CHAPTER 01: FOUNDATION AND THEORY OF CORPORATION LAW

THE ORIGIN OF CORPORATION LAW

What is a corporation? How do you defind company, corporation?
 Company have Legal personality
A group of individuals doing business together

Corporation = a body formed and authorized by law to act as a single person although constituted
 Has its own rights and liabilities.
Company Law or Corporation Law?
UK Law - The word “corporation” has a wider concept than “company”, including “corporation sole” and “Corporation
aggregate”
“Corporare”: to furnish (something) with a body or to infuse with substance
Corporation: artificial construct infused by the law with the ability to have legal rights and incur legal liabilities.
Historical development of corporation law:
See hang-outs
Company Law or Corporation Law: are the same thing
- In UK, company or corporation are understood the same
- The word “corporation” has a wider concept than “company”, including “corporation sole” and “corporation aggregate”
- Corporation sole are limited by law to one member. It provided for a separate legal personality for an individual position (the
 corporation sole is distinct in Law from the individual who occupies the post)
Eg: bishop, mayors
- People would often leave property (as an offering to Saints) to Church
- Church officials (Father A – “Bishop” – Corporation sole)
 Bishop can decide anything the property because the have power
Corporation Aggregate: May have one or more member
- Types of corporation aggregate: Statutory corporations, chartered corporartions, registered companies, building societies, credit
unions, and limited liability partnership
 A company is one type of corporation aggregate (incorporated entities only), brought into being by the registration procedures
laid down by CA2006  not including a partnership or any other unincorporated entities.
US Law: “Corporation” corresponds to “company”  Incorporated entities which are created under and regulated by Corporation
Act (Code)

CATEGORIZATION OF BUSINESS ORGANIZATION

 Unincorporated
orgainzation
Sole traders/
Propretorships

Partnerships

 It is not a legal personality

 Incorporated
organizations

Limited Chartered and

Registered liability
companies parnerships statutory
corporation

Limited Unlimited
companies companies

Companies limited by shares: Companies limited by

Public companies; Private guaranter
companies

1. Legal structures of Unincorporation Business Organization

Not corporate entities or legal persons
Come into existence either by agreement or by legislation, do not own the benefits of separate legal status.
 ∆ SOLE TRADERS/ PROPRIETORSHIP
- A sole traders: only individual can be the owner
- Is an individual who is in business on his own account;
- It a party to contracts, owns all the property he/she uses in the crurse of trade and receive all the income and profits from the
business;
- The owner entires all business
- No business itself is not a separate legal entity
- Setting upin business as a sole trader/propietorship
- No business organization law relevant to the formation, operation or management of a sole trader
- In the UK, a sole trader needs to register as self-employed with the authorized agency [Her Majesty’s Revenue and Customs
(HMRC)] and may need to comply with any law applicate to the particular type of his/her business
 Because there haven’t any organization
What are advantages and disadvantages of the sole trader?
Advantages of Sole proprietorship
- Proprietor owns entire business and can make all managerment decisions
- The business can be easily transferred or sold
Disadvantages of Sole Propietorships
- Sources of capital are limited to: personal funds plus, any loans the owner can obtain
- The owner legally responsible for business’ contracts and torts committed in course of employment.
 ∆ PARNERSHIP:
Definition:
Partnership is the relation which subsists between persons carrying on business in common with a view of profits (S1, Partnership
Act 1980 of the UK)
How to decide whether or not a partnership exists?
 You have look for the type of relation between persons  Look for agreement between them
(không cần đăng ký kinh doanh  Để chứng minh  Tìm ra thỏa thuận giữa một nhóm người)
Partnership exists base on agreement between a group of persons
In Vietnam, partnerships is legal personality but in UK is not.
i. Formation: a partnerships exists bases on agreement between member of the group.
ii. Repair some document send to … and wait for 3-4 days to have the agree
iii. No separate personality
iv. Minimum of two partners (must have at least two partner)
v. Unlimited liability of partners.
vi. Each partner is agent of the partnership and of other partners
Partnerships have no public disclosure obligations.
Partnerships is automatically dissolved every time there is a change of partners
In the UK: Two types (unincorporation entities)
 Ordinary partnerships:
Has no legal existence distinct from the partners themselves. Every member has unlimited liability for the debts and obligations of
the firm (Partnership Act)
Limited partnerships (LPs):
(Limited Parnership Act) the active partners (general partners) have unlimited liability but the sleeping partners’s liability is
limited to the amount that they have agreed to contribute.
Tại sao công ty hợp danh ở Việt Nam là legal persons? 
An organization shall be recognized as a legal entity if it meets all of the following conditions:
- It is legally established as perscribed in this Code and relevant Laws
- It has an organiztional structure prescribed in Article 83 of this Code
- It has property independent from either natural and juridical persons and shall be self-liable by resourse to its property;
- It participates independently in legal relations in its own name.
Nếu công ty hợp danh là pháp nhân thì tại sao thành viên hợp danh lại có trách nhiệm tài sản vô hạn?
 what kind of power they have  they have so much power  can be to abuse their power.
Limited liability partnerships
are incorporated entities provided for by the Limited Liability Partnership Act.
*must be registered at Companies House*: cơ quan đăng kí kinh doanh ở Anh
2. 2.2 Legal Structure of Incorporated Business Organizations:
The word “incorporated” shows that the underlying purpose of registering certain types of business is to confer corporate
personality on the organization.
 Limited company - Registered companies
A company is a limited company if the liability of its members is limited by shares or by guarantee [s3.1 CA2006]

Limited companies:
Only companies limited by shares may be a public company. (Public companies are able to offer their shares by advertisement
to the public for investment [s.755]
Companies limited by shares:
if member’s/shareholder’s liability is limited to the amount, if any, unpaid on the shares held by them, the company is “limited
by shares ” [s.3.2]
ex: John is a shareholder of the company limited by share. He agree to buy one share 10 pounds, however he only paid 5 pounds
(that is have a debt with that company is 5 pounds). There is a debt from the company so that mr.John have paid 5 pounds.
Nếu John mua cổ phần của công ty có giá trị 10 pound nhưng chỉ trả 5 pound thì khi công ty có nợ thì john chỉ trả cho công ty 5
pound nợ còn lại của John.
 Public companies (plc)
 Private companies (ltd)
+ Companies limited by guarantee
+ Companies limited by shares may be public companies (công ty đại chúng ở Việt Nam) or private companies (same as công
ty không đại chúng ở Việt Nam)
+ The name of a public limited company must end with ‘plc’ or public limited company’ and the name of a private
+ Shareholders’ rights, responsibilities, and liabilities are determined by the number, class, and value of their shares.
+ Internal structure and management rules are set out in the CA 2006, articles of association and shareholders’s agreement.
Companies limited by guarantees:
If membes’/shareholders’ liability is limited so much amount as the members undertake to contribute to the assets of the company
in the event of its being wound up, the company is “limited by guarantees” [s3.3, CA 2006]
(i) Companies limited by guarantee must be formed without any share capital (s5), thus, there are no shareholders, but the company
must have one or more members
This corporation type is widely used mainly for non-profit organization as charities, community projects, clubs, societies and
other similar bodies (các công ty này không có vốn góp nhưng vẫn có vốn từ nhà nước)
(ii) Members are only liable to make a contribution to the assets of the company in the event of its being wound-up, and the amount
of contribution is fixed at the outset by the company’s constitution
(iii) Profit is not distributed among the members but put back into the company or used further the company’s public purposes.
Vì sao thành viên của công ty chỉ có nghĩa vụ góp vốn khi công ty mất khả năng thanh toán?
Why do the members only pay the assets when the company wound up?
Theo tư cách pháp lý thì công ty là pháp nhân nên có nợ xảy ra thì công ty phải tự chịu trách nhiệm của chính công ty
Unlimited companies:
If there is no limit on the liability of its members the company is an “unlimited company” [s.3.4]
+ Incorporated at an govermental agency
+ Separate legal personality
+ It a winding up or formal liquidation, all the shareholders bear joint, several and unlimited liabiality for the company’s debts and
 financial obligation.
- Unlimited company is the combiantion of Partnership and limited company. It don’t private information as partnership and
their structure is also the same the limited company.
- When the company is wound up, shareholders’ will liable to make a contribution to all assets of their company.
 Cổ đông có trách nhiệm vô hạn.
 Mô hình công ty đơn giản, members không có trách nhiệm phải công bố thông tin nhưng họ phải chịu trách nhiệm vô hạn. (mô
hình sáng tạo của nhà làm luật để giúp các doanh nhân)
In VN, we don’t have unlimited company
Limited liability partnerships (LLP):
- LLPS are incorporated organizations governed by the Limited Liability Partnerships Act 2000 (and extensive regulations made
pursuant to both that Act and the Companies Act 2006).
- They are legal persons
- Are partners have limited liability (similar to công ty trách nhiệm hữu hạn ở Việt Nam)
2.3 Chartered and Statutory Corporation:
- These corporations are formed by obtaining a charter of incorporation from the Crown or securing a private Act of Parliament
- This type of formation is unlikely to happen today
- Many of these corporations are not-for-profit organization (hoạt động không vì lợi nhuận)
Hiện tại đã không xảy ra nữa
III. The nature of companies (The company limited by shares)
s.15 of the CA 2006: companies become incorporated and separate persons on registration
  Separate legal personality of a company and limited liability of its members are two key consequences of the incorporation.
Two key:
+ The separate legal personality
+ Limited liability
1. 1. The principle of corporate entity (Separate legal personality)
- Separate legal personality: a company is a legal person in its own right, separate and distinct from its members.
- Has the legal capacities and powers of a naturalperson:
 Sue or be sured in its own name
 Enter into and enforce contracts
 Hold title to and transfer and property
 Hold civil or crimial liabily for violations of law.
- The company will not die when its members die (perpetual lifetime);
- The share capital once subcribed must be maintained by the company, it no longer belongs to the members and cannot be
returned except some exceptional cases;
- In general liability of members/shareholders is limited to the total value of the shares that they agreed to buy
HOMEWORK: SALOMON V A SALOMON & CO LTD [1897] AC 22 (HOUSE OF LORDS) (THE LEADING CASE WHICH
GAVE EFFECT TO THE SEPARATE ENTITY PRINCIPLE)
WHAT HAPPENED
LÝ DO GÌ TÒA ÁN TRAO TRÁCH NHIỆM CHO CÔNG TY  Biến một công ty thành một pháp nhân
2. 3. Limited liability
- The doctrine of limited liability was introduced 1855 (Limited Liability Act 1955) in UK
- A company, as a separate juridical person must satisfy claims and judgement against it, to the extent of its assects.
 Limited liability of shareholders
Disadvantages of limited liability
∆ Có thể bị lạm dụng bởi các mục đích sai trái
∆ Không thể thu hồi hết số nợ
Advantages of limited liability
∆ Limited liability encourages capital formation
∆ Limited liability shields shareholders from the debts and obligations of the company.
Criticisms on limited liability
∆ With the shield of limited liability, the shareholders and managers may have incentives to engage in high-risk business
activities.
∆ The legal personality of a company in some cases is abused by the shareholders for wrongful or unjustifiable purposes.
3. 3.3 Lifting the company veil (Piercing the corporate veil, veil-piercing)
Veil refer to the legal personality of the company
o Lifting the corporate veil refers to the possibility of looking behind the company’s separate personalitty to make the
shareholders liable for their company’s debts (an exception to the rule that they are normally shielded by the corporate shell).
o In this way, the company and its shareholders are treated as one, and all the rights, activities and obligations of the companies
are also the rights, activities and obligations of the shareholders.
 Grounds for lifting the corporate veil
The company is deemed to be nothing more than an “alter ego” of the owners: a shareholder (or shareholders) dominates a
company and misuses it for improper purposes
(i) The company was formed or used to facilitate the evasion of legal obligation (sometimes tort obligation)
Jones v Lipman [1962] 1WLR 832
(ii) The company is used as a means to perpetuate a fraud.
(iii) Separateness has not been maintained between the company and its shareholders

CHAPTER 2 COMPANY FORMATION

I. REGISTERING A COMPANY/FORMATION OF COMPANIES
Basic steps:
- Prepare registration documents
- Register company with the registar of companies
- Post-registering steps: open account, obtain corporate seal (if required), pay for capital…
Registration authority
- Registrar of companies (s 1060 CA2006)
- The Companies House
Method of forming a company:
- (s7 CA2006) A company is formed by one or more persons subcribing their names to a memorandum of association and
complying with the registration requirements
- (s14, s15 CA2006) If the registration requirement are complied, the registrar of companies must register the documents and issue
a certificate of incorporation.
Documents required for registration: See hand-outs)
- Company nam: rules governing company name is contained in Part 5 of the CA 2006
- A company name will not be registered if it: has prohibited name (s53)
- Suggests connection with government or public
Business name: (Rules governing business names are contained in Part 41 of the CA 2006)
- A company’s business name can be different from its company name
Ex: a company with the company name G as appliances limited traded under business name Flames For You.
- Business names are not registered with my any government department but business name provisions must be adhered to.
The certificate of incorporation (s15 CA 2006)
The certificate of incorporation is conclusive evidence that the requirements of the Companies Act 2006 as to registration have been
complied with and that the company is duly registered under this Act.
- The certificate must be signed by the registrar or authenticated by the registra’s official seal
Commencement of business (khoi su kinh doanh)
- A private company can
- A public limited company cannot conduct business unless it has obtained a trading certificate from Companies House.
- The trading certificate is issued if the company has minium allotted share capital of 50.000 pounds of which at least on quarter of
the nominal value and all share premium must be paid up. (s761-763)
- It is an offence to trade without a trading certificate and the directors are liable, on conviction, to a fine.
Ex: company A: 100.000
B, C, D: 50.000 (1/4 of 50k = 12,5k)
II. Promoters and pre-incorporation contract
II.1Promoters (nguoi thanh lap)
- The term “promoter” is a term of business and not of law.
- A promoter may be an invidual, a firm, an association of persons or even a company who decides to form a company and take all
or some of the nescessary steps to form it.
Main functions performed by promoters: see-hangout
Promoter will owe a fiduciary to the company
(1) A promoter cannot be allowed to make any secret profits.
- If it is founf that in any particular transaction of the company, he has obtained a secret profit for himself, he will be bound to
refund the same to the company.
(2) The promoter it not allowed to derive a profit from the sale of hid own property.
II.2Pre – incorporation contracts (hop dong co tu truoc khi cong ty duoc thanh lap)
Pre – incorporation contracts are those were made by the promoters before the company was formed.
S51(1) of the CA 2006: “A contract with purportsto be trade by or on behalf of a company at a time when the company has not been
formed has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the company or as
agent for it, and he is personally liable on the contract accordingly”
Mr.Lane was attempting to form a company that was going to run a pop artist group

was never
incoprorated

A contract signed by Mr.Lane on behalf on the company.

Phonogram Ltd – a recording company
Financial assistance
 The court held that Mr.Lane was personally liable for the -preincorporation contract.

NOTES:
1. When the company is registered, it is not bound by the pre-incorporation contract
Ex: Phonogram Ltd v Lane [1982]
2. The person who is made liable under s.51 can void personal liability by a clear agreement on exclusion of personal liability with
the other party to the contract.
3. A company may not become a party to a pre-incorporation contract by ratification
4. A company may become a party to a pre-incorporation contract by novation
Novation is a tripartite transaction in which the parties to the original agreement, together with the company, enter into a new
agreement.
III. The articles of association (back bond)
Constitutional documents of a company
o Articles of association
o Special resolutions – Nghi quyet
o Resolutions/ agreements of all memebers/ shareholders
o Current statement of capital
o Certificate of incorporation
Notes:
- All constitutional documents must be registered with the regiatrar of companies and are available for public scrutiny (s30) and
must be sent to a member on request (s32).
- Shareholders’ agreements fall within s29 must be registered.
- The most important constitutional document of a company is it’s articles of a association.
Articles of association (AOA)
Definition
The regulations governing a company’s internal management including the rights of shareholders, the conduct of meetings and the
appointment, removal and powers of directors.
Model articles
There are different sets of model articles for different types of companies, these operate as the articles of a company to the extent that
they have not been excluded or modified. (s19, s20)
Content of the AOA
The content of the articles is a mater to be agreed upon by the orginal shareholders of the company and maybe changed from time to
time as the company develops.
Articles which are inconsistent with the law are void and unenforceable
Ex: Articles purporting to override certain statutory rights or powers may be held to be void and unenforceable.q

Characteristics that distinguish the AOA as a statutory contract from other typical contracts
o A mendament of a contract usually required the argreement of all parties >< The articles can be amended by a special resolution
which means a resolution passed by a majority of not less than 75% (s21(1), s 283(1))
o A contract only binds those parties who argee to it >< All members at any time are bound by the articles, so that a new member
who has played no part in the drafting of the articles, upon being registered as a member, is bound by the articles.
o The Articles cannot be challenged based on the doctrines of misrepresentation mistake or undue influence.
o The court may not rectify (sua doi) the articles even if they do not represent the intentions of the members on incorporation.
Amending the articles of association
o Special resolutions (Nghi quyet) must be passed by sharerholders representing not less than 75% of the total voting rights of
shareholders who vote on the resolution.
o Ordinary resolutions must be passed by not less than a simple majority 50% + 1 vote.
o A company may amend its articles by special resolution (s21)
 the relevent special resolution and a copy of the new articles must be sent to the registrar of companies (s26 and s30).
Vdu: ordinary resolutions - 100% deu thong qua cai nghi quyet thi amending the articles of association co valid hay ko? Attention the
names of resolutions – more than enough; 70, 80% is not enough
Exceptions: matters that does not require a special resolution to be amended:
(i) s 551.8
(ii) s 685.1,2
Ex: A 100 shares
B 100
C 300
Ordinarychary (1 share=1vote)
Only C approve resolutions  will be pass??  NO,
Shareholders’ argeements (thoa thuan co dong)
Shareholders’ argeements are usually entered into when the company is first registered but may be entered into at any time. They may
not or may be a part of the official constitution of the company, but either ways can fundamentally affect the way a company is
managed and controlled.
Ex: 10 shareholders  act together - 1 of them say yes  all of the others say yes  1 of them say no  no
Ex: if 1 shareholders want to transfer
Parties to shareholders’ argeement
o Are contracts entered into by two or more shareholders, binding only those shareholders and can only be amended with the
argeement of all parties.
o A company can be made a party to a shareholders’ argeement.
Confidential (bi mat)  chi nhung shareholder’s moi biet, ko dc public nhu AOA
Enforcing shareholders’ argeements
If a shareholder who is a party to a shareholders’ argeement breaches (vipham) the argeement, any other shareholder who is a party to
the argeement who has suffered loss caused by the breaches may sue for damages (tien boi thuong thiet hai) for breach of contract.
(based on contract law).

CHAPTER 3: FINANCING A COMPANY

CONTENTS
1. Shares and share capital of a company
 2. Captial maintenance and distribution
3. Finanancing a company under Vietnamese law
TYPES OF CORPORATE FINANCING
Two ways: through borrowing (which creates debts/ debt financing) and through the investment of funds by owner (which creates
equity capital [vốn chủ sở hữu] – equity financing).
(i) Debt financing
- Lending creates a debtor creditor relationship
- Creator have priority over equity holders/ shareholders and must be paid interest (tiền lãi) on the money borrowed before
dividends (cổ tức) are paid to shareholders.
 The total amount of income that a company can make in a year would have to be used to paid for the creators first, and then it can
be used for paying dividends for shareholder.
- In a dissolution of the corporation, creditors receive their principal (phần nợ gốc) before equity holders receive anything.
 If the company is dissolve, creators receive their principal before equity shareholder can receive anything
Your company must pay all of the debt if use debt financing
(ii) Equity financing
o Equity financing occurs where a company issues shares to one or more investors who become shareholders of the company. In
return for the shares, the shareholders pay the issue price of the shares to the company. The company receives and owns shares
in the company.
o Shareholders in a public traded company may sell their shares in the stock market but the price depends on the success of the
business.
- Shares of the company have 2 values: the nominal value (menh gia co phan) – market value (thi gia co phan)
Ex: Vinamilk – 1 share – 160k (market value) - just 10k (menh gia co phan) – LDN
- Which is the basis decided market value of their shares of 160k? Profit in the year
o Compared to creditors, the shareholders have greater risk (lower priority than creaditors) but also the potential for greater
return (increased profits benefit the shareholders)

[The company receives in funding and the shareholders receives owns shares in the company. When shareholders buy shares
from company, they will have to pay for the shares, they have to pay the issue price of the shares. The money that the
shareholders pay for the company will become the capital of the company and in return shareholders all owners of the shares.
They have a membership of the company.]
 [Compares debt financing and equity financing [does not create any payment obligation to the company] simply the owners of
the company provide capital to the company and the company doesn’t have any obligation to return to the company. Only
when the business of the company is succesful, and have profit, then that profit will distributed to the shareholders or the
company is resolved after using all of the assets for the payment, all of the assets will distributed to shareholders.]
Even though a company may have payment obligation, but shareholders of that company always more benefit from the
company, because a creators lends money to the company, the maximum amount that creators can receives back is the value
of the debt
You are the creator of the company, you lend 10 milions dong to a company, you will receive interest based on 10 milions.
However, the maximum you will receive for a company is 10 milions + some interest.
When you are a share of the company, after years, you receive profit distribution from the company. Ex: In this year, your
company has a total amount of a profit for 10 bilions dong, that 10 bilions dong will be distributed to you base on your
shareholding.]
[The shareholders will receive much more from the company, however there is a risk, if the business of the company is going
down hell, you will lost anything. From the creators, there is something wrong to the company, the company will have to sell
all of the assets to return for the creators. If there is nothing left in the assets of the company then creators receive nothing]

I. Shares and share capital of a company

I.1 Nature of shares and membership
What is a share? A share is a small part of capital of company
What is a shareholder?
 Nature of Shares
- “Share” in a company means share in the company’s share capital. A share is a piece of personal property (s541)
- “A share is the interest of the shareholder in the company measured by a sum of money, for the purpose of liability in the first
place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders”
Farwell J in Borlands Trustee Steel [1901] FCh 279
 A share is a fraction of capital, denoting the holder’s proportionate fiancial stake (the more share you own the more benefit
you will receive) in the company and defining his or her liability to its equity funding;
Ex: mrA own 20% of the total of shares, mrA will have proportionate fiancial stake in the company by 20%, the total amount of
profit that his company in the year distributed to him by 20% and in the voting process in the company, he has a voting right in
20%
The total number of shares, can define liability of the shareholders in the beginning, the liability of the shareholders is limited to
the total value of the shares that shareholders own
Just a number of shares, we can define the right and the liability of the shareholders
 A measure of the holder’s interest and rights in the company (rights and liability)
 A species of property  can be transferred throught sale or as gift to another person.

Membership
- The relationship between a company and its shareholders is governed by a ‘standard form contract’ – the articles of association
The AOA is a standard form of contract, the word ‘membership’ reflaxed relationship between a company and its shareholders.
The moment you decide to become a shareholder in the company, that moment you are deem to have accepted all of the contents
of the articles of association, eventhough you did not take part in the drafted of the articles, but the moment you buy shares you
have deem accepted to hold contents of the articles
- Shareholders are part-owners of the company, have the role as part of the decision-making of the company, manifest in voting
rights attched to their shares.
Not all shareholders in the company are allow to vote at minute at a company, because it depends on types of shares that they
own, some shares do not allow the holder to voting rights
- The law usually requires that a shareholder us given a share certificate in respect of his shares (S769, 776 CA 2006)
Ex: in VN, co phan so huu co tuc always vote right
- When some shareholders will they receive a share certificate? In VN, you always receive a share certificate in join stock
company; in UK, always receive a share certificate, in what situation?
- How u can buy share in joint stock company in VN? And where? market share – destionation where should you go – san giao
dich chung khoan – buy by phone or and apps
When you buy online, you don’t receive a share certificate.
- Who run that apps? Securities company - Stock exchanges
- Without that apps, how can you approve owner in company
- In every joint stock company always have a register list of shareholders
Ex: mua nhung ko dc update ten trong a list of shareholder, co quyen nao hay ko hay quyen duoc vote hay ko? Dc ghi ten vao so
dang ki thanh vien
- Dc ghi ten vao trong so dang ki thanh vien, thi trc khi co ten, shareholder co quyen nao hay ko? Co dc quyen chuyen hay ko? –
you are the owner your share, still have a right owner, and your property after you buy, so you can transfer any one else, but
 you don’t receive profit of company because you don’t have a right of shareholders, your name has not in a list of
shareholders, you are not allow attend the meeting.
- When u buy a share  u pay a share  u receive the share and the capital  u can sell or give your share for someone else

I.2 Classes of shares

How many classes of shares in joint stock company in VN?
Shares that provide the owners with the same rights and liabilities are called a class of shares
 various types of shares deliver financing flexibility to companies
And why having various types of shares can deliver financing flexibility to companies ?
- Ordinary shares
- Other classes of shares
 Preference shares (co phan uu dai)
 Redeemable shares (cp hoan lai) are not preference shares.
 Deferred shares (cp ko uu dai)
 Non-voting shares

Ordinary shares (just like in VN)

- Most basic type of share
- One ordinary share carries one vote
- Ordinary shares carry the basic rights of shareholders (right to share in the profits of the company; right to share the residual
wealth of the company when the company is wound up [quyen nhan lai tai san gia tri con lai cua cong ty khi bi pha san]; right
to vote on shareholder resolution)
Other classes of shares
- Optional
- Carry rights differing from ordinary shares;
 Provide more benefits associated with a certain right
 Limitation on a certain right
Preference shares
Usually be entitled to have dividends paid at a predetermined rate (1 muc co tuc xac dinh trc) (e.g £10 at a rate of 10% on
their nominal value) in priority to any dividend on the ordinary shares.
- Preference shareholders have the first claim on the corporate profits (dc nhan chia loi nhuan) in any year, a right to priority
over the ordinary shareholders when capital is returned to the members in a winding up.
- It is quite usual for preference shareholders to have no voting rights at the shareholder meetings.
And why for preference shareholders to have no voting rights at the shareholder meetings?
In VN, when you buy co phan uu dai co tuc, you will receive dividends of the higher rate than ordinary shareholders and will
receive dividends before ordinary shareholders.
Redeemable shares
- In Vn, la co phan uu dai hoan lai
Fully paid-up shares that either will be redeemed (bought back by the company) at the option of the company or the shareholder,
on certain dates and subject to such terms are stated in the articles or company resolutions.

Deferred shares (founder shares)

Deffered shares have rights which are deferred to the ordinary shares, they will only get dividends after a specified minium has
been paid to the ordinary shareholders, and as regards to the return of capital on a winding up.
In UK, founders [first shareholders] of the company would voluntarily take deffered shares as demonstration for their confidence
in financial liability
No benefit for deferred shares
Non-voting shares (employee shares)
Carry no rights to vote and no right to attend general meetings
- A company may issue employess with non-voting shares because they want them to be able to benefit from dividends or
distribution of profits but do not want them to participate in decision making.
I.3 Share capital
Share capital: total nominal value of the shares of a company that have been issueed (for shares that have buyer) / alotted. (for
shares that have not yet)
- Initial share captial : total nominal value of the shares taken by or issued to the first shareholders who sign the memorandum
of association at the time of registration.
- A statement of initial share capital must be included in an application to register a company
Ex: A and B both subcribe to the memorandum of association of Company C Ltd in which they each agree to take 1 share with the
value of £1
 Initial share capital: £2 (the first shareholders)
 Share capital (von dieu le chinh thuc): £2
If D bought 1 share  initial share capital chi tinh tren gia tri so co phan ban dau [£2 ]  share capital: £3
- Paid-up share capital is the sum of those parts of the nominal value of issued shared already contributed to the company.
(reflex the real amount of money/ capital – the company receive of shareholders)
- Muon biet cong ty co bao nhieu tien phai dua tren paid-up share capital
If A and B has each paid 40 pence on their shares. £1 equal 100 pences. A & B are not allow to make a full payment
 Paid-up share capital: 80 pence (40+40)
Called-up share capital
- CA 2006 s.547 also defines called-up share capital as the sum of the amounts paid for shares when issued, sums subsequently
called up (paid or not paid) and sums due to on a specified date with out further call.
A & B has just paid 40 pences. How much do they paid more for the company? 60 pences
The company can require A & B pay more
And If Company C Ltd could subsequently called-up 20 pences per share (40 pence)
 Called-up share capital: £1.20 (80pences (beginning) + 40 pences (the company requires more – [A 20; B 20])
- What is the function/ purposed of called-up share capital? - When the company requires more capital
- How much is the called up the more capital? (the company calls more 20pences for each)  £1.60
- Goi den khi nao called-up share capital = share capital; cac shareholders co quyen tra theo tung dot, ko can phai tra 1 lan
1.4 Alteration (changed) of share capital (increase or reduces)
- Each time the company’s share capital is altered, an updated statement of capital must be sent to the registrar of companies.
- A company having a share capital may alter its share capital ONLY in the ways provided for in s617 of the CA 2006.
1.4.1 Increasing the share capital
Alloting new shares
- The only way for the share capital will be increased
S617 (2a): a company may increase its share capital by alotting new shares in accordance with Part17 of the Act
NOTES
 Offering of shares to the public  detailed securities regulation (quy dinh ve chung khoan) must be complied with the
securities regulation
 The terms “allotment” and ‘issue’ offen used interchangeably (su dung thay the cho nhau).
Is a allotiong new shares can increasing the share capital?
When the company intent a loan from the bank  increase the share capital?  can never make
If the company has annual profits/ income make the share capital increase? can never make
When the company can obtain a loan or has annual profits, the total of mount assets will be increased, but the unit call the share
capital will stay the same. Only when the company issues new shares, that way the share capital will be increased.
Authiority to allot new shares
- Shareholders (ordinary resolutions)
- The directors in accordance with s.550 and 551
S550 for private companies with one class of shares only, the Act authorizes the directors to issue shares of that same class.
S551 for
o Private companies with one class of shares seeking to issue a different class;
o Private companies with more than one class of shares,
o Public companies;
 either the articles, or an ordinary resolution can authorize the directors to issue shares
Statutory pre-emption rights of existing shareholders
Pre-emption rights of existing shareholders are the rights of existing shareholders to be offered new equity shares first, in
proportion to their existing equity share holding (s560-577)
Pre-emption rights preserve the proportion interest (the rights and the benefi of the proportion to the shareholdings) of each
shareholders.
 preserve each shareholder’s proporitionate interest in the equitable share capital of the company.
The purpose of pre-emption rights is too increase the share capital of the company without affected the right and benefit of the
existing shareholders.
The share capital is increased but shareholdings the percentage of ownership stay the same.
The offer must open for acceptance for at least 21 days (s562[5])
(i) Statutory pre-emption rights apply only to issue of new ordinary shares
If new preference shares are issued, then we not apply preference shares
- In VN, what classes of share are apply pre-emption rights? Can’t be apply any classes of shares? – D124 – maybe apply 2
classes of shares (JSC)
(ii) Statutory pre-emption rights also do not apply to a variety of circumstances (see hand-outs)
 Issue price
All shares must have a fixed nominal value (mệnh giá định sẵn) (s542) – it will not be change
‘Nominal value’ of share: the fixed (cố định) monetary value attached to the share when it is issued, also referred to as the ‘par’
value.
 is also the minimum amount for which a share can be issued
∆ Nominal value must be fixed – In, VN 10k vnđ – never be changed
∆ Shares can not be issued at a discount (s580)  below the nominal value (prohibition)
∆ Market value can be change (thị giá cổ phần)
Why the existing shareholders is the first subject dc chao ban?
Ex: Company – 4 shareholders 1k pounds (25% for each)  1000 shares offer to A B C and D for each of them  no change,
because the share capital increase but shareholdings still 25% for each
In VN, Gia tri co phieu ai la nguoi quyet dinh? D138 – border director’
Premium
- Shares can be issued at a price higher than nominal value  the share premium. ex: a share with a nominal value of 1 pound is
issued at 1.20 pounds, the share premium is 20 pence
- S610: the amount of the premiums must be kept in a separate account (share premium account) and may be used for some
certain purpose only
Why the shares premium can not be put the same account share capital? Because the share capital is only calculate based on the
nominal value of the issue shares
Completing the issue of share
A shareholder does not have legal title to shares and those shares have not been issued unless and until his name appears in
relation to those shares in the register of members.
 A person can only officially become a shareholders if when her/his name appears in the register of members
Ex: MrA buys a share of the company, his name doesn’t appears in the register of members. He can transfer his share but he can
not receive profit or right or meeting.
 An allotment of new shares must be registered within 2 months if the date of the allotment (s554)
 A company must complete share certificates in relation to allotted shares within two months of the allotment (s769), this
obligation does not apply to uncertificated dermaterialized shares
 if you buy share only, you don’t have certificate
1.4.2 Reduction of the share capital
A company cannot reduce its share capital except in one of the ways listed in C10 of the CA 2006
(to be discussed in the next part of this chapter)
II. Capital maintenance
“Capital maintenance” is a principal or doctrine with two components
 A limited company having a share capital may not reduce its share capital except as authorized by law
 Distributions of a company’s assets to its members, whether in cash or otherwise, may only be made out of profits available
for the purpose.
Reduction of share capital
Reduction of share capital can be done by acquisition of own shares
Acquisition of own shares
S658: a company is not permitted to acquire its own shares (repurchase of shares or redemption of shares ), except in accordance
with part 18 – CA 2006
Redeemable shares
S684-689 provide reules for the issue and redemption or redeemable shares (hoàn lại cổ phần)
 The terms for redemption of shares must be met. These terms are determined by the Articles or by the directors if being
authorized (s685)
 Shares cannot be redeemed unless ther are fully paid (s686)
How do you understand redemption of shares?
Ex: mrA buy 10 shares with 10 pounds, and those share redeemed by the company, how much can mrA receives? 10 pounds or
more than 10 pounds – mrA may receives more than 10 pounds. Ex: mrA has redeemed 20 pound from the company
How much share capital reduce??? Just 10 pounds – the nominal value of the shares
 Redeemable shares must then be cancelled, and the company must reduce its issued share capital by the nominal value of the
cancelled shares (s688)

Repurchase of shares
S694-701
Difference between a repurchase and a redemption
 In a repurchase, the buyer and the seller need to agree to terms and conditions of repurchase at the time of the repurchase
  In a redemption, the shares will have been issued as redeemable shares, so that the terms and conditions of the re-acquisition
will be known from the outset.
Notes
- Share cannot be repurchased unless fully paid (s691)
- The repurchased shares must be cancelled, and the company reduce its issued share capital by the nominal value of the
cancelled
Repurchased Redemption
Market value Nominal value
If the shareholders make a request, the terms are not set out at the The terms are already set out the articles
articles, only the set up once when the shareholders’ request

Distribution
(i) The first and primary rule (s830), applicable to all companies, is that a company may not make distribution to any of its
members except out of profits which are availble for the purpose
(ii) Additional limit on distribution by public companies:
Net asset test (giá trị tài sản rồng – chưa trừ đi các nghĩa vụ trả nợ): công ty không được chia lợi nhuận nếu như net asset test
không vượt qua called-up share capital + undistributed preserve
S831 states that a public company may only make a distribution up to the amount by which its net assets exceed the aggregate of
its called up share capital and undistributable reserves (s731).
 CHAPTER 4 CORPORATE GOVERNANCE
(QUẢN TRỊ CÔNG TY)
I. Shareholders’ meeting
1.1 Definition
OECD principales of Corporate Governance 2004:
“Corporate governace involves a set of relationships between company’s management, its board, its shareholders and other
stakeholders. Corporate governance also provides the structure through which the objectives of the company are set and the mean
of attaining those objectives and monitoring performance are determined”
Report of the Cadbury committee on the financial aspects of corporate governance 1992:
“Corporate governance is a system [of rules] by which companies are directed and controlled”
The UK corporate governance framework
The UK corporate governace framework is framework of legislation, codes and voluntary practices.
The UK corporate governance code sets out good governance principles and practice.  applied to listed companies on a
“comply or explain” basis [is not legal documents]
The listed companies they have a choice with comlying or not complying with the code, but if they choose not comply they have to
give explanation.
1.2 Different systems of CG
Three power
o Sovereign power : is held by the shareholders
o Executive power: difines the strategy and implements the operational decisions that guide the company. This is exercised by
the management body of a company (directors and board of directors)
o Supervisory power: ensures that the exercise of executive power is compatible with the corporate’s benefits, and the
company’s permanence (supervisory board)
Shareholders in the company they owner/ belong to all of 3 power. Excutive power and supervisory power
The one-tier system
Shareholders just established only 1 board
- The single body excercises both the executive and the supervisory powers at the same time – “board of directors’ or
sometimes “management board” in the various national laws.
- Executive members are responsible for day-to-day management of the company while the non-executive members have the
power to supervise management by the board members.
Two types of directors: the executive directors exercise executive power and the non-executive members are independent
directors, they exercise supervisory directors.
In VN, we have choice the one-tier system and the other system. How can we know independent directors or the non-executive
directors? What are the standards the non-executive directors in VN? Article 155
Do you think those standards in article 155 can ensure independents of non-executive directors [are good enough]? Is not good
enough. Relationship [supervisory powers relate with executive powers]
Ex: MrA is the non-executive directors, mrA is a bestfriend mrB (executive directors), who is executive directors? Do you think
mrA is truly independent?How can mrA exercises the supervisory directors?
In the UK, it is a open list, but in VN provide a fix list.
The two-tier system
Separates the executive power from supervisory power by stipulating that they be exercised by two different bodies: a
management body and a supervisory body.
Shareholders established 2 boards (executive power and supervisory power)
In VN, you can choose the one-tier system and the two-tier system (traditional system).
Which system do you think better? It’s the one-tier system, the non-executive of directors who is responsble for the superviosory
power, they are inside the BOD, they are members of directors, they can attend a meeting of the BOD, they can vote so they know
what is going on inside the BOD. The supervisory power can be exercise better by the non-executive directors. Because the non-
executive directors is a person having supervisory power.
There are 2 difference boards, the supervisory system separates board of directors, what is going on board of directors what
business we taking about? Does the supervisory board really know what is going on inside the board of directors? The superviser
can not attend a meeting of the BOD.
Risk: the one-tier system - if the non-executive directors are not really independent from the executive directors and other
manager of the company. This system is becomes very risky for coverage government of the company. The one-tier system is best
only when the non-executive directors are truly independent.
 The mixed system
Offers companies a choice between the one-tier system and the two-tier system
In VN have the mixed system because we can choose one-tier or two-tier
The UK CG system (the one-tier system)
The key organs of governance of a company are the board of directors and the shareholders:
- As a governing organ of the company, the shareholders are often referred to as the ‘shareholders in general meeting’.
- The board of directors is principal organ of management.
In UK, shareholders just sets up the board of directors, principal governance organ the management.
II. Shareholders’ meeting
II.1Power of Shareholders
- The role of shareholders in the governance of any company is established by:
∆ The AOA
∆ Statue law
∆ Cases recognizing the power of the shareholders in certain circumstances.
- Statutory powers of shareholders : hand-outs
- Default powers of shareholders : management power will revert to the shareholders in circumstances where the board is
unable to act
Nếu như the BOD thất bại trong việc điều hành công ty thì sẽ trao trả lại cho shareholders. Only the BOD can exercise the
executive of directors, but the shareholder is the true owner of the board, and they give the power to the board.
[Barron V Potter [1914] Ch 895]
- How shareholders exercise their powers: by taking decision (in the form of resolutions)
II.2Meetings
Shareholder meetings, also called company meetings, are an important part of shareholder decision-making
Quorum
The minimum number of people necessary at a meeting (s.318)
- In the case of a company has only one number, one qualifying person present at a meeting is a quorum
- Apart from the above circumstance, and unless the articles require a higher number, two shareholders present at a meeting
are a quorum.
In VN, chỉ cần sở hữu 50% tổng số cổ phần có thể tiến hành cuộc họp (ex: 1 người sở hữu 50%  cuộc họp được tiến hành), but
in UK, thì dù có sở hữu 50% tổng số cổ phần nhưng nhưng không đủ 2 shareholders thì cuộc họp cũng không được tiến hành vì
đã là cuộc họp thì phải có ít nhất 2 người. If you are a major shareholders, but you forget come to the meeting, you give up your
right attend the meeting.
Types of meetings
 Annual general meetings
- Every public company must hold an annual general meeting (AGM) within six months of the end of its financial year and if
the company fails to do so, a criminal offense is committed by every director and the company secretary (s336)
In the private company base on the AOA
 General meetings (mid-term)
- Call of directors (s302)
- Request of holders of at least 5% of the voting rights (s303; 304)  the directors have to call a general meeting within 21 days
of such request or hold the meeting within 28 days of the request.
- If the directors fail to call, the shareholders who made request may call a meeting and hold it within 3 months of the request
(s305).
Ex: MrA (holder) decided to call a meeting: whether or not mrA sent a request to the BOD and has waited 21 days?
2 steps:
Sent a request to the BOD
Waiting 21 days
Notice of general meetings
All shareholders and directors are entitled to receive notice of every general meeting unless the articles provide otherwise (s310).
A notice must state the general nature of the business to be dealt with as well as the time, date and place of the meeting (s311).
Ex: if the person (the minority shareholders) own 0,5%  the company must sent the notice of general meetings
II.3Resolutions
Public companies: resolutions of the shareholders of the public company must be passed at shareholders’ meetings , held and
conducted in accordance with the Act.
Private companies: shareholders pass resolutions either at shareholders’ meetings or by written resolutions [s288(1)].
Proportion of votes needed to pass resolutions
The two basic types of resolutions passed by shareholders are ordinary resolutions and special resolutions.
 Ordinary resolutions must be passed by not less than a simple majority 50% + 1 vote (s282)
 Special resolutions must be passed by not less than 75% (s283)
How do we able to know which matter is ordinary resolutions or special resolutions, you must to read the AOA.
Unanimous informal decisions can be effective
A resolution that is UNANIMOUSLY passed by shareholders still has effectiveness without the need for compliance with formal
procedures (the “duomatic principle”)
“Một nghị quyết được thông qua bằng tỉ lệ tuyệt đối mặc dù quy trình thông qua không tuân thủ theo quy định của pháp luật”
Chỉ có trái quy trình thông qua mới được áp dụng, còn trường hợp illegal content of resolution, quy trình đúng thì không được
áp dụng.
Re Express Engineering Works Ltd [1920] 1 Ch 466 (CA)
Euro Brokers Holdings Ltd v Monecor (London) Ltd [2003] BCLC 506 (CA)]
Voting methods
Vote on a show of hands
 Used at shareholders meetings
Poll vote (tỉ lệ)
Written resolution vote  used for written resolutions and available to private companies only
Vote on a show of hands is based on shareholders in attendance at a meeting raising their hands to indicate support for, or
opposition to, a resolution put to the meeting.
Ex: 6 shareholders
A & B 400 ordinary shares/ per
C & D 100 ordinary shares/ per
E 200 ordinary shares
F 300 preference shares (carry no votes)
At the meeting: E is absent
Special resolution:
A, B approve
C, D disapprove
2 of 4 say yes  50%  not be pass (75%)  your shareholdings is not a matter
And ordinary resolutions not be pass (50% + 1 vote)
Poll vote
A poll vote is not based on the number of shareholders who vote but on the voting rights of the shareholders who vote
Total number of votes: A+B+C+D= 1000votes
A, B: 80%  pass (75%)
Written resolution vote
Written resolution vote is based on the voting rights of all shareholders eligible to vote.
(!) Written resolution can only be used by private companies and even private companies cannot use the written resolution
proceudre to remove a director or to remove an auditor before expiry of his term of office (s188, 288 (2))
Chỉ được sử dụng bởi private companies, và không được sử dụng phương pháp này để miễn nhiệm giám đốc và kiểm toán viên
trước thời hạn kết thúc nhiệm kì
Special resolution:
A, B, C approve
No meetings, A+B+C = 900votes/1200= 75%  pass
Which methods is the best?
Proxies and corporate representatives
Proxy: a person appointed by a shareholder to vote at a general meeting. The proxy can speak at the meeting and vote on the
show of hands and on the poll. The proxy need not be a shareholder of the company (s324)
Corporate representatives: is an individual who represent a company X at any meeting of a company of which company X is a
shareholder
 The representative has the full rights of the corporate shareholder he or she represents (s323)
Ex: Company X (is not a real person) is a shareholder of company Y, a company is a shareholder of other company, then
appointed representative is a must. When you are an invidual shareholder, having or not having proxy depends on your choice.
III. Board of directors
III.1 Board powers and decision-making
A. Powers of the board
The board of directors is a body distinct from the individual directors. The board collectively is an organ of government of
the company, entrusted by the articles with the resonsibility to manage the company and to exercise all the powers of the
company.
Ex: The BOD (A, B, C, D) – Can each of mrA, B, C, D perform the right and duties form the board? mrA is a member of the
BOD, so can mrA perform all of the rights and duties on behalf of his BOD?
Issued new reference shares, mrA is member of the BOD, mrA exercised all of the rights and duties on behalf of his board? Of
course not because the authority to issue new shares is a power of directors not of mrA
B. Board decision-making
Statule law does not regulate board decision-making. Establishing the rules for how the board of directors is to take decision is an
important part of the articles of both private and public companies
In VN, condition meeting conducted phải theo luật DN, Đ157 ¾ of the board, second time ½ of the board
Condition resolution conducted – K12157
UK Law is better than VN Law
III.2 Defination and classification of directors
- The details of directors are recorded by the company in the register of directors (s162 CA 2006) and their appointment is
notified to the registrar of companies (s167)
- S250(1) of the CA 2006: “Director includes any person occupying the position of director by whatever name called”
A person who is not legally appointed as director but if effect that person is exercising a power as director, so that person is a
director.
Ex: mrA (major shareholder) is not a director, not appointed director, he just a major shareholder of the company, because
major shareholder effect he can exercises some power of director  mrA is a director but he is not legally appointed director
Một người không cần giữ vị trí chính thống là giám đốc có thể là legally as directors
 De Jure Directors: director appointed in accordance with the articles of association who has agreed to become a director and
the appointment of whom is registered and filled in accordance with the requirements of the CA.
 De Facto Directors : person who has not been legally appointed to be director or whose appointment has terminated, but
opened occupy and assume the position of director, despite a lack of authority and right to act.
Smithton Ltd v Naggar [2014] EWCA Civ 939
Ex: mrA is just a major shareholder, not legally appointed director, so he exercises power of director  mrA is recognizes a De
Facto Directors
 Shadow directors: (s251) means a person in accordance with whose directions or instructions the directors of the company
are accustomed to act (except where that person gives advice in a professional capacity like a solicitor or accountant (s251(2))
Ex1: mrA is a shareholder, he owns 90% of the shares of the company, the BOD must listen to mrA, mrA doesn’t have openly
occupy the position of directors, mrA can just stay in the shadow and gives directors to the BOD to act.
Ex2: mrB is a business strategy adviser of the BOD. He gives advice for the BOD, the BOD needs to listen the adiviser, mrA is
not a shadow director, because mrB just to give advice. Tới chừng nào thì mrB (a solicitor) will become shadow directors?
Whenever the advice of mrB becomes the directions or instructions to the BOD, then mrA becomes shadow directors.
What is the purpose of recognizing giám đốc thực tế và giám đốc ẩn? impose application and liability on them
The non-executive directors don’t always independent the director, only when the non-executive directors can satisfy the status/
the list of standard to become independent directors, then we will be consider independent. The non-executive directors do not
manage the company, it just supervisory the company.
Trade and Industry v Deverell [2000] 2 WLR 907
Both de facto and shadow directors owe the general duties of directors set out in Part 10 of the CA 2006
3.3 Appointing and removing directors
 Executive and non-excutive directors
 Indepentdent directors
Composition of a board
A private company must have at lease one director and a public company must have a minimum of two directors (s154 CA 2006)
but no statutory maximum number of directors is set for either private or public companies.
- A person will be not permitted to act as a director if he falls into one of these categories:
 A person who hast not attanied the age of 16 (s257 CA);
 A bankrupt person (company directors Disquilification Act (CDDA) 1986, s11);
 Persons subject to a disqualified order or an undertaking in lieu thereof, under the CDDA 1986;
In VN, limitation about maximum number (at least 3 and maximum 11)
In VN, K2Đ17 LDN2020 (18t) – luật phá sản không áp dụng cho cá nhân
In UK, luật phá sản áp dụng cho cá nhân, apply cho TA, TA cut down the debt và have new scheduled cho món nợ
Appointing directors
- The CA 2006 is silent on how directors are to be appointed  rules regarding appoitment of directors are normally set out in
the articles.
Shareholders have a right appointed the directors
- In general directors are appointed or removed by a resolution passed by a mojority of shareholders present and voting at a
shareholders’ meeting
Removal of directors
S168(1) CA 2006: “A company may, by ordinary resolution at a meeting, remove a director before the expiration of his office,
not with standing any thing in any agreement between it and him”
 the written resolution procedure cannot be used in remove a director
IV. Directors’ duties
Directors duties can be classified into:
 Management duties (s171-174)
 Conflict-of-interest duties (s175- 177)
IV.1 General Management Duties
Duty to act within powers (s171)
“A director of a company must –
- Act in accordance with the company’s constitution, and
- Only exercise powers for the purposes for which they are conferred.”
Ex1: Company A’s articles: loans in excess of 200k to be approved in advance by shareholders
Without shareholder approval, the directors unanimously resolved to enter into a loan with a third-party for 500k
Has the BOD violated the duty to act?
Ex2: Company A Ltd’s artilces: the board has the power to issue new share
Company A is at the edge of being taken over by Company B who controls 50% of Company A’s shares
The directors of Company A have decide to issue new shares, which makes Company B unable to complete its acquisition
Reaching duties to act the powers, HĐQT có sử dụng đúng mục đích quyền hạn của mình để phát hành cổ phiếu mới hay không?
Is the BOD using the power issue new shares for the correct purpose on which of this power giving to them - To raise the share
capital, to expense the size of the company more capital – main purpose to giving this power. The board of directors using this
power to prevent the company B from taking over company A, it is wrongful purpose?
To determine whether or not there has been a breach of this duty:
∆ Ascertain the nature of the power
∆ Define the limits within which it maybe excercised;
∆ Examnine the substantial purporse for which it was excercised;
∆ Reach a conclusion whether the exercise was proper or not
[Howard Smith v Ampol Petroleum Ltd [1974] AC 821 (PC)]-
Duty to promote the success of the company (s172)
A director must act in the way he considers in good faith would be most likely to promote the success of the company for the
benefit of the shareholders
A director must exercise power in the way that he thinks it is the best to promote the best. Whether or not the directors has acted
to the good faith (mind of person)?
Ex: The BOD decided to left the company to signs the contract and later the contract is fail  Has the BOD breach the duties to
the promote? Time to the BOD makes the decided – they truly belive that the contract is success - financial document, statistic,
some evaluation – these evidences to see whether or not the directors is exactly
 Courts consider the beliefs of the director
Courts have introduced an objective dimension test into consideration of whether or not the duty has been breached.
o Evidence that the director did not stop to consider the interests of the company
o If no intelligent and honest person in the position of the director could in the circumstances have reasonably believed he was
acting in the interests of the company, the courts will find that the duty has been breached.
Duty to exercise independent judment (s173)
“(1) a director of the company must exercise independent judgment.
(2) This is duty not infringed by his acting---
+ In accordance with an agreement entered into by the company that restricts the future exercise of discretion by its directors,
or
+ In a way authorised by the company’s constitution.”
(!) Directors seeking consultation from solicitors, advisers
When the BOD listen or take adviser – các giám đốc phải có sự đánh giá riêng của mình về lời khuyên của adviser – it is
independent judment
Duty to exercise reasonable care, skill and diligence (s174)
- “the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried
out by the director in relation to the company, and
- The general knowledge, skill experience that the director has.”
Ex: MrA is a director of Company A Ltd (a Real-Estate Company)
MrA made a decision on purchasing a building. Later on, it turned out that Company A has purchased the building that did not
worth the price.
To become a real estate director:
- Significant professional experience in real estate development and sales
- Educational qualifications: a bachelor’s degree and a master’s degree in real estate, engineer, business, or finance, a liscensed
real estate broker
- A number of years of work experience in business administration or finance
- Other professional qualifications and desired skills that each particular company may require.
Khi nào thoả hết các quy định này và đã tìm kiếm mọi nguồn nhưng vẫn áp dụng sai thì mới vi phạm duty này, vì mrA chưa có
kinh nghiệm nhưng đã xem xét kỹ lưỡng nhưng vẫn thất bại thì không áp dụng
IV.2 Conflict of-interest duties
Conflict of-interest duties are the duties imposed on directors primarily to discourage them from acting in their own self-interest
or the interest of another person that is not their company.
A breach of conflict of interest duty can aslo entail a breach of a management duty (not true on reverse)
Duty to avoid conflicts of interest (s175) (trach nhiem tranh xay ra xung dot loi ich)
A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts , or
possibly may conflict, with the interests of the company.
Ex1: A (director 1– major shareholder company 2) – 1 and 2 enter transaction –
Ex2: A (director 1) and his wife (director 2 – only owner) – 1 and 2 enter transaction – conflict – tai san chung – relationship
between husband and wife
Co phai tat ca cac giao dich conflict voi giam doc deu bi cam hay ko?
The board of directors can authorize conflicts of interest (a director is not liable for the breach of this duty if the conflict of
interest is approved by the board)
The director having the self-interest is not allowed to vote at the meeting of the board.
CASE LAW:
∆ Directors who leave or are in the process of leaving the company are still subject to the duty to avoid conflicts of interest
 [Canadian Aero Service Ltd V O’Mallym [1973] 40 DLR (3d) 371]
(A director is in breach of this duty if he takes advantage of an opportunity that the company would otherwise be interested in but
cannot or do not wish to persue a corporate opportunity).
Duty NOT to accept benefits from third parties (s176)
Directors must not accept benefits from third parties conferred by reason of his being a director or doing or not doing anything as
a director.
(!) receiving any benefit from a third party is a breach of this duty? In other to make a conclusion on breach of duty, we need
to examine whether or not the director has to do something in his own power director, in return of benefits that he has
received
Ex1: A (director – company A) tour – company B hotel 
Ex2: christmas gift
Third party benefits must be approved by the shareholders if a director wants to avoid liability (s180 (4b))
The shareholders not the board of directors
Duty to declare interest in transactions (s177 + 182) (nghia vu cong khai loi ich trong cac giao dich)
 Duty to declare any interest in proposed transactions (s177)
 Duty to declare any interest in existing transactions (s182)
If a director in any way, directly or indirectly, has interest in a proposed/ existing transaction or arragement with the company, he
must declare the nature and extent of the interest to the other directors at a meeting of the directors.
Directors contracting with their own company (GD co HD voi chinh cty cua minh)
A director enters into a contract with his company
 does the director violate the duty to avoid conflicts of interest (s175)?
Ex: mrA sells his house to the company  valid the duty? 
S175.3 This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company
Conditions for a contract between a director and his company
1. Duty to declare interest in proposed transactions (s177)
2. Contracts that must be approved by shareholders: other requirements under the company’s articles of association
(1) Substantial property transaction (s190) – cac giao dich co gia tri lon
- The object of these transactions: substantial non-cash asset (s190)
- An asset is a substantial assest if its value: (s191)
+ Exceeds 10% of the comoany’s asset value value and is more than 5000
+ Exceeds 100.000
NOTES
S190 also applies to a substantial property transaction between the company and a person who is connected with a director (the
person in s252, 253)
(2) Loans and similar arrangements to directors (s197)
(3) Long-term service contracts (s188)
(4) Payment for loss of office (s215)