Assignment about the comparison between g20 oecd principles of corporate governance and corporate law 2005

Name Trần Thanh Tùng Student code 11154840 Assignment about the comparison between G20/OECD Principles of corporate governance and corporate law (2005) Contents I, Introduction 2 II, Content 3 Chapter[.]

Name: Trần Thanh Tùng.

Student code: 11154840

Assignment about the comparison between G20/OECD Principles of

corporate governance and corporate law (2005)

Contents

I, Introduction 2

II, Content 3

Chapter I: Ensuring the basis for an effective corporate governance framework 3

Chapter II The Rights and equitable treatment of shareholders and key ownership functions 5

Chapter III : Institutional investors, stock markets and other intermediaries 8

Chapter IV The role of stakeholders in corporate governance 11

Chapter V Disclosure and transparency 14

Chapter VI The Responsibilities of the Board 17

III, Conclusion 24

I, Introduction

“The lack of corporate governance practice in the private sector is appalling.“ - Judge DenisDavis According to his mentioned, the corporate governance is really important to the success ofcompany Corporate governance represents a set of principle, system and processes by which acompany is governed It provides guidelines on how a company can be directed and controlled so

as to reach its goals and objectives and add value, benefit to a company, all of which is in theinterest of stakeholders Nevertheless, good corporate governance isn’t inclusive everything It ismeans to make market confidence and business integrity which is necessary for companies thatneed access to equity capital for long term investment This is significant for future orientedgrowth companies and to balance any increase in leveraging The OECD Principles of corporategovernance provide a timely and tangible contribution to support investment as a forceful driver

of growth The corporate governance framework in Vietnam is at an early stage of development,and relevant laws and regulations are being developed The informal sector is still informal inthat the informal securities market is much larger than the formal one, and the state maintains asignificant shareholding equitized enterprises The capacity and resources of agencies andorganizations responsible for management, enforcement and market development are limited

The principles are intended to help policy makers evaluate and improve the legal, regulatory andinstitutional framework for corporate governance, with a view to support economic efficiency,sustainable growth and financial stability This primarily achieved by providing shareholders,board members and executives as well as financial intermediaries and service providers with theright incentives to perform their roles within a framework of checks and balance

So, with the corporate law in 2005 and OCED Principles, we have a comparison between OECDPrinciples of Corporate Governance and Corporate Law (2005) to find out some similarity anddifference, This report provides a basis for Vietnam to assess compliance with corporategovernance practices in relation to OECD corporate governance principles This report describescurrent practices and issues policy recommendations in six areas: (i) corporate governanceframework; (ii) rights of shareholders; (iii) equal treatment with shareholders; (iv) the role ofstakeholders in corporate governance; (v) disclosure and transparency; and (vi) theresponsibilities of the Board

The report shows that Vietnam has made significant progress in setting up a corporategovernance framework However, there are still some big challenges ahead These challengesinclude ensuring the implementation of new legal changes, strengthening the capacity of thesecurities market regulator, enforcing compliance with the law developing the framework andstandards for the informal securities market, raising awareness and training board members oncorporate governance, and encouraging quality, timely and easy information to approach.

II, Content

The revised Principles maintain many of the recommendations form earlier versions ascontinuing essential components of an effective corporate governance framework They alsointroduce some new issues and bring greater emphasis or additional clarity to others While some

of the principles may be more appropriate for larger than for smaller companies, it’s suggestedthat policymakers may wish to raise awareness of good corporate governance for all companies

This section assesses Vietnam's compliance with each of the OECD Corporate GovernancePrinciples, which is relied on the corporate law presented in 2005 Policy recommendations can

be made if a principle is not fully complied

The Principles provide guidance through recommendation across 6 chapters These aresupplemented by annotations that contain commentary on the Principles and are intended to helpreaders understand their rationale

Chapter I: Ensuring the basis for an effective corporate governance framework.

The corporate governance framework should promote transparent and fair market, and theefficient allocation of resources It should be consistent with the rule of law and support effectivesupervision and enforcement

A The corporate governance framework should be developed with a view to its impact onoverall economic performance, market integrity and the incentives it creates for marketparticipants and the promotion of transparent and well-functioning

Listed companies operate in the form of joint stock companies The majority of listedcompanies are "equitized" SOEs, of which the state still holds a majority stake In 2005,the average share of state ownership in listed companies was approximately 26% 12Foreign investors, mostly institutional investors, averaged 17% ownership Ownership offoreign investors in statutory listed companies is limited to 49% In some companies,foreign investors own up to 30% The remaining shares in listed companies are held byindividual investors and institutional investors, but the main problem is the ability offoreign companies to acquire and control one company Local companies are verylimited This may limit some of the potential benefits of improving corporate governanceand performance of listed companies through the acquisition of foreign business,technology and management capabilities.

B The legal and regulatory requirements that affect corporate governance practices in ajurisdiction should be consistent with the rule of law, transparent and enforceable

Listing regulations Decree No 144/2003 / ND-CP sets forth regulations on issuance ofsecurities to the public, continuous obligations of listed companies, regulations relating tosecurities transactions and the provision of securities and services related to the securitiesmarket in the territory of the Socialist Republic of Vietnam The issuance of governmentbonds, local government bonds, securities of credit institutions, shares of equitized SOEs andconvertible bonds of foreign-invested enterprises The company is not regulated by Decree144/2003 / ND-CP.15

In this context, these companies are exempted from the obligation to report and discloseinformation enforced by the SSC On the unofficial market has not been managed, thebenefits of

Minority shareholders are not effectively protected to avoid being abused by issuers or majorshareholders

According to §30 of Decree 144/2003 / ND-CP, the regulations on listing include:

 A joint stock company with a minimum charter capital of VND 5 billion;

 Have a healthy financial situation, no overdue debt over one year;

 The result of business operation is profitable for at least the last two years, there is noaccumulated loss;

 The board of directors, board of directors and board of supervisors of the companyare committed to hold at least 50% of their shares in the company at least 3 yearsfrom the date of listing, regardless of the state capital they are in may be authorized

D Stock market regulation should support effective corporate governance

E Supervisory, regulatory and enforcement authorities should have the authority, integrityand resources to fulfill their duties in a professional and objective manner Moreover,their rulings should be timely, transparent and fully explained

F Cross-border co-operation should be enhanced, including through bilateral andmultilateral arrangements for exchange of information

Chapter II The Rights and equitable treatment of shareholders and key ownership functions

G20/OECD Principles of corporate governance Enterprises Law 2005 (Viet Nam)

2 Convey or transfer shares The shares are freely transferable,

sufficiently informed about,

have the right to approve or

participate in, decisions

concerning fundamental

corporate changes

1 Amendments to the statutes, or articles of incorporation or similar governing documents of the company

Clause 2 Article 104 Passing of resolutions of General Meeting of

Clause 3 Article 104 Passing of resolutions of General Meeting of

Shareholders

C Shareholders should have

the opportunity to

participate

effectively and vote in

general shareholder meetings

1 Shareholders should be furnished with sufficient and timely information

concerning the date, location and agenda of general meetings

Article 100 Invitations to General Meeting of Shareholders Article 99 Program and agenda of General Meeting of Shareholders

2 Processes and procedures for

general shareholder meetings

3 Shareholders should have the

opportunity to ask questions to the

board, including questions relating

to the annual external audit, to

place items on the agenda of

general meetings, and to propose

resolutions, subject to reasonable

limitations

Right to ask questions: The law does not provide for this right of

shareholders

4 Effective shareholder participation

in key corporate governance

decisions, such as the nomination

and election of board members,

should be facilitated

Article 101 Right to attend GeneralMeeting of ShareholdersClause 2 Article 79 Rights of ordinary

shareholders

5 Shareholders should be able to vote

in person or in absentia, and equal

effect should be given to votes

whether cast in person or in

absentia

Enterprise Law recognizes both forms

of direct meetings or approvalauthorized person, allow voting by mail

or by remote voting, voting through theGeneral Meeting of Shareholders

6 Impediments to cross border voting

should be eliminated

Not mention

D Shareholders, including

institutional shareholders,

should be allowed to consult

with each other on issues

concerning their basic

shareholder rights

Article 78 Classes of shares

Chapter III : Institutional investors, stock markets and other intermediaries.

The corporate governance framework should ensure equal treatment for all shareholdersincluding minority shareholders and foreign shareholders Every shareholder should have theopportunity to make an effective complaint when their rights are violated

A All shareholders of the same series of a class should be treated equally

1 Within any series of a class, all shares should carry the same rights All investors should beable to obtain information about the rights attached to all series and classes of shares before theypurchase Any changes in voting rights should be subject to approval by those classes of shareswhich are negatively affected

Joint stock companies are also required to submit the approved annual report to the businessregistry Individuals and organizations have the right to view and copy annual reports maintained

by the business registrar For unlisted companies, only shareholders holding more than 10% ofshares have the right to obtain information from the six-month financial statements (six-monthreport not approved at the General Meeting of Shareholders and not audited, and the quality ofthis report is not high) (Article 79 Corporate Law 2005)

When a stock is offered to the public, a company must disclose information about itsshareholding structure, stating the types of shares Shares must be registered; Registered contentincludes information related to the type of stock, and shareholders are aware of this information(Article 79 Corporate Law 2005)

Adoption of changes in voting rights adversely affects the class of shares Corporate Law 2005does not have clear regulations This is a serious violation of this principle.

2 Minority shareholders should be protected from abusive actions by, or in the interest of,controlling shareholders acting either directly or indirectly, and should have effective means ofredress

- Ability to convene: The law stipulates that a group of shareholders owning 10% of shares shall

be entitled to convene the General Meeting of Shareholders.(Article 79 Corporate Law 2005)

- Ability to check documents: The 2005 Corporate Law provides for the right to view and extractinformation relating to the list of shareholders entitled to vote, the charter of the company andminutes of the general meeting of shareholders and resolutions adopted by the General Meeting

- Possibility to sue to cancel the decision of the General Assembly of Shareholders: Under the

2005 Corporate Law, minority shareholders have the right to request the court to revoke anyresolution violating company regulations

- Ability to request the cancellation of resolutions of the General Meeting of Shareholders:Shareholders have the right not to admit the resolutions of the General Meeting of Shareholders(Article 107 Corporate Law 2005)

- The right to postpone the General Meeting of Shareholders Corporate Law 2005 is not clearlydefined

- Appeal in court: According to the Law on Enterprises, if the list of shareholders has the right tovote incorrectly, shareholders may request the company correct Shareholders may request

economic court or arbitrators to consider and cancel invalid resolutions approved by the GeneralAssembly of Shareholders (Article 107 Corporate Law 2005)

3 Votes should be cast by custodians or nominees in a manner agreed upon with the beneficialowner of the shares

4 Impediments to cross border voting should be eliminated

Since the General Meeting of Shareholders is only informed 7 days in advance of the CorporateLaw 2005, foreign investors have great difficulty in exercising their voting rights.(Article 100Corporate law 2005)

5 Processes and procedures for general shareholder meetings should allow for equitabletreatment of all shareholders Company procedures should not make it unduly difficult orexpensive to cast votes

B: Insider trading and personal trafficking should be prohibited.

Review: Basic not complied

Basic rules on insider trading The 2006 Securities Act has no general provision prohibitingtrading based on information that is not disclosed to the public Disclosure of insider trading.Transactions of internal employees are allowed on condition that they report to SSC, STC andlisted companies Internal staff must report to the SSC at least 10 working days prior to thetransaction date and must notify HOSTC and the company within 3 days of the transaction beingcommenced.63 Penalties civil / administrative Violation of this rule will result in penalties.64There is no criminal law in the Penal Code relating to insider trading, but provisions relating togeneral offenses may be issued to apply

C: Members of the Board of Directors and senior management must disclose to the Board

of Directors that they have significant benefits in any transaction or matter affecting the company whether directly, indirectly or on behalf of a third party,

Regulations on disclosure of information on transactions with related parties According to thenew provisions of the Enterprise Law 2005, members of the Board of Directors, members of theSupervisory Board, the General Director and other managers of the company must report to thecompany within 7 days of all benefits They may put them in a conflict of interest with thecompany.66 The information that must be reported includes: name, address, business registrationcertificate, business sector and stockholding percentage the part of the officer or person involvedwith this object.

Regulations on approval of transactions with related parties / regulations of the Board ofDirectors / General Assembly of Shareholders

The law stipulates that transactions with related parties must be approved at the General Meeting

of Shareholders when the value of transactions exceeds 50% of the total value of the company'sassets for unlisted companies, and 20% for listed companies

There are some regulations on conflict of interest and using of business opportunities Conflicts

of interest must be reported to the company, reported at the annual meeting of shareholders andrecorded in the company's books Shareholders, members of the board of directors, members ofthe board of supervisors, and general director (executive director) have the right to review thecontents of the reported information Company employees are not allowed to use the businessopportunities of the company to serve their own interests

Chapter IV The role of stakeholders in corporate governance

The corporate governance framework should recognize the rights of stakeholders as defined bylaw or under bilateral agreements, encouraging the company to actively cooperate withstakeholders in asset creation, employment and financial stability for businesses

A The rights of stakeholders with respect to the law or under bilateral agreements must be respected

Review: Partially compliant

According to the 2005 Enterprise Law and the Model Charter 2002, stakeholders, includingemployees, unions, suppliers, or creditors, are not involved in the enterprise's internal decision-making process Stakeholders in Vietnam may include party organizations, women's unions,previous line ministries, and people's committees These agencies have an influence on thecompany's decision A list of relevant stakeholder rules No codes of conduct orrecommendations for dealing with stakeholders have been developed At present, the level ofawareness of corporate social responsibility is low Labor relations are governed by the LaborCode Trade unions have significant influence in state-owned enterprises and former SOEs.

B When the interests of interested parties are protected by law, interested parties must have the opportunity to file a complaint when their rights are violated.

Workers and creditors can file a lawsuit Workers are protected under the Labor Code, collectivebargaining agreement (if any) and Bankruptcy Law The creditors are protected under the CivilProcedure Code and the Bankruptcy Law

In practice, however, there are few cases that could support the effectiveness of existingmechanisms

C The mechanism to improve the efficiency of workers' participation should be allowed to

be built.

There are some regulations on the right to buy shares of employees There are no officialregulations In fact, some companies are unanimously approved by the shareholders to issueconvertible preferred stock as a bonus to the management or right to purchase shares of theemployees This method has become more popular over the last two years

D When shareholders participate in corporate governance, they must have access to appropriate, adequate and reliable information in a timely and regular manner.

The law does not provide for the right of specific stakeholders to have access to information.Stakeholders are not allowed access to the information of the business other than the informationdisclosed to the public Creditors may have special access to information under the terms of the