Whether to protect the interests of small shareholders or not?

The Enterprise Law (amended) will expand the object of having access to in-depth information of enterprises, participate in the operation process of enterprises to protect the interests of small shareholders.


At the seminar "Comments on the Investment and Enterprises bill (Revised)" organized by the Investor Magazine, Dr. Phan Duc Hieu, Deputy Director of the Central Institute for Economic Management (MPI) - the agency assigned to comment and amend the Enterprise Law - shared about the important changes of the Enterprise Law (amended) is coming soon.


Mr. Hieu said, the Law on Enterprises was born in 2014 has created a breakthrough in establishing new businesses and expanding business activities. As of 2018, the whole country had 131,275 newly established enterprises with a registered capital of up to 1,478 million billion dong. This figure is 1.75 times higher than the number of newly established enterprises and 3.4 times of the newly registered capital compared to 2014 when the Enterprise Law has not yet taken effect.


However, after four years of application, the Enterprise Law also revealed many shortcomings, no longer suitable with reality. Some contents need to be completed to improve the quality of corporate governance organization according to international practices, increase the safety level for shareholders and investors to improve the quality of the business environment.


Sharing about the major changes in the Enterprise Law, Mr. Hieu said there were five major changes.


The first is to simplify procedures for market entry. Secondly, improving the legal framework to protect investors. Thirdly, improve the efficiency of governance and state-owned enterprises' operation. The fourth is to improve the legal framework for household businesses. Finally, it is more convenient to reorganize the business.


In particular, it is worth noting that the amended Enterprise Law may abolish and change some regulations related to shareholder rights, expand the object of shareholders to access information about the company's activities, and to participate important decisions of the company to protect the interests of small shareholders.


For example, Clause 2, Article 114 and Clause 4, Article 149 of the Law on Enterprises require shareholders to own at least 10% of the shares and within six consecutive months to have the right to nominate candidates to the Board of Directors. treatment.


According to Mr. Hieu, this requirement is too high compared to reality. Therefore, the amended Enterprise Law can eliminate the requirement of owning for six consecutive months and shareholders only need to own at least 1% of the shares to have the above rights.


“Currently, people do not trust the head of the business, so changing the rules to protect the interests of small shareholders is necessary to raise capital in the population. Along with that, the change of regulations will help us stay ahead of the regional countries to protect the interests of small shareholders”, Mr. Hieu said.


There are many mixed opinions


Around the amendment of the above provisions in the Enterprise Law, there are many conflicting opinions


On the business side, the representative of Pacific Group, Mr. Phan Le Hoang said that it is appropriate to remove the condition of owning shares for a continuous period of at least six months, because he is a shareholder of the company. of course shareholders must immediately exercise their rights regardless of old or new shareholders.


However, according to Mr. Hoang, the regulations on reducing the ownership ratio of shareholders or groups of shareholders from 10% to 1% are inappropriate, failing to ensure a competitive environment for businesses.


“Protecting the interests of small shareholders is the right thing to do, but to stabilize the company, there must still be a certain percentage to vote by the majority, to ensure the rights and responsibilities of major shareholders. Therefore, the ownership rate of 10% of the total number of shareholders or a group of shareholders or more shall be maintained according to the old regulations” said the representative of Pacific Group.


Sharing views on this issue, Mr. Nguyen Thanh Viet, President of Intracom, said that financial transparency and reporting information to shareholders is very important for businesses. However, corporate governance, protecting business secrets is also very important.


According to Mr. Viet, reducing the ownership rate of shareholders who have the right to access information and intervene in the operations of the enterprise may cause competitors to buy shares and make it difficult for businesses.


"A 1% stake in an enterprise is not large and it may make it difficult for businesses, along with the cost of corporate governance will increase" Viet said.


Agreeing with the drafting of the amended Enterprise Law, Mr. Dau Anh Tuan, head of the Legal Department, VCCI said that in corporate governance, the current rights of small shareholders who are less interested. According to OECD recommendations, it is required to protect shareholders, including small shareholders. In recent years, we have been ranked very low in protecting shareholder rights according to the World Bank (WB).


According to Mr. Tuan, protecting the rights of small shareholders will of course increase administrative costs. Japan also has consequences, like harassment by shareholders. However, this phenomenon is not common in Vietnam.


"It is appropriate to lower the percentage of shares to have the right to intervene in the operation of the business, but the ratio should be considered", Mr. Tuan said.


Mr. Tuan said that 1% is a relatively good practice to encourage people to invest in business. “When shareholders have 1%, their interests have also been attached to the business. And the decline in this trend will make the ranking of minority shareholders' protection in Vietnam soar as assessed by the World Bank”.


According to Dinh Vu