Summary of Doctoral thesis: Laws on protecting minority shareholders of joint stock company in Vietnam - A comparative study with Japan and the United States of America

The research scope of the dissertation within the scope of LOE 2014 and other relevant legal documents has a comparative comparison with some regulations of Japan and the United States on the rights of MIS, the responsibility of the manager of JSC.

VIETNAM ACADEMY OF SOCIAL SCIENCES

GRADUATE ACADEMY OF SOCIAL SCIENCES

PHAN HOANG NGOC

LAWS ON PROTECTING MINORITY SHAREHOLDERS

OF JOINT STOCK COMPANY IN VIETNAM: A COMPARATIVE STUDY WITH

JAPAN AND THE UNITED STATES OF AMERICA

Major: Economic Law Code: 9 38 01 07

SUMMARY OF DOCTORAL THESIS

Hanoi, 2018

THE THESIS IS COMPLETED AT

GRADUATE ACADEMY OF SOCIAL SCIENCES

Supervisor: Prof PhD Hoang The Lien

Reviewer 1: Assoc Prof PhD Nguyen Duc Minh

Reviewer 2: Assoc Prof PhD Duong Dang Hue

Reviewer 3: Assoc Prof PhD Le Thi Thu Thuy

The thesis was defended at the Council level of thesis assessment of the Graduate Academy of Social Sciences At:… hours… , Dated months 2018

the dissertation is publicly in:

- National Library

- Library of the Academy of Social Sciences under the Vietnam Academy of Social Sciences

INTRODUCTION

1 The necessity of the topic

Regarding the practice of law enforcement, the violation of rights of minority

shareholders (MIS) is relatively common, large shareholders often have conditions to violate the rights of MIS

MIS often have less opportunity to participate in management, deciding important issues of the company The rights of MS on property, corporate governance, access to information have not been fully enforced by managers or violated, treated unfairly by large shareholders

In terms of meeting the requirements of integration, compared with the laws

of many countries, especially developed countries such as Japan, the United States, the provisions on the protecting minority shareholders (PMIS) of the joint stock company (JSC) in our country - Vietnam are still incompatible.The protection mechanism is also not effective, especially, the dealing of violations of the rights of investors - minority shareholders

The above-mentioned practices show that it is necessary to further improving the laws and mechanism on protecting the interests of MS in Vietnam, and comparing, referencing the lesson, practice of foreign laws, including Japan and the United States

2 Purposes and research tasks of the thesis

Purpose of the study The dissertation reviews and evaluates the results of

research on theory and law on the protection of Vietnamese archeology with reference

to the law of Japan and the United States Through that proposal to improve the law of protection

Research tasks, the dissertation will deploy the following tasks: Firstly, the

dissertation clarifies the fundamental theoretical issues on protecting MIS (PMIS); Secondly, the dissertation conducted on the analysis and evaluation of minority shareholders' rights in Vietnam, comparing with the laws of Japan and the US; clarifies similarities and differences; Thirdly, the thesis proposes to improve the law on PMIS Vietnam

3 Scope and subjects of research

Scope of the study: The research scope of the dissertation within the scope of

LOE 2014 and other relevant legal documents has a comparative comparison with some regulations of Japan and the United States on the rights of MIS, the responsibility

of the manager of JSC

Research subjects: The dissertation focuses on studying the legal norms on the

protection of MIS' rights; internal governance structure; the role of the joint stock company and the responsibility of the managers of the company to ensure the rights of

4 Research Methodology

The thesis uses the following research methods: Analytical methods; comparative research methods; Secondary data methods At the same time, the thesis

is based on the methodology of Marxism - Leninist doctrine; Ho Chi Minh's thoughts

on state and law; Other theories such as: Agency theory, shareholder benefit theory, and some other related theories in term of laws and economics

5 New contributions of the thesis

Thesis contributes to determine and clarify the concepts and characteristics of minority shareholder and protections; compare those of Vietnam and the US and Japan; systematize company directors’ role, liability and power in the relationship with shareholders in the countries’ laws From the US, Japan and Vietnam’s laws, compare and clarify the similarities and differences on legal mechanism for protecting minority shareholders

6 Scientific significance

The dissertation examines the overall law of Vietnam regarding the protection of minority shareholders' rights in order to present their views and solutions to improve the law protecting minority shareholders in Vietnam

The research results of the thesis are scientific research documents for reference, teaching on PMIS and corporate governance in Vietnam Research results are also useful for management agencies, corporate executives, shareholders and other stakeholders to improve corporate governance and governance, and contribute to Theoretical views on the protection of MIS in Vietnam

7 The structure of the thesis

Apart from the Introduction, Conclusion and List of References, the list of scientific works, the thesis is divided into 03 chapters and General Conclusion and Recommendations (having the conclusion in each chapter)

CHAPTER 1 SUMMARY OF RESEARCH

1.1 Overview of research related to thesis topics

This section provides an overview of the international and Vietnamese

research in relation to the topic: "Laws on protecting minority shareholders

of joint stock company in Vietnam: a comparative study with Japan and the

United States of America”, Including the systematization of works, research

articles directly related to the topic for analysis and comparison

1.1.1 Situation of international research

Theoretical and practical research on the protection of MIS is one of topics

of the greatest interest to scientists around the world, and many studies have highlighted the important role of law in protecting shareholders of JSC

Scientific studies focus on aspects such as ownership of the company, the legal mechanism of the PMIS and the relationship between the trust of the shareholders and the management of the company The United Kingdom, the United States developed the theory of Representation, determine the relationship of MIS with managers and major shareholders

The separation between shareholder ownership and the management; and administration of the company by the board members, directors and other representatives is central issues of corporate governance It is imperative to have supervision by the rules and governance standards of the representative so that they can fulfill their responsibilities with due diligence, loyalty and obligation entrusted by the shareholders

1.1.2 Research situation in Vietnam

To systematize researches in Vietnam on theoretical and practical aspects of the law on protection of MIS, the mechanism of protection of shareholders, the results showed that:

On measures to protect shareholders, the study put forward a number of

groups of measures: protection of shareholders by law, law enforcement; protection by the internal mechanism - self-regulation by the company charter,

by the rules of ethics, professional In addition, other measures: shareholders themselves to exercise their rights, litigation manager; request the association

of shareholders to represent and protect their interests

Regarding the fundamental rights of shareholders, on the basis of the

Law on Enterprises (LOE), the categorized studies consisted of four main groups of rights: rights of property, corporate governance, and right of access to information and rights In lawsuit – or the right to restore the interests of shareholders

1.2 Results of research on PMIS The thesis inherits and continues research

Comparative studies (especially in the United States and Europe) have addressed and analyzed the rationale for protecting minority shareholders

on the basis of Agency theory The results of the comparative study on

mechanism for dealing with the company's conflict of interest and shareholders' protection suggest that: there is a significant narrowing of the gap, the difference in terms of protecting shareholders in the law British - American compared to Germany, Italy, France and Japan (Harvard University Press, The Anatomy of Corporate Law: A Comparative and Functional Approach)

Specifically, countries in the common law system and countries in the civil law system have issued mandatory standards and requirements for companies and investors - shareholders to enter and exit the market (transparency criteria, information control, stock trading standards, corporate governance standards)

Another difference is that countries in these two jurisdictions have focused much on investing resources in the management and enforcement

of the law on investor protection If the United States intensifies the role of law enforcement, serious and timely treatment of damages caused by the managers (MAN) is not the same as the State actively pursued the criminal case Meanwhile, Germany, Italy, France and Japan have also concentrated their resources similarly to the United States to strengthen their accountability and enforcement of criminal justice

Studies in Vietnam have also made comparative studies with Japanese and American laws; Analyze some specific cases of disputes and conflicts among shareholders and propose solutions to protect some TSI's rights

Overseas studies (mainly Japan, the United States and Europe) have provided a systematic and approaching methods to the concept of minority shareholder protection (PMIS) of company in the law and this concept from

- The relationship between the shareholder and the manager of the company, in terms of the relationship between the owner and the manager,

the representatives have the role of protecting the rights of shareholders, minority shareholders; The benefits of minority shareholders are easily violated by the major shareholders as well as the management of the company and other entities

- The responsibility of the company and its managers for the interests

of MIS; fiduciary relationship, representation between the Board of Directors, the director and the managers with MIS are regulated by law, supplemented by the charter, internal company regulations

- The law protecting minority shareholders in Vietnam has not been systematically studied (about the relationship between shareholders and managers of the company, in terms of the relationship between the owner and the manager, represent)

1.4.1 Theoretical background: The dissertation is based on the

Marxist-Leninist doctrine and Ho Chi Minh's thought on state and law In addition, research theories are considered for reference use such as: Agency theory, the theory of interests of shareholders, the theory of interests of stakeholders and some other theoretical point of view Directly to the issue

of protecting the rights of minority shareholders in JSCs

1.42 Research Methods

The dissertation uses the following research methods:

In Chapters 1 and 2 of the thesis use mainly synthesis and analysis methods; indirect methodology - synthesis of documents

Chapter 3 of the thesis focuses on comparative research methods, in addition to other traditional research methods such as analysis, statistics and synthesis By comparing and contrasting the laws of Vietnam with those of Japan and the United States, the author conducts research on the scope of comparative criteria developed in accordance with the principles of corporate governance provided by the OECD

The Criteria for studying of the mechanism of protecting MIS between Vietnam and Japan, and the United States: This is done in accordance with OECD Principles of Corporate Governance, with two principles for ensuring the fundamental rights of shareholders and the responsibilities of the OECD The Board is used as the main comparison criterion of the thesis Firstly, MIS's rights, violations of MIS's rights in the company Second, the

responsibilities of the MAN in securing the rights of MIS Considering regulations on loyalty, prudence of managers of the company; The duty to protect the rights of shareholders - to ensure equity in the treatment of shareholders

Apart from the above mentioned criteria, the thesis considers other additional factors such as the structure of corporate governance structure; Mechanism of monitoring and evaluating the performance of managers in the company

Conclusion of Chapter 1

Throughout the review of Chapter 1, the findings on the protection of MIS’rights, including theoretical and legal studies, have been presented The results of the study have stated the inadequacies of Vietnamese laws and practices, although there is no systematic and comparative study with Japanese and the US laws and practices It does not specify the similarities and differences between Vietnamese PMIS and other countries’

Based on the results of the research on the results of national and international research, the dissertation continues to analyze and compare systematically in practice, laws of Japan and the United States, to clarify the similarities and differences between Vietnam and other countries mentioned above and proposals to improve the law of our country

CHAPTER 2 THEORYTICAL ISSUES ON LAWS PROTECTECTING OF MINORITY SHAREHOLDERS OF JOINT STOCK COMPANY

IN VIETNAM

2.1 Overview of minority shareholder protection

2.1.1 Conception of minority shareholders

Based on the conception of minority shareholders in Vietnam, Japan and the United States, the thesis broadly characterizes the relationship of majority shareholders to minority shareholders with fewer shares, voting rights It is unlikely to affect the price of shares or the company's operations

MIS has the nature of: (i) Minority voting power, representing the weak point of the MIS, while the majority voting and dominant is the right of major shareholders (ii) The election of the Board of Directors, with minor voting rights, of course, MIS can not vote to reflect their will unless they make a link and vote cumulatively (3) The management of the company, MIS is not important position, the decisive role of the management of the work of the company that is decided by the managers or the MAS

2.1.2 The need to protect the rights of minority shareholders

The rights of MISs are largely dependent on the security responsibilities of managers and major shareholders in the implementation

of the Corporate Governance regime (CGR) Laws, regulations and regulations of corporate governance are not complied, synchronized in terms of the mechanism for ensuring the implementation as well as rules binding obligations of major shareholders and managers of the company

Subjects have the possibility of violating the right of the MISs (First, the acts of the Supreme People's Court violate the interests of TSIs, such as voting

on the rate of dividends, nominating members of the Board of Directors, the Board of Supervisors, Second, behaviors abused by MAN, violating loyalty, prudence) The above is the basis for the legal mechanism of the PMIS, establishing the protection mechanism associated with MIS' relationship with major shareholders and management companies

2.1.3 The purpose of the company and the theory of protecting the interests of shareholders

Shareholders are the best interests of the company, and the company

is also responsible for protecting the interests of stakeholders such as customers, banks and partners you

The company and its managers must have the responsibility and duty

to give priority to ensuring the maximum benefit of any subject, to take measures to ensure the benefit of whom? shareholders or those with related interests Considering the purpose of the company, the shareholder value theory, the company has only one purpose is to maximize shareholder benefits In contrast, stakeholder value theory determines that a company is established for the benefit of all stakeholders, not just for the sake of shareholders

In terms of protecting the interests of shareholders, especially vulnerable MIS and large shareholders, or managers, the law should protect shareholders through mechanisms that ensure the best interests of shareholders

2.2 Amending the law on the protection of the rights of minority shareholders

Legislation is that the state relies on the law, using specific legal means (such as normative documents, applicable documents, acts of exercising rights and obligations) to regulate social relationships, impact, direction of the relationship according to specific objectives set

2.2.1 Revision of the law on minority shareholders' rights

In the legal relationship to protect the rights of MIS before the major shareholders and company management, the documents LOE 2014, the Securities Law 2006 and related documents set out the principles of the framework, Internal rules specify

The issue is that the law has "hard" rules to apply, defining rights to protect, especially protection of MIS due to weaknesses from violations of major shareholders and abusive behavior The power of the MAN

In order to protect its shareholders, Japan issued the principle of

"accepting or explaining", under which the company fails to have the right

to explain the reasons In the United States, a mandatory mechanism is required for companies to be transparent and accountable for the best interests of their stakeholders

2.2.2 Amending the law on minority shareholders' rights in relation

to major shareholders and managers in the company

The mechanism that LOE 2014 (Totally, 43 Articles, clauses of 61 articles regulating on joint stock companies) empowers the shareholders to select and decide internal issues, protection measures and shareholder rights; LOE has been no specific regulation that defines the rights of minority shareholders to be protected from the acts of major shareholders and acts of abuse of power by the management of the company

To protect MIS before major shareholders and MAN, the law on the one hand adjust the rights and measures to protect the MIS On the other hand, there must be consistent regulations from the law to the rules of internal management, responsibilities and obligations of the MAN to ensure

the interests of the MIS

2.2.3 Classification of rights of minority shareholders

The nature of the MIS is the right to vote minority, in addition to MIS have the same rights as other corporations in the company

Based on the nature of rights of shareholders, divided into two groups: the right to prevent and the right to overcome (group of rights to prevent: supervision of managers, attend the General Meeting of Shareholders, access to information the right to overcome includes inspection check the company, sue the violation) Based on ownership and security, there are groups of property rights; access rights to information; the right to conduct the General Meeting of Shareholders; the right to request a resolution of the dispute

2.3 Responsibility to protect the rights of shareholders of the manager in corporate governance

2.3.1 The Position and role of Board of Director (BOD)

The establishment of the Board of Directors according to the different models, methods and objectives of the company still ensures the best interests of shareholders First, the board has a role, a controlling role for managers; Executive Directors are well-versed in the company Second: Some researchers assert that the BOD has the role of minimizing representation costs through the structural form of the BOD, requiring independent external members to carry out supervisory oversight The Limit the difference in benefits between managers and shareholders

2.3.2 Role and responsibilities of the Board of director’s members and non-executive members

The board of directors with multiple non-executive members is consolidated and referred to in the Representation Theory and Corporate Governance Principles Accordingly, an effective management board should consist of a majority of non-executive members, with the role of creating good performance, the reason for which is independent of the management of the company On the other hand, BOD executives play the role of carrying out daily operations of the company

2.3.3 The responsibility of the manager of the company in the internal management mechanism to protect the MIS

The management of the company includes the relationships between the heads of the company, the management of the company (board members, directors), managers with the shareholders own the company The manager

is therefore responsible for representing, receiving trustees operating the company to secure the ownership of the company of the shareholders

The shareholders hire or authorize the manager to be a representative in the company's activities Shareholders always expect loyal representatives to act in the interests of shareholders - this is the ultimate goal The problem arises

in the relationship: the conflict of interest between shareholders - owners and managers of the company Therefore, the law, corporate governance principles and corporate rules and regulations have a role to play in establishing conflict resolution measures

Arguments for representation are one of the cornerstones of the development of corporate governance principles and have been adopted by many countries, in addition to regulatory requirements and internal governance mechanisms in many countries including the United States, Japan, Vietnam

2.4 Methods of protecting the rights of minority shareholders

According to the definition of protection (protection), the protection means the following: (i) to keep from spoiling; (ii) safe keeping of an organ

or character; (iii) Advocate with reasonable cause Thus, the law on protection of MIS is protection, protection by law; self-defense, or advocacy

by reason

2.4.1 Protecting minority shareholders according to the functions of

management agencies, supervisors and the handling of violations

Authorities that govern and enforce the law: administrative bodies, tribunals and other independent organizations (auditors, lawyers, associations protecting investors) It is a positional institution, a role independent of the company, protects the MIS when required or when there

is a legal event Considering the independent position of each of these organizations outside the company, also known as the "external protection mechanism" of the company

In terms of strengths, the functional protection mechanism of company institutions is more objective and independent, and is trusted by shareholders and other stakeholders On the limitation, the external mechanism will only deal with the request or when the violation has been detected, the consequences of damage to the interests of MIS will be dealt with

non-2.4.2 Protect minority shareholders by proactively protecting their shareholders' interests

MISs actively protect the rights and interests themself, protect the rights of MIS also known as the self-protection rights - by the shareholders exercise the rights that the law allows

Under the current situation in Vietnam, the law should provide more supportive measures to help shareholders implement the mechanism of proactive self-protection and participate in the activities of The General Meeting of Shareholders or the management of the company to ensure that its interests do not necessarily look to the regulators or the external court

2.4.3 Protect minority shareholders by management mechanism and the responsibility of company managers

* Corporate governance mechanisms include statutory regulations issued by the state, rules and internal governance rules established by the company in accordance with law and internal governance requirements, and the shareholders themselves of the company through That is the legal basis

to ensure the operation of the company, protect the rights of MIS by the management of the company

The system of norms of corporate governance is focused on regulating the roles of managers, the functions of the General Meeting of Shareholders, the Board of Directors, the Board of Directors and the Board of Supervisors;