the company;

+ The shareholders that agree to sell back their shares to the company shall send a written agreement to the company by express mail within 30 days from the notification date. The agreement shall contain the full name, mailing address, nationality, legal document number if the shareholder is an individual; name, EID number or legal document number, headquarters address if the shareholder is an organization; the quantity of shares being held, quantity of shares to be sold; method of payment, signature of the shareholder or the shareholder’s legal representative. The company only buys back the shares within this time limit.

To Quoc Trinh

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