Lecture Note

LECTURE NOTES
BUSINESS LAW AND BUSINESS ETHICS COURSE

Mr Bui Duc Giang – PhD in Law and Senior Lecturer in Law
Email: [email protected]
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Table of Contents
CHAPTER 1 – FUNDAMENTALS OF COMPANY LAW ............................................................................. 3
1.1. Company Establisment ....................................................................................................... 3
1.1.1. Introduction................................................................................................................................... 3
1.1.2. Capital Contribution .................................................................................................................... 5
1.1.3. Company Registration .................................................................................................................. 6
1.1.4. Company Charter ......................................................................................................................... 7
1.1.5. Corporate Personality .................................................................................................................. 7
1.2. Shares.................................................................................................................................... 8
1.2.1. Proprietary character of a share ................................................................................................. 8
1.2.2. Shares in a JSC ............................................................................................................................. 8
1.2.3. Rights and obligations carried by shares in a multiple member LLC ................................... 12
1.2.4. Transfer of Shares ...................................................................................................................... 13
1.2.5. Purchase by a company of its own shares ................................................................................. 14
1.3. Corporate structure, governance and management ....................................................... 16
1.3.1. General ........................................................................................................................................ 16
1.3.2. Multiple member LCC ............................................................................................................... 17
1.3.3. JSC ............................................................................................................................................... 19
1.3.4. Contract Approvals .................................................................................................................... 22
1.4. Company Meetings and Resolutions ................................................................................ 24
1.4.1. General ........................................................................................................................................ 24
1.4.2. Meetings of the Members’ Council of a multiple member LLC ............................................. 25
1.4.3. Meetings of the General Meeting of Shareholders ................................................................... 27
1.4.4. Meetings of the Board of Directors ........................................................................................... 29
1.4.5. Resolutions................................................................................................................................... 30
CHAPTER 2 – FUNDAMENTALS OF CONTRACT LAW AND CONTRACT DRAFTING ................. 33
2.1. Contract Formation ................................................................................................................. 33
2.1.1. Definition of Contract ..................................................................................................................... 33
2.1.2. Contract Glossary and Language .................................................................................................. 33
2.1.3. Privity of Contract .......................................................................................................................... 34
2.1.4. Freedom of Contract ....................................................................................................................... 34
2.1.5. Formal Requirements ..................................................................................................................... 35
2.1.6. Contract Duration ........................................................................................................................... 35
2.1.7. Contents of a contract ..................................................................................................................... 36
2.1.8. Nullity of Contract .......................................................................................................................... 36
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2.1.9. Application Law and Jurisdiction.................................................................................................. 37

2.2. Contract Performance and Termination ............................................................................... 38
2.2.1. Performance .................................................................................................................................... 38
2.2.2. Amendment to a contract ............................................................................................................... 40
2.2.3 Contract Termination ..................................................................................................................... 40
2.2.4. Remedies for Breach of Contract................................................................................................... 43
2.2.5. Limitation of Actions ...................................................................................................................... 46
CHAPTER 3 – BUSINESS ETHICS ................................................................................................................ 47
3.1. Concept of Business Ethics ..................................................................................................... 47
3.2. Ethical Theories ....................................................................................................................... 47
3.3. Corporate Social Responsibility ............................................................................................. 48
3.4. Vietnamese law perspective .................................................................................................... 49
3.5. When do things become unethical? ........................................................................................ 50
3.6. Practical Advice ....................................................................................................................... 50
Business Law and Business Ethics Course (2023) – Hanoi School of Business & Management (HSB) – All rights reserved.
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CHAPTER 1 – FUNDAMENTALS OF COMPANY LAW
1.1. Company Establisment
1.1.1. Introduction
Types of business organisation
There are 4 types of enterprises which may be formed under Vietnamese law now in force:
limited liability company (LLC), joint stock company (JSC) (or shareholding company),
partnership and private enterprise. The first two types are most widely used in practice.
LLCs include LLCs with two members or more (multi member LLCs) and single member
LLCs:
• A multiple member LLC is an enterprise with 2 to 50 members being entities and/or
individuals. Members are liable for the debts and other proprietary obligations of the
company to the extent of the amount of capital contributed into it (Article 46.1 of Law
No. 59/2020/QH14 on enterprises dated 17 June 2020, as amended in 2022 (the
“LOEs”).
• A single member LLC is an enterprise owned by an entity or individual (the company
owner). The company owner is liable for all debts and other proprietary obligations of
the company to the extent of the amount of the charter capital of the company (Article
74.1 of the LOEs).
Pursuant to Article 111.1 of the LOEs, a JSC is a company, in which:
• The charter capital is divided into equal portions called shares;
• Shareholders may be entities or individuals; the minimum number of shareholders is
3 and there is no restriction on the maximum number;
• Shareholders shall be only liable for the debts and other proprietary obligations of the
company to the extent of the amount of capital contributed into it;
JSCs are divided into three subcategories: non-public JSC (private JSC), public JSC which is
not listed and public, listed JSC. JSC is the most popular form of company in Vietnam for the
time being.
Under Article 32.1 of Law No.54/2019/QH14 dated 26 November 2019 on Securities, a public
company means a JSC having completed registration of the status of public company with the
State Securities Commission of Vietnam and which is either:
• A company which has a minimum amount of paid-up charter capital of 30 billion VND
and in which at 10% of the number of voting shares is held by at least 100 investors not
being major shareholders1; or
• A company which has made a successful initial public offer of shares through
registration with the SSC.
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A major shareholder of a public company is a shareholder holding at least 5% of the total voting rights (Article
4.18 of the LOS).
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A public company is subject to additional rules and greater regulation than a non-public
company.
The Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) are the two
stock exchanges for listed companies in Vietnam. The Unlisted Public Company Market
(UPCoM) is folded into the HNX. At the end of June 2023, the total public companies on those
three exchanges is 1,600 of which 403 are listed on HOSE, 332 on HNX and 865 on UPCoM.
Under Article 177.1 of the LOEs, a partnership is an enterprise in which:
• There must be at least two members being co-owners of the company jointly conducting
business under one common name (unlimited liability partners). In addition to
unlimited liability partners, the company may also have limited liability partners;
• Unlimited liability partners must be individuals who shall be liable for the obligations
of the company to the extent of all of their assets;
• Limited liability partners may be entities or individuals and shall only be liable for the
debts of the company to the extent of the amount of capital they have undertaken to
contribute to the company.
A private enterprise is an enterprise owned by one individual who shall be liable for all
activities of the enterprise to the extent of all his assets (Article 188.1 of the LOEs).
Based on its ownership structure, a company may be:
• A State-owned enterprise which is an enterprise more than 50% of the charter capital
or total shares with voting rights of which are owned by the State (Article 4.11 of the
LOEs);
• An enterprise with foreign capital which is an enterprise with member(s) or
shareholder(s) being a foreign investor(s);
• A domestic enterprise being an enterprise without foreign capital.
The legislation on enterprises also recognises business household as a type of business

organization. Article 79.1 of Decree No.01/2021/ND-CP of the Government dated 4 January
2021 on registration of enterprises provides that:
“A business household shall be created and registered by an individual or the members of a

family household who shall be liable for all of its business activities by all of such individual
or members’ assets”.
In principle, foreign investors may set up all the types of companies mentioned above.
According to the Enterprises White Book 2022 released by the Vietnamese Ministry of
Planning and Investment, at the end of 2021, there were 857,551 enterprises in operation across
the country.
As LLCs and JSCs are used most in practice, the following sections and developments of this
course will rather focus on them.
Persons not eligible for creating and managing an enterprise

Article 17 of the LOEs provides a list of persons who are not eligible for creating and managing
an enterprise in Vietnam. This list includes inter alia:
• cadres, State officials and State employees in accordance with the Law on Cadres and
State Officials and the Law on State Employees;
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• officers, non-commissioned officers, career servicemen and national defence workers

and employees in agencies and units of the People’s Army of Vietnam; officers, career
non-commissioned officers and public security workers in agencies and units of the
People's Public Security of Vietnam, except for persons appointed to be authorized
representatives to manage the State capital contribution portions in enterprises or to be
managers in State owned enterprises;
• minors; and
• and persons who are prosecuted for criminal liability.
Persons not eligible for contributing capital or purchasing shares
Under Article 17.3 of the LOEs, the following categories of persons are not allowed to
contribute capital to, purchase shares in shareholding companies, LLCs and partnerships:
• State agencies and units of the people’s armed forces using State assets to contribute
capital to enterprises to make private profit for their own agencies and units;
• Entities not permitted to contribute capital to enterprises as stipulated in Law on Cadres
and State Officials and the Law on State Employees and the Law on Anti-Corruption.
Legal representatives
Not all executive directors of companies can represent those companies in dealings with third
parties or in judicial proceedings. This authority is given to a special person inside the company
called “legal representative”.
In case a JSC or LLC has more than one legal representative, their powers will be specified in
the company’s charter. If no such specification exists in the charter, each of them may legally
and validly represent the company (Article 12.2 of the LOEs).
Enterprise Code Number
Each company possesses an enterprise code number which is unique and indicated in its
Enterprise Registration Certificate. It serves also as its tax code number (Article 29 of the
LOEs).
1.1.2. Capital Contribution
Assets contributed as capital may be Vietnamese Dong, freely convertible foreign currency,
gold, land use rights, intellectual property rights, technologies, technical know-how and other
assets which can be valued in Vietnamese Dong (Article 34.1 of the LOEs).
The company will become the owner of those assets upon completion of the capital
contribution (Article 35 of the LOEs). In return, the contributors of capital will acquire the
capacity of members or shareholders and own shares in the company.
Pursuant to Article 4.34 of the LOEs,
“Charter capital means the total value of assets contributed or undertaken to be contributed
by members of the company and/or the owner of the company when establishing a LLC or
partnership; or means the total aggregate par value of shares sold or registered for
subscription when establishing a joint stock company”.
The law requires a legal capital or minimum capital, i.e. a minimum amount required for the
formation of a company, operating in certain conditional business lines, such as 3,000 billion
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VND for a commercial bank and 150 billion VND for a financial leasing company (Article 2.1
of Decree No. 86/2019/ND-CP of the Government dated 14 November 2019 regulating legal
capital of credit institutions and foreign bank branches), 700 billion VND for a company
operating in air transport and exploiting more than 30 aircrafts (Article 8.1(c) of Decree
No. 92/2016/ND-CP dated 1 July 2016 regulating condition business lines in the field of civil
aviation as amended in 2019).
On registration of a multiple member LCC or JSC, the contributors of capital become its first
members or shareholders and their names are entered on the register of members or register of
shareholders. Every such company must keep a register of its members or shareholders
detailing inter alia their names, addresses, and the extent of their shareholding (Articles 48 and
122 of the LOEs). A person agrees to become a member or shareholder by purchasing or
obtaining shares from the company or by acquiring shares from an existing member or
shareholder. A person who obtains the shares only becomes a member or shareholder of the
company when the company registers his name on the company register (Article 52.2 and 127.6
of the LOEs).
1.1.3. Company Registration
In order to a company for being validly formed, an application shall be lodged with the
competent Business Registration Office (BRO) under the Provincial Department of Planning
and Investment.
“An enterprise shall be issued with an enterprise registration certificate (ERC) when it
satisfies all of the following conditions:
(a) Its registered line of business is not prohibited from business investment;
(b) The name of the enterprise complies with the provisions of articles 37, 38, 39
and 41 of this Law;
(c) It has a valid application file for enterprise registration;
(d) It has paid in full the enterprise registration fee as stipulated by the law on
charges and fees”.
Under Article 28 of the LOEs,
“An ERC shall contain the following main contents:

1. Name of the enterprise and enterprise code number.
2. Head office address of the enterprise.
3. Full name, contact address, nationality and serial number of the personal legal
document in respect of the legal representative of a LLC or JSC; and in respect of an unlimited
liability partner of a partnership, and in respect of the owner of a private enterprise. Full name,
contact address, nationality, serial number of the personal legal documents in respect of a
member being an individual; name, enterprise code number and head office address of a
member being an entity in the case of a LLC.
4. Charter capital in the case of a company, and invested capital in the case of a private
enterprise”.
When an enterprise changes any content of its ERC, it must register such change with the BRO
within 10 days from the date of the change (Articles 30.1 and 30.2 of the LOEs).
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1.1.4. Company Charter
The charter is a key element of the company’s constitution and sets out the rules governing
the internal running of the company. Pursuant to Artile 24.2 of the LOEs, the charter of a
company shall contain the following main contents:
“(a) Name and head office address of the company; names and addresses of branches
and representative offices (if any);
(b) Business lines;
(c) Charter capital, total number of shares, classes of shares and par value of shares
of each class in the case of a JSC;
(d) Full names, contact addresses and nationalities of unlimited liability partners in
the case of a partnership; of the company owner or of members in the case of a
LLC; of founding shareholders in the case of a shareholding company. Capital
contribution portion and its value for each member in the case of a LLC or a
partnership, number of shares, classes of shares, par value of shares of each class
of founding shareholders in the case of a JSC;
e) Rights and obligations of members in the case of a LLC or a partnership; of
shareholders in the case of a JSC;
(f) Organizational and managerial structure;
(g) Number, managerial positions and rights and obligations of legal representatives
of the enterprise; allocation of rights and obligations of legal representatives
where the company has more than one legal representative;
(h) Procedures for passing decisions of the company; rules for resolution of internal
disputes;
(i) Bases and methods of determining wages, remuneration and bonuses of managers
and inspectors;
(k) Circumstances in which a member or shareholder shall have the right to require
the company to redeem its capital contribution portion in the case of a LLC or its
shares in the case of a JSC;
(l) Principles for distribution of after-tax profit and dealing with losses in the
business;
(m) Circumstances for dissolution, procedures for dissolution and procedures for
liquidation of the assets of the company;
(n) Procedures for amendment of or addition to the charter of the company”.
The following table summarises authority for amending the company charter:
Type of company Who can amend? Legal basis

Multiple member LLC Members’ Council Art.55.2(k) of the LOEs
Single member LLC Company Owner Arts. 76.1(a) and 2 of the
LOEs
JSC General Meeting of Art.138.2(e) of the LOEs
Shareholders
Partnership Members’ Council Art.182.3(b) of the LOEs
1.1.5. Corporate Personality
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A company shall possess a legal personality as from the date of issuance of its Enterprise
Registration Certificate (Articles 46.2, 111.2 and 177.2 of the LOEs and Article 86.2 of the
Civil Code No.91/2015/QH13 dated 24 November 2015 (the “Civil Code”)).
Its legal personality provides the company with rights and also subjects it to duties (Articles
74.1 and 86.1 of the Civil Code). This enables it with the appropriate capacity to enter contracts,
own property, sue, be sued, be subject to criminal laws, and so on. These are rights and duties
that are independent of the members and shareholders of the company, its directors or
employees.
The company’s legal existence will cease on its dissolution or declaration of its bankruptcy.
1.2. Shares
1.2.1. Proprietary character of a share
A share means a share in the company’s charter capital. It is the expression of a proprietary
relationship between the company and a member or shareholder. A member or shareholder is
a proportionate owner of the company and owns the shares. Shares themselves are property
which can be transferred. They are intangible moveables.
1.2.2. Shares in a JSC
General
Under Article 114 of the LOEs, a JSC must issue ordinary shares and may create preference
shares. Those preference shares include:
• Redeemable preference shares;
• Dividend preference shares;
• Voting preference shares; and
• Other preference shares as stipulated in the charter of the company and in the securities
legislation.
These preference shares carry rights in preference to ordinary shares.
Persons eligible to purchase dividend preference shares, redeemable preference shares and
other preference shares shall be stipulated in the charter of the company or decided by the
General Meeting of Shareholders (Article 114.3 of the LOEs).
Only organizations authorized by the Government and founding shareholders have the right to
hold voting preference shares. Voting preference of founding shareholders shall be effective
within 3 years as from the date on which the company is issued with an ERC. Voting rights
and the duration of voting preference with respect to voting preference shares held by the
organization authorized by the Government shall be stipulated in the charter of the company.
Upon expiry of the duration of voting preference, voting preference shares shall be converted
into ordinary shares (Article 116.1 of the LOEs).
Ordinary shares may not be converted into preference shares. Preference shares may be
converted into ordinary shares pursuant to a resolution of the General Meeting of Shareholders
(Article 114.5 of the LOEs).
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Share certificates are certificates issued by a JSC, book entries or electronic data certifying the
ownership of one or more shares of such company (Article 121.1 of the LOEs).
The rights and duties attached to owning a share depend upon both the LOEs (generally
obligatory) and the company’s charter (a matter of contract).
Under Article 135.1 of the LOEs, payment of dividends on preference shares shall be made in
accordance with the respective conditions applicable to each class of preference shares.
Ordinary Shares
Ordinary shares are issued without any special rights being attached to them. They are not
subject to limited voting rights as in case of dividend preference shares or redeemable
preference shares.
Founding shareholders must together register to subscribe at least 20% of the total number of
ordinary shares which may be offered for sale when registering establishment of the JSC
Pursuant to Article 135.2 of the LOEs, dividends on ordinary shares shall be determined on the
basis of the realized net profit and payment for dividends shall be sourced from profit retained
by the company. A JSC may pay dividends on ordinary shares only when the company satisfies
all the following conditions:
• The company has fulfilled its tax obligations and other financial obligations in
accordance with law;
• The company has made appropriation for all funds of the company and has made
up for previous losses in accordance with law and the charter of the company;
• Upon payment of all dividends, the company will still be able to satisfy its debts
and other property obligations which become due.
Pursuant to Article 115.1 of the LOEs, ordinary shareholders have the following rights:
“(a) To attend and express opinions at meetings of the General Meeting of Shareholders
and to exercise the right to vote directly or through an authorized representative
or in other forms provided in the charter of the company and in law. Any ordinary
share shall carry one vote;
(b) To receive dividends at the amount decided by the General Meeting of
Shareholders;
(c) To be given priority in subscribing for new shares in proportion to the ratio of
ownership of ordinary shares each shareholder holds in the company;
(d) To freely assign their shares to other persons, except in the cases provided in
articles 120.3 and 127.1 of this Law and other relevant laws and regulations;
(e) To sight, consult and make an extract of information about names and contact
addresses on the list of shareholders with voting rights; to request amendment of
incorrect information about them;
(f) To sight, consult and make an extract or copy of the charter of the company,
minutes of meetings of the General Meeting of Shareholders and resolutions of the
General Meeting of Shareholders;
(g) Upon dissolution or bankruptcy of the company, to receive part of the remaining
assets in proportion to the ratio of ownership of shares in the company”.
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Redeemable preference shares
In accordance with Article 118.1 of the LOEs, a redeemable preference share carries the
possibility of being redeemed or bought back by the company at some future at the request of
its holder or in accordance with the conditions stipulated in the redeemable preference share
certificate and the charter of the company.
Rights of redeemable preference shareholders are the same as those of ordinary shareholders,
but they do not have the right to vote, the right to attend meetings of the General Meeting of
Shareholders or the right to nominate candidates to the Board of Directors and the Inspection
Committee, except for the case of voting in a move to adversely vary the rights and duties set
out in the shares (Article 118.3 of the LOEs).
Dividend Preference Shares
“A dividend preference share is a share for which a dividend is paid at a rate higher than that
paid for an ordinary share or at an annual fixed amount. Annually distributed dividends shall
include fixed dividends and bonus dividends. Fixed dividends shall not depend on the outcome
of the business of the company. The specific amount of fixed dividends and method for
determination of bonus dividends shall be specified in dividend preference share certificates”.
Furthermore, upon dissolution or bankruptcy of the company, dividend preference shareholders
shall be to receive part of the remaining assets in proportion to the ratio of ownership of shares
in the company after the company has paid in full its debts and redeemable preference shares
(Article 117.2(b) of the LOEs).
They also have other rights as those of ordinary shareholders but they do not have the right to
vote, the right to attend meetings of the General Meeting of Shareholders or the right to
nominate candidates to the Board of Directors and the Inspection Committee, except for the
case of voting in a move to adversely vary the rights and duties set out in the shares (Article
117.3 of the LOEs).
Voting preference shares
Under Article 116 of the LOEs,
• a voting preference share is an ordinary share which carries more votes than other
ordinary shares. The number of votes per voting preference share shall be stipulated in
the charter of the company.
• Holders of voting preference shares shall have other rights as ordinary shareholders
but may not assign such shares to other persons, except in case of assignment pursuant
to a legally effective judgment or decision of a court or inheritance.
Other rights of shareholders

Shareholders shall have other rights including:
• A right to assign his shares subject to restrictions in the charter or law (Article 127.1
of the LOEs);
• A right to use his shares as security (Article 15 of Decree No.21/2021/ND-CP of the
Government dated 19 March 2021 providing detailed guidelines for the
implementation of the Civil Code’s provisions on secured transactions);
• A right to make a gift of part or all of his shares in the company to another individual
or organization or use his shares to pay debts. The individual or organization receiving
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such gift or receiving payment of debts by shares shall become a shareholder of the
company (Article 127.5 of the LOEs).
• Where a shareholder being an individual dies, the heir of such shareholder under a will
or at law shall become a shareholder of the company (Article 127.3 of the LOEs).
• A right of a shareholder or shareholders owning at least 1% of the total ordinary shares
to take legal action on his/their own name or on behalf of the company against a
member of the Board of Directors or the director or general director of the company
(Article 166 of the LOEs).
• Under Article 115.2 of the LOEs, a shareholder or shareholders holding at least 5 % of
the total ordinary shares in the company or another smaller percentage stipulated in the
charter may (i) request the calling of a meeting of the General Meeting of Shareholders;
(ii) sight, consult and make an extract of the book of minutes and resolutions and
decisions of the Board of Directors, mid-year and annual financial statements, reports
of the Inspection Committee, and contracts and transactions which must be passed by
the Board of Directors and other data except for data relating to commercial secrets or
business secrets of the company and (iii) request the Inspection Committee to inspect
each specific issue relating to the management and administration of the operation of
the company where it is considered necessary.
• Within 90 days from the date of receipt of a resolution or the minutes of a meeting of
the General Meeting of Shareholders or the minutes of the results of vote-counting by
way of written opinions from the General Meeting of Shareholders, a shareholder or
shareholders holding at least 5 % of the total ordinary shares in the company or another
smaller percentage stipulated in the charter shall have the right to request a court or an
arbitral tribunal to cancel the resolution or part of the contents of the resolution of the
General Meeting of Shareholders if (i) the sequence and procedures for convening the
meeting and issuing the decision of the General Meeting of Shareholders seriously
breached the LOEs and the charter of the company; or (ii) the content of the resolution
breaches the law or the charter of the company (Article 151 of the LOEs).
Obligations of shareholders
Shareholders of all types shall be subjected to certain obligations. Those are provided in Article
119 of the LOEs as follows:
“Article 119 Obligations of shareholders
1. To pay in full and timely for the shares undertaken to be subscribed.

2. Not to withdraw the ordinary share capital contributed from the company in any form,
except where shares are redeemed by the company or other persons. Where a
shareholder withdraws all or part of the share capital contributed not in accordance with
this clause, such shareholder and any person with related interests in the company must
be jointly liable for debts and other proprietary obligations of the company to the extent
of the value of shares withdrawn and any damage occurring.
3. To comply with the charter and the rules on internal management of the company.
4. To observe resolutions and decisions of the General Meeting of Shareholders and the
Board of Directors.
5. To preserve confidentiality of information provided by the company pursuant to the
company charter and law; and only to use information provided in order to perform and
protect their lawful rights and interests, and not to distribute, copy or send such
information to other organizations or individuals.
6. Other obligations in accordance with this Law and the charter of the company”.
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1.2.3. Rights and obligations carried by shares in a multiple member LLC
Pursuant to Article 49.1 of the LOEs, shares in a multiple member LLC confer upon its
members the following rights:
“(a) To attend meetings of the Members’ Council, to discuss, make recommendations

and vote on the matters within the authority of the Members’ Council;
(b) To have the number of votes in proportion to its capital contribution portion, except
for the case stipulated in article 47.2 of this Law;
(c) To have profit distributed to it in proportion to its capital contribution portion
after the company has paid taxes in full and fulfilled all other financial
obligations in accordance with law;
(d) To have distributed to it the remainder of the value of assets of the company in
proportion to its capital contribution portion in the company upon dissolution or
bankruptcy of the company;
(e) To be given priority in making additional capital contributions to the company
upon any increase of charter capital of the company;
(f) To dispose of its capital contribution portion by way of assignment of all or part of
its capital contribution portion, or by gift or other methods in accordance with law
and the charter of the company;
(g) To initiate legal action regarding civil liability on its own name or in the name of
the company against the chairman of the Members' Council, the director or general
director, the legal representative or other managers in accordance with article 72
of this Law;
(h) Other rights as stipulated in this Law and in the charter of the company”.
Furthermore, under Article 49.2 of the LOEs, a member or a group of members holding at least
10% of the charter capital or a smaller percentage as stipulated in the charter of the company
shall have the following rights:
• To request that a meeting of the Members' Council be convened to deal with issues
within its authority;
• To inspect, sight or consult transaction monitoring records, accounting books and
annual financial statements;
• To inspect, sight, consult or copy the register of members, minutes of meetings,
resolutions and decisions of the Members’ Council and other documents of the
company;
• To request a court to cancel a resolution or decision of the Members' Council within
90 days from the date of closing of a meeting of the Members' Council if the sequence,
procedures and conditions for holding such meeting or the contents of such resolution
or decision are inconsistent with or do not comply with the LOEs and the charter of
the company.
Where a member of the company holds more than 90% of the charter capital and where its
charter does not confer the above rights upon the other group of members, they shall
automatically have those rights (Article 49.3 of the LOEs).
Pursuant to Article 50 of the LOEs, the members of a multiple member LLC shall have the
following obligations:
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“1. To contribute in full and timely the amount of capital as undertaken and to be liable for
the debts and other property obligations of the company to the extent of the amount of
capital contributed to the company, except for the cases stipulated in articles 47.2 and
47.4 of this Law.
2. Not to withdraw its contributed capital from the company in any form, except for the
cases stipulated in articles 51, 52, 53 and 68 of this Law.
3. To comply with the charter of the company.
4. To observe resolutions and decisions of the Members’ Council.
5. To bear personal liability when performing the following acts in the name of the
company:
(a) Breach of the law;
(b) Conduct of business or other transactions not in the interests of the company and
thereby causing loss to other persons;
(c) Premature payment of debts in cases where the company is likely to be in financial
danger.
6. Other obligations as stipulated in this Law”.
1.2.4. Transfer of Shares
In a JSC
Under Article 127 of the LOEs, shares can be freely transferred between parties except in the
following cases:
• the company’s charter imposes restrictions on transfer. For example, a JSC’s charter
may give its legal representative the right to refuse to register shares that have been
transferred to others.
• Within a period of 3 years from the date of issuance of the ERC to the company,
ordinary shares of a founding shareholder may be freely assigned to other founding
shareholders, and shall only be assigned to persons not being founding shareholders
upon approval of the General Meeting of Shareholders. In this case, founding
shareholders intending to assign ordinary shares may not vote on the assignment of
such shares. Those restrictions do not apply to (i) additional ordinary shares which
founding shareholders have after registration of establishment of the enterprise, or (ii)
shares which have been assigned to others not being founding shareholders (Articles
120.3 and 120.4 of the LOEs).
In principle, where shares can and have been transferred, the company must be notified of the
change of shareholder.
The company must register changes to shareholders in the register of shareholders at the request
of the related shareholders within 24 hours of receipt of the request in accordance with the
charter of the company (Article 127.7 of the LOEs).
In line with Article 127.6 of the LOEs, once such registration is completed, the new shareholder
acquires all the rights attached to the shares (such as a right to vote at meetings, or a right to
receive a dividend) and is part-owner of the company.
14
The company is required to notify the Business Registration Office of change to its founding
shareholders or shareholders being foreign investors within 10 days following the change
except in the case of a listed company (Articles 31.1(b) and 31.2 of the LOEs).
In a multiple member LLC
Shares in a multiple member LLC are termed “capital contribution portion”. Pursuant to
Article 52.1 of the LOEs,
“Except in the cases provided in Articles 51.4, 53.6 and 53.7 of this Law, a member of a
multiple member LLC shall have the right to assign all or part of its capital contribution
portion to other persons in accordance with the following provisions:
(a) Offering such capital contribution portion for sale to all other members in
proportion to their respective capital contribution portions in the company on equal terms of
offer;
(b) Assigning to non-members on the same conditions as the offer applicable to other
members as stipulated in sub-clause (a) above when the other members of the company do not
purchase or do not purchase in full within thirty (30) days from the date of the offer”.
In principle, where shares can and have been transferred, the company must be notified of the
change of member.
The company must timely register changes to members in the register of members at the request
of the related member in accordance with the charter of the company (Article 48.3 of the
LOEs).
In line with Article 52.3 of the LOEs, once such registration is completed, the new member
acquires all the rights attached to the shares (such as a right to vote at meetings, or a right to
receive a dividend) and is part-owner of the company.
The company is required to register change to its members with the Business Registration
Office within 10 days following the change (Article 30 of the LOEs).
1.2.5. Purchase by a company of its own shares
A company may purchase its own shares in some exceptional circumstances.
“a member of a multiple member LLC may demand that the company redeem its capital
contribution portion if such member voted against a resolution or decision of the Members’
Council on the following issues:
(a) Amendment of or addition to the provisions of the charter of the company relating to the
rights and obligations of members and of the Members’ Council;
(b) Re-organization of the company;
(c) Other cases as stipulated in the charter of the company”.
The demand for redemption of capital contribution portions must be made in writing and sent
to the company within 15 days from the date on which the resolution or decision was passed
15
Such purchase will result in the reduction of the company’s charter capital (Article 68.3(b) of
the LOEs) which must be notified to the Business Registration Office within 10 days following
completion of the purchase (Article 68.4 of the LOEs). Such notification takes the form of a
registration of the change to the charter capital that will be, upon completion, updated in the
company’s Enterprise Registration Certificate (Articles 30.1 and Article 28.4 of the LOEs and
Article 51 of Decree No.01/2021 of the Government dated 4 January 2021 on registration of
enterprises).
In accordance with Articles 132 and 133 of the LOEs, a JSC may purchase its own shares in
the following three circumstances:
• At the request of a shareholder who has voted against a resolution on re-organization

of the company or on a change to the rights and obligations of shareholders stipulated
in the charter of the company. Such request must be made in writing and specify the
name and address of the shareholder, the number of shares of each class, the intended
selling price, and the reason for demanding redemption by the company. Such demand
must be sent to the company within 10 days from the date on which the General Meeting
of Shareholders passed the resolution in question.
• As decided by the company. In such case it may redeem no more than 30% of the total
number of ordinary shares already sold, and all or part of the dividend preference shares
already sold. The Board of Directors shall have the right to decide on redemption of no
more than 10% of the total number of shares of each class already sold within a period
of 12 months. In other cases, redemption of shares shall be decided by the General
Meeting of Shareholders (Article 133 of the LOEs).
• Where the holder of redeemable preference shares exercises his right to request the
company to purchase those shares.
Such purchase will result in the reduction of the company’s charter capital (Article 112.5(b) of
the LOEs).
“The company must register reduction of its charter capital corresponding to the total par
value of shares redeemed by the company within ten (10) days from the date of completion of
payment for redemption of shares, unless otherwise stipulated in the law on securities”.
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1.3. Corporate structure, governance and management
1.3.1. General
The following table summarises the various bodies of a company under the LOEs2:
Types of Company bodies enjoying or in charge of

enterprises Ownership Governance Management/Operation Control
Private
1 Enterprise Owner Enterprise Owner
Enterprise
Members’ Council (comprising
Members’
2 Partnership all members of the company)
Council
Single member
Company
3 LLC owned by Owner Owner
Chairman
an individual
Company
Single member
Chairman or
4 LLC owned by Owner Owner
Members’
an entity
Council
Multiple Members’ Council (comprising Members’
5
member LCC all members of the company) Council
General
Director or General
Meeting of
Board of Director
6 JSC Shareholders
Directors
(comprising all Inspection
shareholders) Committee or
State-owned Owner(s) (the Auditing
enterprises (in State & other Committee under
Similar to
the form of a owners in case the Board of
enterprises of
7 single member the State does Directors
categories 4,
LLC, multiple not own all
5 and 6
member LLC shares in the
or JSC) enterprise)
The members or shareholders of a company delegate the day-to-day management of the

business to director or general director and therefore possess no automatic rights of
management themselves. However, they can play a significant role in the company’s
governance. Depending on the shares held and the rights attached, members and shareholders
may attend meetings, vote on resolutions, and even seek to remove director or general director
and the legal representative or dissolve the company. The members or shareholders can
therefore seek to protect their rights and interests and hold the directors to account.
2
Trương Thanh Đức, “Kinh doanh sành luật”, Nhà xuất bản Chính trị Quốc gia Sự thật, 2021, 306.
17
1.3.2. Multiple member LCC
Pursuant to Article 54 of the LOEs,
“1. A multiple member LLC shall have a Members’ Council, a chairman of the Members’
Council and a director or general director.
2. A multiple member LLC being a State-owned enterprise as prescribed in article 88.1(b)
of this Law and any subsidiary of a State-owned enterprise as prescribed in article 88.1
of this Law must have an Inspection Committee; other cases shall be decided by the
company.
3. The company must have at least one (1) legal representative holding the position of
chairman of the Members' Council or director or general director. If the company
charter does not contain any relevant provision, then the chairman of the Members'
Council is the legal representative of the company”.
Article 55.1 of the LOEs provides that:
“The Members’ Council is the highest decision-making authority of the company and
comprises all individual members of the company and authorized representatives of
members being organizations of the company”.
Pursuant to Article 55.2 of the LOEs, the Members’ Council shall have the following rights
and obligations:
“(a) To make decisions on annual business plans and developmental strategies of the
company;
(b) To make decisions on any increase or reduction of the charter capital and on the
timing and method of raising additional capital; to make decisions on issuance of
bonds;
(c) To make decisions on projects for investment and development of the company;
on solutions for market development, marketing and technology transfer;
(d) To approve lending and borrowing agreements, contracts for sale of assets and
other contracts as stipulated in the charter of the company and valued at fifty (50)
or more per cent of the total value of assets recorded in the most recently published
financial statements of the company, or a smaller percentage or value as stipulated
in the charter of the company;
(e) To elect, remove or discharge the chairman of the Members’ Council; to make
decisions on the appointment, removal, discharge, signing and termination of the
contracts of the director or general director, the chief accountant, inspectors and
other managers stipulated in the charter of the company;
(f) To make decisions on salary, remuneration, bonus and other benefits for the
chairman of the Members’ Council, the director or general director, the chief
accountant and other managers stipulated in the charter of the company;
(g) To approve annual financial statements, plans for use and distribution of profits or
plans for dealing with losses of the company;
(h) To make decisions on the organizational and managerial structure of the company;
(i) To make decisions on the establishment of subsidiary companies, branches and
representative offices;
(k) To make amendments of or additions to the charter of the company;
(l) To make decisions on re-organization of the company;
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(m) To make decisions on dissolution or petition for bankruptcy of the company;

(n) Other rights and obligations in accordance with this Law and the charter of the
company”.
The powers of running the company are conferred upon the company’s director or general
director and legal representatives. They possess the authority to act as the company’s agent and
perform the tasks required. As the number of shareholders in a company increases, it would be
impractical or impossible for each to be involved in the management and control of the
company’s affairs and hence they appoint the director or general director and legal
representative who may exercise the powers conferred on the position by the company. They
may also wish to remove them from the position and hence they are provided with the
mechanisms to achieve this.
Under Article 63.1 of the LOEs, the director or general director shall be the person who
manages the day-to-day business of the company and shall be responsible to the Members’
Council for the exercise of his rights and the performance of his obligations.
Pursuant to Article 63.2 of the LOEs, his rights and obligations shall include:
“(a) To organize the implementation of resolutions and decisions of the Members’

Council;
(b) To make decisions on all matters relating to the day-to-day business of the
company;
(c) To organize the implementation of business plans and investment plans of the
company;
(d) To issue the rules on internal management of the company unless otherwise
stipulated in the charter of the company;
(f) To appoint, remove or discharge managers in the company, except for the
positions within the authority of the Members’ Council;
(e) To sign contracts in the name of the company, except for those within the
authority of the chairman of the Members’ Council;
(g) To make recommendations on the organizational structure of the company;
(h) To submit the annual financial statements to the Members’ Council;
(i) To recommend the plan for use and distribution of profit or for dealing with losses
in business;
(k) To recruit employees;
(l) Other rights and obligations as stipulated in the charter of the company, in
resolutions and decisions of the Members' Council, and in his employment
contract”.
Under Article 65.1 of the LOEs, the Inspection Committee comprises 1 to 5 inspectors. The
term of an inspector shall not exceed 5 years and inspectors may be reappointed for an
unlimited number of terms. The main role of the Inspection Committee is to supervise the
management work carried out by the Director or General Director and ensure the integrity of
the financing reporting. Nevertheless, the law is unclear on whether it is empowered to
supervise the Members of the Members’ Council.
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1.3.3. JSC
Article 137.1 of the LOEs recognizes 3 organizational, governance and managerial models for
JSCs as follows:
• The first model consists of a General Meeting of Shareholders, a Board of Directors,

an Inspection Committee and a director or general director.
• The second model consists of a General Meeting of Shareholders, a Board of Directors,
and a director or general director (the Inspection Committee is therefore not required)
if the company has less than 11 shareholders and the shareholders being entities
together own less 50% of the total shares of the company.
• The third one consists of a General Meeting of Shareholders, a Board of Directors, and
a director or general director provided that in this case, at least 20% of the number of
members of the Board of Directors must be independent members and there must be an
auditing committee under the Board of Directors. The organizational structure,
functions and duties of the auditing committee shall be regulated in the company charter
or in the operational rules of such auditing committee issued by the Board of Directors.
“Unless otherwise stipulated in the law on securities, an independent member of the

Board of Directors stipulated in article 137.1(b) of this Law must satisfy the following criteria
and conditions:
(a) Not being a person currently working for the company, the parent company or any
subsidiary company of the company; or not being a person having worked for the
company, the parent company or any subsidiary company of the company for at
least the three preceding years;
(b) Not being a person who is currently entitled to salary or remuneration from the
company, except for allowances which members of the Board of Directors are
entitled to in accordance with regulations;
(c) Not being a person whose spouse, natural or adoptive parent, child, adopted child
or sibling is a major shareholder of the company, or a manager of the company or
its subsidiary company;
(d) Not being a person directly or indirectly owning at least one per cent of the total
voting shares in the company;
(e) Not being a person who was a member of the Board of Directors or the Inspection
Committee of the company for at least five preceding years, except in the case of
appointment for two (2) consecutive terms”.
Where the company has only one legal representative, the chairman of the Board of Directors
or the director or general director shall be the legal representative of the company. Where it is
not stipulated in the charter, the chairman of the Board of Directors shall be the legal
representative of the company. Where the company has more than one legal representative, the
chairman of the Board of Directors and the director or general director shall automatically be
the legal representatives of the company (Article 137.2 of the LOEs).
Under Article 138.1 of the LOEs, the General Meeting of Shareholders shall include all
shareholders entitled to vote and shall be the highest decision-making authority of a JSC.
20
Pursuant to Article 138.2 of the LOEs, the General Meeting of Shareholders shall have the
following rights and obligations:
(a) To pass the developmental directions of the company;

(b) To make decisions on the classes of shares and total number of shares of each class
which may be offered for sale; to make decisions on the annual dividend rates for
each class of shares;
(c) To elect, remove or discharge members of the Board of Directors and inspectors;
(d) To make investment decisions or decisions on sale of assets valued at thirty five
(35) or more per cent of the total value of assets recorded in the most recent
financial statements of the company, except where the charter of the company
stipulates another percentage or value;
(e) To make decisions on amendments of and additions to the charter of the company;
(f) To approve annual financial statements;
(g) To make decisions on redemption of more than ten (10) per cent of the total number
of shares of each class already sold;
(h) To consider and deal with breaches by members of the Board of Directors and
inspectors which cause damage to the company and its shareholders;
(i) To make decisions on re-organization and dissolution of the company;
(k) To decide the budget or the total remuneration, bonuses and other benefits of the
Board of Directors and of the Inspection Committee;
(l) To approve the internal governance rules, and the operational rules of the Board
of Directors and of the Inspection Committee;
(m) To approve the list of independent auditing companies, and to decide on an
independent auditing company to conduct inspection of activities of the company,
and to remove the independent auditor when considered necessary;
(n) Other rights and obligations in accordance with this Law and the charter of the
company”.
Article 153.1 of the LOEs prescribes that:
“The Board of Directors is the body managing the company and has full authority, in the name
of the company, to make decisions and to exercise the rights and perform the obligations of the
company, except for those within the authority of the General Meeting of Shareholders”.
The Board of Directors shall have 3 to 11 members. The charter of the company shall specify
the number of members of the Board of Directors (Article 154.1 of the LOEs). The term of
office of its members shall not exceed 5 years; and they may be re-elected for an unlimited
number of terms. One individual shall only be elected as an independent member of the Board
of Directors of one company for no more than 2 consecutive terms of office (Article 154.2 of
the LOEs).
Pursuant to Article 153.2 of the LOEs, the Board of Directors shall have the following rights
and obligations:
“(a) To make decisions on medium term developmental strategies and plans, and on
annual business plans of the company;
(b) To recommend the classes of shares and total number of shares of each class which
may be offered for sale;
(c) To make decisions on selling unsold shares within the number of shares of each
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class which may be offered for sale; to make decisions on raising additional funds
in other forms;
(d) To make decisions on the selling price of shares and bonds of the company;
(e) To make decisions on redemption of shares in accordance with the provisions in
Articles 133.1 and 133.2 of this Law;
(f) To make decisions on investment plans and investment projects within the authority
and limits stipulated by law;
(g) To make decisions on solutions for market expansion, marketing and technology;
(h) To approve contracts for purchase, sale, borrowing, lending and other contracts
and transactions valued at thirty five (35) or more per cent of the total value of
assets recorded in the most recent financial statements of the company, except
where the charter of the company stipulates some other percentage or value, and
contracts and transactions within the decision-making authority of the General
Meeting of Shareholders as stipulated in clause 2(d) of Article 138 and clauses 1
and 3 of Article 167 of this Law;
(i) To elect, remove or discharge the chairman of the Board of Directors; to appoint,
remove, and sign contracts or terminate contracts with the director or the general
director and other key managers as stipulated in the charter of the company; to
make decisions on salaries, remuneration, bonuses and other benefits of such
managers; to appoint authorized representatives to participate in the members'
councils or general meetings of shareholders of other companies, and to make
decisions on the amounts of remuneration and other benefits of such persons;
(k) To supervise and direct the director or general director and other managers in
their work of conducting the day-to-day business of the company;
(l) To make decisions on the organizational structure and the rules on internal
management of the company, to make decisions on the establishment of subsidiary
companies, branches and representative offices and the capital contribution to or
purchase of shares of other enterprises;
(m) To approve the agenda and contents of documents for the meetings of the General
Meeting of Shareholders; to convene meetings of the General Meeting of
Shareholders or to obtain opinions in order for the General Meeting of
Shareholders to pass resolutions;
(n) To submit annual financial statements to the General Meeting of Shareholders;
(o) To recommend the dividend rates to be paid, to make decisions on the time-limit
and procedures for payment of dividends or for dealing with losses incurred in the
business operations;
(p) To recommend re-organization or dissolution of the company, or to request
bankruptcy of the company;
(q) Other rights and obligations in accordance with this Law and the charter of the
company”.
The director or general director shall manage the day-to-day business of the company, be
supervised by the Board of Directors, and shall be responsible to the Board of Directors and
before the law for the exercise of his delegated powers and the performance of his delegated
obligations (Article 162.2 of the LOEs).
The Board of Directors shall appoint one member of that board or employ another person as
the director or general director of the company (Article 162.1 of the LOEs). The term of the
director or general director shall not exceed 5 years and the director or general director may be
re-appointed for an unlimited number of terms.
22
Pursuant to Article 162.3 of the Law, the director or general director of a JSC shall have the
following powers and obligations:
“(a) To make decisions on all issues relating to the day-to-day business activities of the
company which do not fall within the authority of the Board of Directors;
(b) To organize the implementation of resolutions and decisions of the Board of
Directors;
(c) To organize the implementation of business plans and investment plans of the
company;
(d) To make recommendations with respect to the plan on organizational structure and
the rules on internal management of the company;
(e) To appoint, remove and discharge managerial positions in the company, except for
those under the scope of authority of the Board of Directors;
(e) To make decisions on salary and other benefits for employees of the company,
including managers who may be appointed by the director or general director;
(g) To recruit employees;
(h) To make recommendations on plans on payment of dividends and on dealing with
business losses;
(i) Other powers and obligations in accordance with provisions of law, the charter of
the company and resolutions and decisions of the Board of Directors”.
In the case the company is (i) a public company, or (ii) a State-owned enterprise more than
50% of the charter capital or total shares with voting rights of which are held by the State, the
Chairman of the Board of Directors shall not act concurrently as the director or general director
of the company (Article 156.2 of the LOEs).
The Inspection Commitee is established by the General Meeting of Shareholders with 3 to 5

inspectors for a maximum term of office of 5 years (which may be renewed for unlimited
number of terms) (Articles 138.2(c) and 168.1 of the LOEs). Its missions and duties are
specified in Article 170 of the LOEs and include inter alia to supervise the Board of Directors
and the director or general director and to ensure the integrity of the financial reporting.
The Board of Directors may appoint where necessary a company secretary (Article 156.5 of
the LOEs). In case the JSC is a public company, the Board of Directors shall appoint a person
in charge of corporate governance (Article 41.3(b) of the Law No.54/2019/QH14 dated 26
November 2019 on Securities).
1.3.4. Contract Approvals
Two types of contracts that require specific corporate approvals are contracts with related
parties and substantial property transactions. Failure to obtain such approvals may lead to their
nullity (Articles 67.3 and 167.5 of the LOEs).
Contracts with related parties
Contracts with related parties are deemed sensitive and risky for the company.
In case of a multiple member LCC, Article 67.1 of the LOEs provides that the Members’
Council’s approval shall be required for the validity of contracts and transactions with:
23
“(a) A member or the authorized representative of a member; the director or general

director or the legal representative of the company;
(b) A related person of any person prescribed in sub-clause (a) above;
(c) A manager of the parent company, or a person having authority to appoint
managers of the parent company;
(d) A related person of any person prescribed in sub-clause (c) above”.
Any member of the Members' Council related to the parties in such contract or transaction may
not vote (Article 67.2 of the LOEs).
Likewise, pursuant to Article 167.1 of the LOEs, approvals of the Board of Directors or General
Meeting of Shareholders shall be required for the validity of contracts and transactions between
a JSC and:
“(a) Shareholders or authorized representatives of shareholders being entities holding

more than ten (10) per cent of the ordinary shares of the company, and their related
persons;
(b) Members of the Board of Directors, director or general director and their related
persons;
(c) Enterprises to be declared by members of the Board of Directors, inspectors, the
director or general director and other managers of the company as stipulated in
Article 164.2 of this Law”.
The Board of Directors has authority to approve contracts or transactions featuring in the above
list and valued at less than 35% of the total value of assets recorded in the most recent financial
statements of the company, or a smaller percentage or value as stipulated in the charter of the
company while the General Meeting of Shareholders will approve (i) those valued from 35%
and and (ii) contracts for and transactions of borrowing, lending or sale of assets valued at more
than 10% of the total value of assets of the company stated in the most recent financial
statements between the company and shareholders owning 51% or more of the total number of
voting shares or their related persons (Articles 167.2 and 167.3 of the LOEs). Shareholders
with interests relating to the parties to the contract or transaction do not have the right to vote
A related person is defined in Article 4.23 of the LOEs as:
“any individual or organization with a direct or indirect relationship with an enterprise in the
following cases:
(a) [Related person] means the parent company, a manager and the legal
representative of the parent company, and any person with the authority to appoint
the manager(s) of the parent company;
(b) [Related person] means any subsidiary company, and any manager and the legal
representative of the subsidiary company;
(c) An individual or organization, or a group of individuals or organizations with the
ability to control activities of such enterprise via ownership or takeover of shares
or capital contribution portions or via issuance of decisions of the company;
(d) A manager of the enterprise, the legal representative, and an inspector;
(e) Spouse, natural or adoptive parent, father-in-law, mother-in-law, child, adopted
child, son-in-law, daughter-in-law, sibling, brother-in-law or sister-in-law of any
manager of the company, of the legal representative, of any inspector, or of any
24
member and shareholder holding a controlling portion of capital contribution or

controlling shares;
(f) An individual who is the authorized representative of any company or organization
stipulated in sub-clauses (a), (b) and (c) of this clause;
(g) An enterprise in which any individual, company or organization stipulated in sub-
clauses (a), (b), (c), (d), (e) and (f) of this clause owns shares at a level entitling it
to control issuance of decisions of the company”.
Under Article 195.1 of the LOEs,

“A company is deemed to be the parent company of another company if it falls into one of the
following cases:
(a) It owns more than fifty (50) per cent of the charter capital or the total number of
ordinary shares of such another company;
(b) It has the right to directly or indirectly make decisions on appointment of the
majority or all members of the Board of Directors, the director or general director
of such another company;
(c) It has the right to make decisions on amendment of and addition to the charter of
such another company”.
Substantial property transactions
Under Article 55.2(d) of the LOEs, the Members’ Council of a multiple member LLC shall
approve lending and borrowing agreements, contracts for sale of assets and other contracts as
stipulated in the charter of the company and valued at 50% or more of the total value of assets
recorded in the most recently published financial statements of the company, or a smaller
percentage or value as stipulated in the charter of the company.
Under Article 153.2(h) of the LOEs, the Board of Directors shall have authority to approve
contracts for purchase, sale, borrowing, lending and other contracts and transactions valued at
35% or more of the total value of assets recorded in the most recent financial statements of the
company, except where the charter of the company stipulates some other percentage or value.
1.4. Company Meetings and Resolutions
1.4.1. General
The purpose of company meetings is to enable members or shareholders to attend in person,

and discuss and vote on matters that affect the company. Although the director or general
director and legal representative of a company manage the general running of the company,
certain key decisions, such as amending the company’s charter, reducing the share capital of
the company, and approving big value contracts (see earlier), must be made by the members or
shareholders. Decisions made by members or shareholders are known as resolutions. They may
pass resolutions in meetings or, alternatively, written resolutions.
Resolutions passed in meetings are only valid if the meeting is properly convened and
conducted. Therefore, the rules on matters such as notice, quorum, and voting must be
complied with
25
In accordance with Articles 59.4, 157.9 and 144.3 of the LOEs, a member of the Members’
Council or Board of Directors or shareholder shall be deemed to attend and vote at a meeting
in the following cases:
• He attends and votes in person at the meeting;

• He authorizes another person to attend and vote at the meeting;
• He attends and votes at the meeting via an online conference, or by casting an electronic
vote or by other electronic forms;
• He sends his or her voting slip to the meeting by mail, by fax or email;
• (In case of meetings of the General Meeting of Shareholders or Board of Directors), he
sends his voting slip by other means stipulated in the charter of the company.
Although a quorum is required (see next), a resolution of the Members’ Council or General
Meeting of Shareholders will be valid if passed by 100% of the total charter capital or total
shares with voting rights even if required meeting procedures have not been complied with
(Articles 62.2 and 152.2 of the LOEs).
1.4.2. Meetings of the Members’ Council of a multiple member LLC
Article 55.1 of the LOEs provides that:
“The charter of the company shall make provisions on the frequency of meetings of the
Members’ Council, but the Members’ Council shall meet at least once a year”.
The power to call meetings is conferred upon:
• the chairman of the Members’ Council (Article 57.1 of the LOEs);

• any one member or a group of members holding 10% or more of the charter capital or
a smaller percentage as stipulated in the charter of the company (Article 49.2(a) of the
LOEs); and
• Where any one member of the company holds more than 90% of the charter capital and
the charter of the company does not stipulate the right to call meetings of a group of
members holding a percentage less than 10%, the other group of members shall
automatically have such right (Article 49.3 of the LOEs).
In the second and third cases, a request to call a meeting must be first sent to the chairman of
the Members’ Council and if he fails to call the meeting within 15 days of receipt of the request,
the member or group of members in question themselves may convene the meeting and recover
their expenses of doing so from the company (Article 57.1 of the LOEs).
Under Article 57.2 of the LOEs, the chairman of the Members’ Council or the person
convening the meeting shall prepare the agenda and documents of the meeting, and convene,
preside over and chair the meeting of the Members’ Council. A member shall have the right to
make written additions to the agenda.
In order for a meeting to be properly constituted, the correct notice must be given and there
must be a quorum (minimum number) of members in attendance.
26
The notice of invitation to a meeting of the Members’ Council may be sent in the form of a
letter of invitation or by telephone, fax, electronic means or any other method as stipulated in
the charter of the company and shall be sent to each member of the Members’ Council. The
notice of invitation to the meeting must specify the time, venue and agenda of the meeting
Under Article 58.1 and 58.2 of the LOEs,

• A meeting of the Members’ Council shall be conducted where the attending members
hold 65% or more of the charter capital; the specific percentage shall be stipulated in
the charter of the company.
• If the first meeting does not satisfy the condition to be conducted stipulated mentioned
above and the charter of the company does not otherwise stipulate, a meeting of the
Members' Council shall be convened as follows:
- The notice of invitation to the second meeting must be sent within 15 days from the
date on which the first meeting was intended to be conducted. The second meeting
of the Members’ Council shall be conducted where the attending members hold
50% or more of the charter capital;
- Where the second meeting of the Members' Council does not satisfy the condition
mentioned above, the notice of invitation to the third meeting must be sent within
10 days from the date on which the second meeting was intended to be conducted.
The third meeting of the Members’ Council shall be conducted irrespective of the
number of attending members and of the amount of charter capital represented by
attending members.
A member or an authorized representative of a member must attend and vote at meetings of the
Members’ Council. The procedures for conducting meetings of the Members’ Council and the
voting method shall be stipulated in the charter of the company (Article 58.3 of the LOEs).
Meetings of the Members’ Council must be recorded in minutes and may be sound recorded or
recorded and stored in other electronic forms (Article 60.1 of the LOEs).
Under Article 60.2 of the LOEs, minutes of each meeting of the Members’ Council must be
passed immediately prior to the closing of the meeting. The minutes must include the following
main details:
• Time and venue of the meeting; purposes and agenda of the meeting;
• Full names, ratios of capital contribution, serial numbers and dates of issuance of capital
contribution certificates of members or their authorized representatives attending the
meeting; full names, ratios of capital contribution, serial numbers and dates of issuance
of capital contribution certificates of members or their authorized representatives not
attending the meeting;
• Matters discussed and voted on; summary of opinions of members on each of the
matters discussed;
• Total number of votes which are valid or invalid; and total number of votes for, against
or abstentions on each matter voted on;
• Decisions passed and corresponding percentage of votes;
• Full names, signatures and opinions of the attendees disagreeing to pass the minutes of
the meeting (if any);
27
• Full names and signatures of the person writing the minutes and the chairperson of the
meeting.
Where the chairperson of the meeting or the person writing the minutes refuses to sign the
minutes of the meeting, the minutes shall become effective if the minutes are signed by all
other members of the Members’ Council who attend the meeting and contain all the contents
stipulated above. The minutes of the meeting shall clearly state the refusal to sign the minutes
of the meeting by the chairperson of the meeting or the person writing the minutes (Article 60.3
of the LOEs).
1.4.3. Meetings of the General Meeting of Shareholders
The General Meeting of Shareholders of a JSC shall convene annual meetings once per year.
In addition to such annual meetings, the General Meeting of Shareholders may convene
extraordinary meetings. The place of a meeting of the General Meeting of Shareholders shall
be determined as the location where the chairperson attends the meeting and must be in the
territory of Vietnam (Article 139.1 of the LOEs).
The General Meeting of Shareholders must hold its annual meeting within 4 months from the
end of a financial year. Unless otherwise stipulated in the charter of the company, the Board of
Directors may extend the time-limit for holding an annual meeting of the General Meeting of
Shareholders where necessary, but not beyond 6 months from the end of the financial year
The Board of Directors shall convene annual and extraordinary meetings of the General
Meeting of Shareholders (Article 140.1 of the LOEs). The Inspection Committee may call an
extraordinary meeting in some circumstances and if it fails to do so, shareholders holding at
least 5 % of the total ordinary shares in the company or another smaller percentage stipulated
in the charter may call the meeting (Articles 140.2, 140.3 and 140.4 of the LOEs). They may
recover their expenses of doing so from the company (Article 140.6 of the LOEs).
The convenor of a meeting of the General Meeting of Shareholders must prepare the agenda
and contents of the meeting and shareholders holding at least 5 % of the total ordinary shares
in the company or another smaller percentage stipulated in the charter may suggest additional
contents to the agenda (Articles 142.1 and 142.2 of the LOEs).
Notice of meetings must be given to every member no later than 21 days prior to the date of
opening, unless the charter of the company stipulates a longer time-limit. The notice of
invitation must contain the name, head office address, enterprise code number, name and
contact address of the shareholder, time and place of the meeting, and other requirements
applicable to attendees (Article 143.1 of the LOEs).
The notice of invitation to the meeting must be sent by a method guaranteed to reach the contact
addresses of shareholders and must be published on the website of the company; if the company
considers it necessary, the notice shall be published in a central or local daily newspaper in
accordance with the charter of the company (Article 143.2 of the LOEs).
28
A shareholder or an authorized representative of a shareholder being an entity may attend a

meeting, or authorize one or more other entities or individuals in writing to attend a meeting
The number of persons necessary for a quorum is provided in Article 145 of the LOEs:
“1. A meeting of the General Meeting of Shareholders shall be conducted where the number
of attending shareholders represents more than fifty (50) per cent of the total number of
voting slips. The specific percentage shall be stipulated in the charter of the company.
2. Where a meeting is not able to be conducted for the first time because the condition
stipulated in clause 1 of this Article is not satisfied, the notice of invitation to the second
meeting must be sent within thirty (30) days from the intended date of the first meeting,
unless otherwise stipulated in the charter of the company. The second meeting of the
General Meeting of Shareholders shall be conducted where the number of attending
shareholders represents thirty three (33) or more per cent of the total number of voting
slips. The specific percentage shall be stipulated in the charter of the company.
3. Where the second meeting is not able to be conducted because the condition stipulated
in clause 2 of this article is not satisfied, the notice of invitation to the third meeting must
be sent within twenty (20) days from the intended date of the second meeting, unless
otherwise stipulated in the charter of the company. The third meeting of the General
Meeting of Shareholders shall be conducted irrespective of the total number of voting
slips of shareholders attending the meeting”.
The company’s charter may stipulate the required procedures for conducting and voting at a
meeting of the General Meeting of Shareholders. If this does not, default rules of Article 146
of the LOEs will apply.
Under Article 150.1 of the LOEs, meetings of the General Meeting of Shareholders shall be
minuted and may be sound recorded or recorded and stored in other electronic forms and must
contain the following main details:
• Name, head office address, and enterprise code number;

• Time and location of the meeting of the General Meeting of Shareholders;
• Agenda and contents of the meeting;
• Full names of the chairperson and the secretary;
• Summary of developments of the meeting and of opinions stated in the General Meeting
of Shareholders on each matter set out in the meeting agenda;
• Number of shareholders and total number of votes of attending shareholders, and an
appendix listing registered shareholders and representatives of shareholders attending
the meeting with the corresponding number of shares and number of votes;
• Total number of votes for each issue voted on, specifying the method of voting, the
number of valid or invalid votes, the number of votes for, against, and abstentions; and
the corresponding percentage of the total number of votes of shareholders attending the
meeting;
• Matters which were passed and corresponding percentage of votes for passing;
• Full names and signatures of the chairperson and the secretary.
If the chairperson or the secretary refuses to sign the minutes of the meeting, the minutes shall
take effect if the minutes are signed by all other attending members of the Board of Directors
29
and contain all the contents stipulated above. The minutes of the meeting must then specify the
refusal to sign the minutes of the meeting by the chairperson or the secretary (Article 150.1 of
the LOEs).
The minutes of a meeting of the General Meeting of Shareholders must be completed and
approved prior to the closing of the meeting (Article 150.2 of the LOEs).
Minutes must be prepared in Vietnamese and may also be in a foreign language. In the case of
any difference in the contents of the minutes between the Vietnamese text and the foreign
language text, the contents in the Vietnamese text shall prevail (Articles 150.1 and 150.4 of the
LOEs).
The minutes of a meeting of the General Meeting of Shareholders must be sent to all
shareholders within a time-limit of 15 days from the date of the closing of the meeting. The
sending of the minutes of vote-counting may be replaced by their posting on the website of the
1.4.4. Meetings of the Board of Directors
The Board of Directors shall hold a meeting at least once every quarter and may hold
extraordinary meetings (Article 157.2 of the LOEs).
Under Article 157.3 of the LOEs, the chairman of the Board of Directors shall convene a
meeting of the Board of Directors in the following circumstances:
• Upon request of the Inspection Committee or an independent member of the Board of

Directors;
• Upon request of the director or general director or upon request of at least five other
managers;
• Upon request of at least two members of the Board of Directors;
• In other circumstances as stipulated in the charter of the company.
The chairman of the Board of Directors must convene a meeting within 7 working days from
the date of receipt of a request. If a meeting is not convened pursuant to a request, then the
person making the request shall have the right to convene a meeting of the Board of Directors
in place of the chairman (Article 157.5 of the LOEs).
A notice of invitation to attend the meeting must be sent to every member of the Board of
Directors and inspectors at least 3 working days prior to the date of meeting, unless otherwise
stipulated in the charter of the company. The notice of invitation must specify the time and
place of the meeting, the agenda and issues to be discussed and decided. It may be sent in the
form of a letter of invitation, or by telephone, fax, electronic means or other method stipulated
in the charter of the company and guaranteed to reach their contact address as registered with
the company (Articles 157.6 and 157.7 of the LOEs).
A meeting of the Board of Directors shall be conducted where three quarters (3/4) or more of
the total members are in attendance. If such quorum is not reached, it shall be convened for a
second time within 7 days from the intended date of the first meeting, except where the charter
of the company stipulates some other shorter time-limit. In this case, the meeting shall be
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conducted if more than half of the number of members attend the meeting (Article 157.8 of the
LOEs).
Members must attend all meetings. A member may authorize another person to attend and vote
at a meeting if the majority of members so agrees (Article 157.11 of the LOEs).
Under Article 158.1 of the LOEs, all meetings of the Board of Directors must be minuted and
may be sound recorded or recorded and stored in other electronic forms and must include the
following main contents:
• Name, address of the head office, and enterprise code number;
• Time and venue of meeting;
• Purpose, program and agenda of meeting;
• Full name of each member attending the meeting or person authorized to attend the
meeting and method of attending the meeting; full names of members not attending the
meeting and reasons therefor;
• Issues discussed and voted on in the meeting;
• Summary of opinions of each member attending the meeting in accordance with the
sequence of development of the meeting;
• Result of voting, indicating members who agree, who do not agree and who abstain
from voting;
• Approved matters and corresponding percentage of votes for passing;
• Full names and signatures of the chairperson and the person writing the minutes.
If the chairperson or the person writing the minutes refuses to sign the minutes of the meeting,
but the minutes are signed by all other attending members of the Board of Directors and contain
all the contents mentioned above, then the minutes shall be effective. The minutes of the
meeting must then specify the refusal to sign the minutes of the meeting by the chairperson or
the person writing the minutes (Article 158.2 of the LOEs).
Minutes must be prepared in Vietnamese and may also be in a foreign language. In the case of
any difference in the contents between the minutes in Vietnamese and the minutes in a foreign
language, the contents in the minutes in Vietnamese shall prevail (Articles 158.1 and 158.5 of
the LOEs).
1.4.5. Resolutions
General
The percentage of members or shareholders needed to agree to pass any resolution depends on
the type of resolution to be passed. There are two major types of resolutions: ordinary
resolutions and special resolutions. Decisions are made by ordinary resolution unless either the
LOEs or the charter states that the decision must be made by special resolution.
Furthermore, certain resolutions must be passed by voting at a meeting.
In case of a multiple member LCC, pursuant to Article 59.2 of the LOEs:
“Unless otherwise stipulated in the charter of the company, resolutions and decisions on the
following issues must be passed by way of voting at meetings of the Members’ Council:
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(a) Amendment of or addition to the contents of the charter of the company;

(b) Decisions on the developmental directions of the company;
(c) Election, removal or discharge of the chairman of the Members’ Council; appointment,
removal or discharge of the director or general director;
(d) Approval of annual financial statements; and
(e) Re-organization or dissolution of the company”.
“Unless otherwise stipulated in the charter of the company, a resolution of the General
Meeting of Shareholders on the following matters must be passed by way of voting in a meeting
of the General Meeting of Shareholders:
(a) Amendment of or addition to contents of the charter of the company;
(b) Developmental directions of the company;
(c) Classes of shares and total number of shares of each class;
(d) Election, removal or discharge of members of the Board of Directors and Inspection
Committee;
(e) Decision on any investment or sale of assets valued at thirty five (35) or more per cent
of the total value of assets recorded in the most recent financial statements of the
company, except where the charter of the company stipulates some other percentage or
value;
(f) Approval of the annual financial statements;
(g) Re-organization or dissolution of the company”.
Ordinary Resolutions
An ordinary resolution is one that is passed (i) by the members in attendance possessing at least
65% (or a higher percentage mentioned in the charter) of the aggregate contributed capital of
all attending members in case of a meeting of the Members’ Council (Article 59.3(a) of the
LOEs), or (ii) by the shareholders possessing more than 50% of the total number of voting slips
of all attending shareholders (a specific percentage must be stated in the company’s charter) in
case of a meeting of a JSC (Article 148.2 of the LOEs).
Ordinary resolutions are used for the more routine decisions while special resolutions are key
or sensitive ones.
Special Resolutions
A special resolution is:
• in case of a meeting of the Members’ Council, a resolution passed by a majority of not
less than 75% (or other percentage mentioned in the charter) of the aggregate
contributed capital of all attending members with respect to the sale of assets valued at
50% or more of the total value of assets recorded in the most recent financial statements
of the company, or a smaller percentage or value as stipulated in the charter of the
company, or amendment of and addition to the charter of the company, or re-
organization or dissolution of the company (Article 59.3(b) of the LOEs).
• or in case of a JSC:
- one passed by the shareholders possessing more than 65% of the total number of
voting slips of all attending shareholders (a specific percentage must be stated in
the company’s charter) with respect to classes of shares and the total number of
shares of each class, change of business lines and business sectors, change of the
32
organizational and managerial structure of the company, investment project or sale

of assets valued at 35% or more of the total value of assets recorded in the most
recent financial statements of the company, except where the charter of the
company stipulates some other percentage or value, re-organization or dissolution
of the company, or other matters as stipulated in the charter of the company (Article
148.1 of the LOEs).
- A resolution which results in an adverse change of rights and obligations of a
preference shareholder is only passed if it is agreed by the number of attending
preference shareholders of the same type owning 75% or more of the total number
of preference shares of such type (Article 148.6 of the LOEs).
- A resolution passed by the method of cumulative voting (Article 148.3 of the
LOEs).
Written resolutions
The Members’ Council of a multiple member LLC or the General Meeting of Shareholders
may pass any decision by a written resolution, apart from resolutions that must be passed by
voting at a meeting as mentioned above.
Where a written resolution is proposed, a copy of the resolution has to be sent to every
member or eligible shareholder (Articles 61.2 and 149.2 of the LOEs).
A resolution of the Members’ Council of a multiple member LCC is passed if it is agreed by

members holding 65% or more of the charter capital; the specific percentage shall be
stipulated in the charter of the company (Article 59.5 of the LOEs).
In case of the meeting of the General Meeting of Shareholders,
• a resolution of the General Meeting of Shareholders is passed when it is agreed by a

number of shareholders owning more than 50% of the total votes of all shareholders
having the voting right. The specific percentage shall be stipulated in the charter of the
• A resolution of the General Meeting of Shareholders resulting in an adverse change of
rights and obligations of a preference shareholder is only passed if it is agreed by the
preference shareholders of the same type owning 75% or more of the total number of
preference shares of such type (Article 148.6 of the LOEs).
Resolutions of the Board of Directors
The Board of Directors shall pass resolutions and decisions by way of voting at a meeting,
collecting written opinions or otherwise as stipulated in the charter of the company. Each
member shall have one vote (Article 153.3 of the LOEs).
Except where the charter of the company provides for some other higher percentage, a
resolution or decision of the Board of Directors shall be passed when it is agreed by the majority
of the members in attendance; in the case of a tied vote, the final decision shall be made in
favour of the vote of its chairman (Article 157.12 of the LOEs).
33
CHAPTER 2 – FUNDAMENTALS OF CONTRACT LAW AND

CONTRACT DRAFTING
2.1. Contract Formation
2.1.1. Definition of Contract
For comparison, English law has no formal definition of a contract. Textbook writers
frequently try to commence their contract law textbooks by providing such a definition.
For instance, Treitel on The Law of Contract (edited by Edwin Peel, 14th edn, Sweet &
Maxwell, 2015) defines it as follows:
“A contract is an agreement giving rise to obligations which are enforced or recognised by

law. The factor which distinguishes contractual from other legal obligations is that they are
based on the agreement of the contracting parties”.
As far as Vietnamese law, pursuant to Article 385 of the Civil Code:
“A contract means an agreement between parties in relation to the creation, modification or

termination of civil rights and obligations”.
As such, a contract means an agreement which gives way to the rights and obligations of the
parties. This is the law between the parties subject to mandatory rules of the law governing
the contract or the law where the contract is performed.
2.1.2. Contract Glossary and Language
Some specific words are given particular meanings in the context of the contract law. For
instance:
Breach of contract: A situation where one party has failed to perform its obligations under the
contract in the manner stipulated by the contract or by law.
Condition precedent: A contractual term which one party shall perform before some or all of
the obligations of the other party fall due.
Damages: A sum of money a party in breach of an obligation shall have to pay to the innocent
party to compensate the innocent party for the loss suffered as a result of the breach of that
obligation.
Instrument: A written document containing some or all of the terms on which the parties have
agreed to contract.
Liquidated damages: damages of a fixed amount set by the parties.
Loss of profit: A measure of expectation damages for breach of contract, under which the
claimant is awarded the profit they would have made on the contract, had it not been breached.
Penalty clause: A clause which seeks to penalize a party for breaching the contract by requiring
the payment of a pre-determined sum for breach.
Performance: Doing what the contract requires, in accordance with its terms.
Representation: A statement which one party makes to another in relation to a fact or to that
party’s present intention.
Rescission: the process by which the whole transaction will be set aside and both parties
restored to the position they were in before the contract was entered into.
34
Void: A contract is void if it is deemed as a matter of law to have never come into being
because of some vitiating factor. Common mistake and illegality are examples of vitiating
factors which make contracts void.
Waiver: giving up, or abandoning, a right or remedy, such as a claim for damages for breach
of contract.
Furthermore, there is no general law requirement that the language of a contract must be
Vietnamese language.
Certain specialized laws expressly give the parties the freedom to agree on the language of the
contract3.
Other specialized laws may however impose the use of Vietnamese language. For instance,
Article 138.4 of Law No. 50/2014/QH13 on Construction dated 18 June 2014 as amended in
2018, 2019 and 2020 prescribes that “the language used in construction agreements shall be
Vietnamese. In case a party to the agreement is a foreign party, the languages shall be
Vietnamese and other language agreed by the parties”. Likewise, Article 14.2 of Law
No.59/2010/QH12 on Protection of Customers’ Interests dated 17 November 2010 as amended
in 2018 (the “Law on Protection of Customers”) provides that the language used in a contract
with a customer shall be Vietnamese unless otherwise agreed by the parties or otherwise
provided by law.
2.1.3. Privity of Contract
Under the general principle of privity of contract, no one may be bound by the terms of a
contract to which he is not an original party.
Article 401 of the Civil Code prescribes that:
“From the time when a contract takes effect, the parties must exercise the rights and perform
the obligations to each other as undertaken”.
As an exception to the above principle, Articles 402.5, 415, 416 and 417 of the Civil Code
recognize contracts for the benefit of a third person called third party beneficiary. Examples
can be insurance contracts or transportation contracts.
2.1.4. Freedom of Contract
Freedom of contract remains a fundamental part of Vietnamese law. Many commercial parties
have their own standard terms of business which they seek to incorporate into the contracts
they conclude.
Under Article 3.2 of the Civil Code:
“Individuals and legal entities create, perform and terminate their civil rights and obligations
on the basis of free and voluntary commitments and agreement. Any commitment or agreement
which does not breach a prohibition by a law or is not contrary to social morals is valid for
performance by the parties and must be respected by other subjects”.
3
For example, Law No. 07/2017/QH14 on Technology Transfer dated 19 June 2017 (Article 22.2).
35
Article 11.1 of the Commercial Law provides that:
“Parties shall have the right freely to reach agreements which are not inconsistent with the
law, fine customs and social ethics in order to create their rights and obligations in commercial
activities. The State shall respect and protect these rights”.
In line with the above articles, the parties may freely agree on the contents of their contract
provided that such contents do not contradict the rules of Vietnamese law or social morals or
fine customs.
For instance, the consumer protection legislation invalidates certain types of provision which
are unfavorable to customers4.
2.1.5. Formal Requirements
Article 119 of the Civil Code provides that:
“Civil transactions may be created verbally, in writing or through specific acts. Civil
transactions by way of electronic means in the form of data messages in accordance with the
law on e-transactions shall be deemed to be written transactions.
Where a law provides that a civil transaction must be in writing, notarized, certified [and/or]
registered, such provisions must be complied with”.
As civil transactions include contracts (Article 116 of the Civil Code), the above provisions
apply to the latter.
Where contracts are made by e-mail or by trading on a website, requirement of writing is

normally considered satisfied. Provided it satisfies the standard authenticity test, the
requirement of a signature can be satisfied by, for example, a digital signature or by typing a
name into an electronic document or e-mail.
2.1.6. Contract Duration
Under Article 401 of the Civil Code:
“A contract legally entered into shall take effect from the time when it is entered into, unless
otherwise agreed or otherwise provided by a relevant law. From the time when a contract takes
effect, the parties must exercise the rights and perform the obligations to each other as
undertaken”.
Article 400.4 of this code further indicates that:
“The time when a written contract is entered into is the time when the last party signs the
contract or accepts to enter into the contract by another method of acceptance which is
expressed in writing”.
4
Article 16 of the Law on Protection of Customers.
36
As such, the date when an agreement comes into effect, or obligations under the agreement
commence, can be different from the date when the agreement is signed. Unless there is
wording in the agreement which indicates a contrary intention, or there is a law which provides
for a commencement date, an agreement takes effect immediately it is signed by all parties.
A contract term may be extended by the parties’ agreement or as a consequence of an automatic

renewal clause contained in the contract.
2.1.7. Contents of a contract
Article 398 of the Civil Code provides that the parties to a contract shall have the right to agree
on the contents in the contract and that a contract may contain the following contents:
• Subject-matter of the contract;
• Quantity and quality;
• Price and method of payment;
• Time-limit, place and method of performing the contract;
• Rights and obligations of the parties;
• Liability for breach of contract; and
• Method of resolving disputes.
Certain specialized laws may provide for mandatory particulars of a contract. For example,
Article 18 of Law No. 66/2014/QH13 on Real Business dated 25 November 2014 as amended
in 2020 prescribes that a contract for purchase and sale, lease out or grant of hire purchase of a
house or building must contain the following main contents:
• Names and addresses of the parties;
• Information regarding the real estate subject to the contract;
• Price of purchase and sale, lease out or hire purchase;
• Method of and period for payment;
• Time-limit for handover and receipt of the real estate and the enclosed file;
• Warranty;
• Rights and obligations of the parties;
• Responsibilities for breach of the contract;
• Penalties for breach of the contract;
• Cases of termination or rescission of the contract and measures for dealing with such
cases;
• Dispute resolution;
• Time of effectiveness of the contract.
It is noteworthy that the lack of one or more items mentioned above may in principle result in
the contract being null and void for want of form in line with Article 129.1 of the Civil Code.
2.1.8. Nullity of Contract
A contract may be declared null and void by a court for certain reasons such as want of
consensus, mistake, illegality, duress or incapacity (Articles 122 and seq. of the Civil Code).
A contract which is void produces no legal relationship between the parties. As a result, in
accordance with Article 131 of the Civil Code:
37
• the parties are restored to the position they would have occupied had no contract been
entered into;
• payments made and property transferred under the supposed contract are recoverable;
and
• the party at fault which caused damage must compensate for such damage.
2.1.9. Application Law and Jurisdiction
Determining the applicable law
Within certain limits (see next), the parties to an international contract may agree to choose
the law applicable to their contract and in the absence of party choice, the law of the country
having the closest connection with such contract shall apply (Article 683.1 of the Civil Code).
Pursuant to Article 683.2 of the Civil Code, the laws of the following countries shall be deemed
to have the closest connection with a contract:
“(a) With respect to a contract for sale and purchase of goods, it shall be the law of the
country in which the seller being an individual resides or in which the seller being
a legal entity was established;
(b) With respect to a contract for services, it shall be the law of the country in which
the service provider being an individual resides or in which the service provider
being a legal entity was established;
(c) With respect to a contract for transfer of use rights or assignment of intellectual
property rights, it shall be the law of the country in which the recipient of rights
being an individual resides or in which the recipient of rights being a legal entity
was established;
(d) With respect to a labour contract, it shall be the law of the country in which the
employee regularly performs work. If the employee regularly performs work in
different countries or it is impossible to determine the place where the employee
regularly performs work, the law of the country having the closest connection with
the labour contract shall be the law of the country in which the employer being an
individual resides or in which the employer being a legal entity was established;
(e) With respect to a consumption contract, it shall be the law of the country in which
the consumer resides”.
However, where it is proved that the law of a country other than the laws stated above has a
closer connection with the contract, the applicable law shall be the law of such country (Article
683.3 of the Civil Code).
The limits include the following:
• Where the subject matter of a contract is immoveable property, the law applicable to
transfer of ownership rights and other rights with respect to property being immoveable
property, applicable to lease of immoveable property or use of immoveable property in
38
order to secure the performance of obligations shall be the law of the country in which
the immoveable property is located (Article 683.4 of the Civil Code).
• Where the law chosen by the parties to a labour contract or a consumption contract
adversely affects minimum benefits of the employee or consumer as provided in the
law of Vietnam, the law of Vietnam shall apply (Article 683.5 of the Civil Code).
• The parties may agree to change the law applicable to the contract, but such change
must not affect the lawful rights and benefits to which a third person was entitled before
such change of the applicable law, unless the third person so agrees (Article 683.6 of
the Civil Code).
With respect to formal requirements, the form of a contract shall be determined in accordance
with the law applicable to such contract. In the case where the form of a contract is inconsistent
with the form of a contract pursuant to the law applicable to such contract, but is consistent
with the form of such contract pursuant to the law of the country in which the contract was
entered into or pursuant to the law of Vietnam, the form of such contract shall, nevertheless,
be recognized in Vietnam (Article 683.7 of the Civil Code).
Jurisdiction
Article 472.1(a) of Civil Procedures Code No.92/2015/QH13 dated 25 November 2015 as

amended in 2019 and 2020 (the “Civil Procedures Code”) implies that the parties to an
international contract may by agreement confer jurisdiction on a foreign court or arbitrators
over any dispute arising from or in connection with such contract. However, Vietnamese courts
will have exclusive jurisdiction in case of proceedings relating to rights over immoveable
property located in the territory of Vietnam and in case where the parties have chosen
Vietnamese courts as jurisdiction to settle their disputes (Articles 470.1(a) and 470.1(c) of the
Civil Procedures Code).
2.2. Contract Performance and Termination
2.2.1. Performance
Manner of Performance:
The general rule is that performance of a contract must be precise and exact. This means that a
party performing an obligation under a contract must perform that obligation exactly within
the time frame indicated by the contract and exactly to the standard required by the contract.
What is required for performance of the contract normally will depend upon its terms and their
construction.
However, the parties may, by express agreement or waiver, substitute a different mode of
performance for that originally agreed on by them.
Time of Performance:
Pursuant to Article 410.1 of the Civil Code:
39
“With respect to a bilateral contract, where the parties have agreed on a time frame for the
performance of an obligation, each party must perform its obligation when the obligation falls
due”.
A bilateral contract denotes a contract whereby each party has obligation(s) to the other
(Article 402.1 of the Civil Code).
Where a party is obliged to do a particular act on or before a certain day, it is not in default
until the end of that day.
Where no time for performance is fixed by the contract,
• As a general rule, either party may fulfil the obligation or request the fulfilment of the
obligation as the case may be at any time, but must give reasonable prior notice to the
other party (Article 278.3 of the Civil Code).
• Specialised legislations may lay down specific rules. For instance, in the case of the
sale of goods, the seller must deliver goods within a time which is reasonable (Article
37.3 of Commercial Law No.36/2005/QH11 as amended in 2017 and 2019 (the
“Commercial Law”)). In the case of the provision of services, the time of payment will
follow the parties’ custom (habits) relating to payment and if there is no such custom,
it will be the time where the provision of services has been completed (Article 87 of the
Commercial Law). In the case of the carriage of goods, the time of payment of freight
charges is upon the property being loaded onto the means of transport (Article 533.2
of the Civil Code).
Force Majeure
Pursuant to Article 156.1 of the Civil Code,
“An event of force majeure is an event which occurs in an objective manner which is not able
to be foreseen and which is not able to be remedied by all possible necessary and admissible
measures being taken”.
The contract breaker will not be liable for any failure to perform any of its obligations in case
of occurrence of an event of force majeure (Article 294.1(b) of the Commercial Law and Article
351.2 of the Civil Code) on immediate notice in writing of such event and possible
consequences to the non-affected party (Article 295.1 of the Commercial Law).
In accordance with Article 296.1 of the Commercial Law, the parties may agree to extend the
contract’s term; and in the absence of such agreement, the contract’s term shall be extended by
an additional period which is equal to the duration of the event of force majeure plus a
reasonable amount of time for remedying the consequences of such event, but not exceeding:
• 5 months in respect of goods or services with an agreed time frame for delivery of goods
or provision of services not exceeding 12 months following signature of the contract;
• 8 months in respect of goods or services with an agreed time frame for delivery of goods
or provision of services exceeding 12 months following signature of the contract.
40
The above possibility of extension of the contract term shall not, however, apply to contracts
with a fixed time frame for delivering goods or completing services (Article 296.4 of the
Commercial Law).
On the expiry of the above extension period, either party may elect to early terminate the
contract by giving a written 10-day’s prior notice to the other party (Articles 296.2 and 296.3
of the Commercial Law).
2.2.2. Amendment to a contract
Article 401.2 of the Civil Code provides that:
“The contract may only be amended or rescinded by agreement between the parties or as
provided by law ”.
Likewise pursuant to Article 421.1 of the Civil Code,
“The Parties may agree to amend the contract”.
Article 421.3 of the Civil Code further requires that:
“An amended contract must comply with the formalities of the original contract”.
For instance, if the original contract has been notarized, its amendment must be notarized as
well. If it is not notarized, the amendment may be void for want of form (Article 129 of the
Civil Code).
2.2.3 Contract Termination
Termination by full performance
In practice, most contracts are performed without any problems arising. The usual way in which
a party to a contract ceases to have any obligations under this contract is by doing exactly what
the contract requires. Where performance has been completed, the contract is deemed to have
terminated (Article 422.1 of the Civil Code).
Termination by subsequent agreement
Article 422.2 of the Civil Code allows the parties to agree on the termination of a contract. This
usually takes the form of a termination agreement signed by the parties.
Termination by breach
Early termination
Article 310 of the Commercial Law provides that a party to a contract may early terminate it:
• Upon occurrence of a breach which has been agreed by the parties as a termination
ground;
• In case a party commits a material breach of a contract obligation.
41
A material breach of a contract obligation is defined vaguely by Article 3.12 of the Commercial
Law as “a breach by one party causing damage to the other party to the extent that such other
party is not able to achieve its objectives of entering into the contract”.
Article 428.1 of the Civil Code has a similar approach regarding the circumstances of early
termination of a contract for breach in prescribing that:
“A party shall have the right to early terminate a contract and shall not be required to pay
damages if the other party commits a serious breach of the obligation(s) stipulated in the
contract or if so agreed by the parties or so provided by law”.
A prior termination notice is required in order for the termination to be effective (Article 311.1
and 315 of the Commercial Law and Article 428.2 of the Civil Code).
As for consequences of the termination, under Article 311 of the Commercial Law,
• The parties shall not continue to perform their contractual obligations. The party
having performed its obligations may request the other party to make payment or
perform the latter’s contractual obligations.
• The injured party (aggrieved party) may claim damages.
Likewise, Article 428.3 of the Civil Code indicates that:
“In case of early termination, the parties do not have to continue to perform their obligations,
except for the agreements on penalties for breach and payment of damages, and the agreements
on dispute resolution. A party which has already performed its obligation may demand the
other party make payment for the portion of the obligation which have been fulfilled”.
Article 428.4 of the Civil Code further provides that: “The party suffering damage caused by
failure to perform correctly contractual obligations by the other party shall be indemnified”.
Rescission
Article 312.4 of the Commercial Law provides that a party to a contract may rescind it:
• Upon occurrence of a breach which has been agreed by the parties as a rescission
ground;
• In case a party commits a material breach of a contract obligation.
Likewise, pursuant to Article 423.1 of the Civil Code:

“A party shall have the right to rescind a contract and shall not be liable to indemnify the other
party for damage in the following cases:
(a) The other party breaches the contract and such breach has been agreed by the parties as
a rescission ground.
(b) The other party commits a serious breach of contractual obligation(s);
(c) Other circumstances as provided by a law”.
A rescission notice is required in order for the rescission to be effective (Article 315 of the
Commercial Law and Article 423.3 of the Civil Code).
As for consequences of the termination, under Article 311 of the Commercial Law,
42
• The parties shall not continue to perform their contractual obligations. The party
having performed its obligations may request the other party to make payment or
perform the latter’s contractual obligations.
• The injured party may claim damages.
As for consequences of rescission, under Article 314 of the Commercial Law, in case of
rescission of a contract,
• It shall no longer be effective as from the time it was entered into, and the parties shall
not be required to continue performance of their contractual obligations, except for
agreed provisions on rights and obligations applicable after rescission or on dispute
resolution.
• Each party may claim benefits attributable to the performance of its obligations under
the contract. If both parties are obliged to make a refund, these obligations must be
performed concurrently; and if it is impossible to refund the exact benefits which a
party has gained, such party shall be obliged to make a refund in monies.
• The injured party may claim damages.
Likewise, under Article 427 of the Civil Code,
• Where a contract is rescinded, it shall be deemed to have been ineffective as from the
time when it was entered into and the parties shall not be required to perform the agreed
obligations, except for the agreements on penalties for breach and payment of damages,
and the agreements on dispute resolution.
• Each party must return anything it has received from the other party upon deduction of
reasonable costs during performance of the contract and costs for preservation and
development of property.
• The aggrieved party may claim damages.
Termination by operation of law
A law may provide for termination of a contract (Article 422.7 of the Civil Code). For instance,
the declaration of bankruptcy of a company will result in the termination of all contracts signed
by this company (Article 108.1(e) of Law No. 51/2014/QH13 on bankruptcy dated 19 June
2014).
Other cases where a contract is terminated
A contract may be terminated in case:
• it is incapable of being performed because its subject matter no longer exists (Article
422.5 of the Civil Code).
• where a contract is only able to be performed by the particular individual or legal entity
which entered into the contract, and that particular individual dies, or that legal entity
ceases to exist (Article 322.3 of the Civil Code).
Where the contract is of a personal nature, such a contract will be terminated by the death of
any party to it whose personal characteristics may be regarded as an important element in the
contract.
43
2.2.4. Remedies for Breach of Contract
General
Article 3.12 of the Commercial Law defines a breach of contract as:

“the situation where one party fails to perform, or does not perform fully or correctly, an
obligation in accordance with an agreement of the parties or in accordance with this Law”.
Where a party performing a contract does not do so to the standard required by the contract or
within the time frame set in the contract, that party will breach the contract and in that case the
aggrieved party may claim:
• penalties;
• damages;
• specific performance;
• late payment interest in case of a payment obligation.
Under Article 294 of the Commercial Law, a defaulting party shall be immune from liability
in the following cases:
• Upon occurrence of any event which the parties have agreed will give rise to immunity
from liability;
• Upon occurrence of an event of force majeure;
• Upon a breach by one party which was totally due to the fault of the other party;
• Upon a breach by one party which was due to implementation of a decision of a
competent State administrative body of which the parties could not have known at the
time of entering into the contract.
The defaulting party shall bear the burden of proof that an event triggering immunity from
liability.
Penalties
Penalty for breach is a remedy whereby the aggrieved party requires the defaulting party to pay
a penalty sum for breach of contract if so agreed in the contract except in cases of immunity
from liability stipulated in article 294 of the Commercial Law (Article 300 of the Commercial
Law).
Article 418.1 of the Civil Code provides for a similar definition:

“Penalty for breach means an agreement between the parties in a contract, whereby a party
breaching an obligation must pay a sum of money to the party whose rights are breached”.
Therefore, in order to apply a penalty,
• there must be a penalty clause in the contract;
• the obligation subject to such penalty has been breached.
There is no need for proving any damage caused to the aggrieved party but the breach.
Article 418.2 of the Civil Code prescribes that:
44
“The amount of a penalty for breach shall be as agreed by the parties, unless otherwise
provided by a relevant law”.
Under Article 301 of the Commercial Law,
“The level of penalty in respect of any one breach of a contractual obligation or the total
amount of penalties in respect of multiple breaches shall be as agreed by the parties in the
contract, but shall not exceed 8% of the value of the portion of the contractual obligation which
is the subject of the breach”.
A law may lay down other penalty cap. For instance, the level of the penalty shall not exceed
10 times the amount of the remuneration for the assessment services (Article 266 of the
Commercial Law).
Damages
Damages for breach of contract aim at compensating for the damage or loss that the claimant
has suffered through that breach.
Article 302.1 of the Commercial Law provides that:
“Damages for loss means payment by a defaulting party of compensation for the loss caused
to the aggrieved party by a breach of the contract”.
As to the amount, under Article 302.2 of the Commercial Law,
“The value of damages for loss shall comprise the value of the actual and direct loss which the
aggrieved party has borne due to the breach of the defaulting party as well as the direct profits
which the aggrieved party would have earned in the absence of such breach”.
Article 303 of the Commercial Law indicates that except in cases of immunity from liability
stipulated in article 294 of the Commercial Law,
“The liability to pay damages for loss shall arise when all the following factors exist:
1. There is a breach of the contract;
2. There occurs an actual loss;
3. The breach of the contract is the direct cause of the loss”.
The burden of proof of the loss lies with the claimant (Article 304 of the Commercial Law).
He also has the duty to mitigate. Indeed, pursuant to Article 305 of the Commercial Law,
“The party claiming damages for loss must take reasonable measures to mitigate the loss
caused by a breach of the contract, including the loss of direct profits which would have been
earned in the absence of such breach. If the party claiming damages fails to take such action,
the defaulting party shall have the right to require a reduction in damages equal to the amount
of loss that could have been mitigated”.
As such, the claimant is under an obligation to act reasonably (i.e. to take positive steps) to
minimise the loss flowing from the breach. What he should do is however fact-specific.
45
With respect to the relationship between penalties for breach and damages, as a matter of
principle, pursuant to Article 307 of the Commercial Law,
• If the parties do not have a specific agreement on penalty for breach, the aggrieved
party shall have the right to claim only damages for loss.
• If the parties have a specific agreement on penalty for breach, the aggrieved party shall
have the right to apply both the remedy of penalty for breach and the remedy of
damages.
Specific Performance
Pursuant to Article 297.1 of the Commercial Law,
“Specific performance of contract means the situation that the aggrieved party requests the
defaulting party to perform properly the contract or to take other measures to cause the
contract to be performed, and the defaulting party shall bear any costs incurred”.
Article 297.2 of this law provides some illustrations as follows:
“Where the defaulting party fails to deliver all goods or provides services which do not
conform to the contract, such party shall be obliged to deliver all goods or provide services in
accordance with the contractual terms and conditions. If the defaulting party delivers goods
or provides services of poor quality, it shall be obliged to rectify the defect in the goods or
services or to deliver substitute goods or to provide proper services in accordance with the
contract. The defaulting party may not use money or goods of other types or other services as
substitutes without the consent of the aggrieved party”.
Late Payment Interest
Article 306 of the Commercial Law prescribes that:
“If the defaulting party delays in paying the price of goods or service charges and any other
reasonable fees, the aggrieved party shall have the right to claim interest on such delayed
payment at the average interest rate applicable to overdue debts in the market at the time of
such payment for the delayed period, unless otherwise agreed by the parties or otherwise
provided by law”.
Article 11 of Resolution No.01/2019/NQ-HDTP of the Supreme People’s Court dated 11

January 2019 indicates that the court may take account of average interest rates applicable to
overdue debts of at least 3 commercial banks which have their head office, branch or
representative office located in the province where the court is located to determine an
applicable late payment interest.
Under Article 357.1 of the Civil Code:
“An obligor who is late in making payment must pay interest on the amount overdue for the
period it is overdue”.
46
In accordance with Article 357.2 of the Civil Code, late payment interest rate shall be fixed by
the parties on the condition that it shall not exceed 20% per annum and in the absence of such
agreement, it shall be 10% per annum.
It is generally accepted that in all circumstances, the agreed late payment interest may not
exceed the 20% cap.
2.2.5. Limitation of Actions
Periods of limitation are prescribed by law with the consequence that a claim begun after the
period of limitation has expired is not maintainable.
If the dispute is referred to a court:
Pursuant to Article 429 of the Civil Code,
“The limitation period for initiating a legal action to request a court to resolve a dispute
relating to a contract shall be 3 years from the date on which the person with the right to make
the request knew or should have known that his/her lawful rights and interests were infringed”.
As such, an action founded on a contract must be commenced within 3 years from the date on
which the claimant (plaintiff) knew or should have known that his lawful rights and interests
were breached.
The Commercial Law which has been enacted earlier than the Civil Code provides that in
principle, the limitation period for initiating legal action applicable to commercial disputes
shall be 2 years from the time of infringement of lawful rights and interests (Article 319).
Article 157 of the Civil Code provides that:
“1. The limitation period for initiating legal action for a civil case shall re-commence in any
of the following cases:
(a) The obligor has acknowledged all or part or of its obligation(s) to the claimant;
(b) The obligor acknowledges or has fulfilled part of its obligations to the claimant;
(c) The parties have reconciled between themselves.
2. The limitation period for initiating legal action for a civil case shall re-commence from
the date following the date on which the event provided in clause 1 of this article occurs”.
If the dispute is referred to an arbitral tribunal:
The period of limitation shall be 2 years from the date where the lawful rights and interests
were infringed (Article 33 of Law No. 54/2010/QH12 on Commercial Arbitration dated 17
June 2010).
47
CHAPTER 3 – BUSINESS ETHICS
3.1. Concept of Business Ethics
Business ethics may be defined as “‘the application of ethical values to business behaviour. It
applies to any and all aspects of business conduct, from boardroom strategies and how
companies treat their employees and suppliers to sales techniques and accounting practices.
Ethics goes beyond the legal requirements for a company and is, therefore, about discretionary
decisions and behaviour guided by values. Business ethics is relevant both to the conduct of
individuals and to the conduct of the organisation as a whole.”5
Corporate Social Responsibility (CSR) is often seen nowadays to form part of business ethics.
3.2. Ethical Theories
Business ethics research tends to calcify around one of three classical theoretical approaches.
These are deontological, consequential or utilitarian and virtue-ethics.
Deontology
This theory is associated with the foremost philosopher Immanuel Kant (1724–1804) who
believed that ethics is based on reason and freedom. Under this theory, three elements that
determine moral worth include:
• The first is that motive is of paramount importance.

• The second principle is that the motive itself has to be of the right type for the sake of
goodness itself: an action’s moral value is due to the maxim from which it is performed,
and not to its outcome.
• The third principle reads: ‘‘Duty is the necessity of an action performed from respect
for the law.”6 As such, actions cannot be subjective, but ones that everyone would
assent to if they considered them rationally. The law here means the moral law, i.e. a
set of moral prescriptions (for example, ‘‘Do not lie,” ‘‘Do not steal,” and so on) that
are clear to everyone. These would then take on the force of a law – they are commands
that would have to be complied with even if we found it inconvenient or against our
immediate self-interest7.
Utilitarianism
The term “utilitarianism” was coined by Jeremy Bentham (1748–1832), and the theory was
later refined by John Stuart Mill (1806–1873).
5
Dando, N and Raven, W (2002), Living up to our Values – Developing ethical assurance, The Institute of
Business Ethics, 12.
6
Immanuel Kant, Foundations of the Metaphysics of Morals, trans. Lewis White Beck (Indianapolis: Bobbs-
Merrill, 1959), 16.
7
Kevin Gibson, Ethics and Business – An introduction, Cambridge University Press, 2007, 40 and 41
48
The greatest happiness principle formulated by John Stuart Mill is as follows:
“Actions are right in proportion as they tend to promote happiness, wrong as they tend to
produce the reverse of happiness. By happiness is intended pleasure, and the absence of pain;
by unhappiness, pain and the privation of pleasure”8.
Basically, it means that we should act to bring about the maximum good for the maximum
number of people. Utility is a measure of welfare, which is often interpreted as human welfare.
The significant element of an act is the amount of good or evil it produces9.
Virtue
The key figure in virtue theory is the philosopher Aristotle (384–322 BCE). Basically, we learn
best from role models in society and making the most of our talents. Instead of working out an
algorithm of correct action, we can model ourselves on heroic people we aspire to be like,
asking what they would do in this situation. Moral goodness is achieved by encouraging and
shaping our virtues10. He states:
“Virtue, then, is of two sorts, virtue of thought and virtue of character. Virtue of thought arises
and grows mostly from teaching, and hence needs experience and time. Virtue of character
results from habit [ethos]; hence its name ‘‘ethical,” slightly varied from ‘‘ethos11.”
3.3. Corporate Social Responsibility
Corporate Social Responsibility (CSR) represents an implied contract between business and
society. The essence of this contract is that companies shall not pursue their immediate profit
objectives at the expense of the longer-term interests of the community12.
When introducing new technology resulting in a loss of jobs, a longer notice period or the
supply of appropriate training will be likely to help the affected staff to find alternative or new
employment more readily. The company may develop an educational partnership with local
schools to provide students with practical trainings. In some countries, companies are
encouraged to become involved in fields which were once solely the responsibility of central
or local authorities. Those are some examples of CSR within and outside the company.
Section 172 of the UK Companies Act 2006 provides an illustration of what social concerns
must be taken into account with a view to promoting the success of a company:
“172 Duty to promote the success of the company
(1) A director of a company 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 its members as a whole,
8
John Stuart Mill, Utilitarianism[1863], ed. Samuel Gorovitz, chapter 2 (Indianapolis: Bobbs- Merrill, 1971), p.
18.
9
Kevin Gibson, Ethics and Business – An introduction, Cambridge University Press, 2007, 30 and 31.
10
Kevin Gibson, Ethics and Business – An introduction, Cambridge University Press, 2007, 44.
11
Aristotle, Nicomachean Ethics, trans. T. Irwin (Indianapolis: Hackett Publishing Company, 1987).
12
Adrian Cadbury, “Corporate Governance and Chairmanship: A personal View”, Oxford University Press,
2002, 160.
49
and in doing so have regard (amongst other matters) to–

(a) the likely consequences of any decision in the long term,
(b) the interests of the company's employees,
(c) the need to foster the company's business relationships with suppliers, customers and
others,
(d) the impact of the company's operations on the community and the environment,
(e) the desirability of the company maintaining a reputation for high standards of business
conduct, and
(f) the need to act fairly as between members of the company”.
On a global level, “environmental, social and governance” (“ESG”) investing (also known as
“sustainable investing or finance”) represents the integration of environmental, social and
governance issues into investment decision-making. The movement is a legacy of the late Kofi
Annan, former United Nations (UN) Secretary General, who led a UN Global Compact
initiative towards sustainable investing. The outcome of the initiative was a report named “Who
Cares Wins” and the establishment in 2006 of the UN backed “Principles for Responsible
Investment” (PRI), by which investor signatories commit to integrating ESG issues into their
investment processes. In the report, the mandate for change was summarised as follows:
''in a more globalised, interconnected and competitive world the way that
environmental, social and corporate governance issues are managed is part of
companies' overall management quality needed to compete successfully.
Companies that perform better with regard to these issues can increase
shareholder value by, for example, properly managing risks, anticipating
regulatory action or accessing new markets, while at the same time contributing
to the sustainable development of the societies in which they operate. Moreover,
these issues can have a strong impact on reputation and brands, an increasingly
important part of company value13.''
Data from the PRI website14 in April 2023 showed a significant year-on-year increase in the
number of signatories to the PRI, reaching over 5,300 in 2022 representing over US$121
trillion assets under management.
3.4. Vietnamese law perspective
There is a general rule set forth in Article 3.2 of the Civil Code and Article 11.1 of the
Commercial Law that contracts and agreements including those signed by companies shall not
be contrary to social morals. However, social morals are defined in Article 123 of the Civil
Code on a very broad and vague manner as “standards of general behaviour in social life,
which are recognized and respected by the community”.
Articles 13.1(a), 13.1(b), 71.1(a), 71.1(b), 165.1(b), and 165.1(c) of the LOEs require the
company’s legal representative, and its managers to:
• act honestly and prudently to the best of their ability in order to assure the maximum
legitimate interests of the company;
13
Executive summary to the Global Compact report “Who cares Wins – connecting financial markets to a
changing world”.
14
www.unpri.org/pri/about-the-pri
50
• to be loyal to the interests of the company and members and shareholders; not to abuse
their position or powers and not to use information, know-how, business opportunities
and other assets of the company for their own personal benefit or for the benefit of other
entities or individuals.
Furthermore, with respect to CSR specifically, Vietnamese legislation on securities partially

addresses social concerns. Indeed, Article 40.5 of the Securities Law provides that governance
of public companies shall “respect and ensure legitimate rights and interests of stakeholders”.
Furthermore, Article 294 of Decree No. 155/2020/ND-CP dated 31 December 2020 of the
Government providing detailed guidelines for the implementation of the Securities Law
prescribes that:
“Article 294. Ensuring lawful rights of stakeholders

1. The public company shall carry out its responsibilities towards the community and
stakeholders in accordance with the law now in force and its charter.
2. The public company shall comply with all applicable laws and regulations relating to labour,
environment and social matters”.
3.5. When do things become unethical?
Many corporate scandals of recent times may be attributed to a novel, modern collapse of
morality. The reason for such collapse of morality is not easy to explain:
“It is not that humans have become any more greedy than in generations past. It is that
avenues to express greed have grown so enormously.”15
The following three ingredients may amount to an irresistible temptation for the majority to
behave unethically or fraudulently16:
• opportunity;
• perceived very little or no risk of detection;
• modest consequences, including small degree of social disgrace, upon detection,
which make the risk worthwhile.
3.6. Practical Advice
Business ethics is a complicated field. However, to help solve out business ethics problems,
some advice may be proposed17:
1. Human nature is complicated. Lots of things contribute to good and bad behavior.
2. A good corporate social responsibility campaign is no substitute for primary business
ethics. Ethics is fundamentally about how your company makes its money, not what it
does with its profits after it’s made them.
15
Greenspan, A (2003), Testimony to Congress.
16
Andrew Chambers, "Chambers’ Corporate Governance Handbook”, London: Bloomsbury Professional, 2017,
504.
17
Jason Brennan, William English, John Hasnas, and Peter Jaworski, “Business Ethics for Better Behavior”,
Oxford University Press, 2021, 230 and 231.
51
3. The main way a business serves society is by ensuring its core products and services
make the world a better place.
4. The core principles of business ethics are refrain from coercion and fraud, honor your
contracts, respect the personhood of all participants in the market, and remember that
personal responsibility is inalienable.
5. Compliance with the law is no substitute for ethics. Although the law and ethics
sometimes overlap, the law sometimes requires unethical behavior, and many unethical
behaviors are nevertheless legal.
6. From a self-interested point of view, being ethical is a good bet. Your ability to make
future trades depends upon your reputation for ethics. The most reliable way of having
a good reputation is to deserve it.
7. Managing for ethics requires creating incentive structures which measure and reward
good behavior but which cannot easily be gamed.
8. Ethics must be part of strategy. Every strategic decision should involve explicit
discussions of the ethics of that decision, including who might be harmed by it, who
might be helped, and what dangers or downsides the decision may pose.
9. When something is everyone’s responsibility, it is no one’s responsibility. Good
management requires avoiding the diffusion of responsibility.
10. In particular, individual decision-makers need to bear the consequences of their actions,
or they will likely promote their own interest at the expense of the company’s.
11. People suffer from moral blind spots. Integrating ethics into strategy can help overcome
that.
12. Most people are conformists. This means putting all the bad apples together will
reinforce bad behavior. Having bad or unethical bosses means having bad and unethical
employees. But the good news is that ethical people will reinforce each other’s good
behaviors.
13. Most people are intrinsically motivated to make a positive difference. Helping
employees see how they make a positive difference can help produce better behavior.
However, we have to be careful to avoid moral accounting, where employees give
themselves permission to act badly to balance when they act well.
14. A company’s values need to be connected to its core product, incentivized, measured,
and meaningful. Otherwise, mission statements, CSR campaigns, and the like will
backfire.
****

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LECTURE NOTES

BUSINESS LAW AND BUSINESS ETHICS COURSE

2.1.9. Application Law and Jurisdiction.................................................................................................. 37

CHAPTER 1 – FUNDAMENTALS OF COMPANY LAW

1.1. Company Establisment

The legislation on enterprises also recognises business household as a type of business

“A business household shall be created and registered by an individual or the members of a

Persons not eligible for creating and managing an enterprise

• officers, non-commissioned officers, career servicemen and national defence workers

1.1.2. Capital Contribution

Pursuant to Article 4.34 of the LOEs,

1.1.3. Company Registration

Pursuant to Article 27.1 of the LOEs,

Under Article 28 of the LOEs,

“An ERC shall contain the following main contents:

1.1.4. Company Charter

Type of company Who can amend? Legal basis

1.1.5. Corporate Personality

1.2.1. Proprietary character of a share

1.2.2. Shares in a JSC

These preference shares carry rights in preference to ordinary shares.

Redeemable preference shares

Other rights of shareholders

1. To pay in full and timely for the shares undertaken to be subscribed.

1.2.3. Rights and obligations carried by shares in a multiple member LLC

“(a) To attend meetings of the Members’ Council, to discuss, make recommendations

1.2.4. Transfer of Shares

In a multiple member LLC

1.2.5. Purchase by a company of its own shares

A company may purchase its own shares in some exceptional circumstances.

Pursuant to Article 51.1 of the LOEs,

• At the request of a shareholder who has voted against a resolution on re-organization

Pursuant to Article 134.2 of the LOEs,

1.3. Corporate structure, governance and management

Types of Company bodies enjoying or in charge of

The members or shareholders of a company delegate the day-to-day management of the

1.3.2. Multiple member LCC

Pursuant to Article 54 of the LOEs,

Article 55.1 of the LOEs provides that:

(m) To make decisions on dissolution or petition for bankruptcy of the company;

“(a) To organize the implementation of resolutions and decisions of the Members’

• The first model consists of a General Meeting of Shareholders, a Board of Directors,

Pursuant to Article 155.2 of the LOEs,

“Unless otherwise stipulated in the law on securities, an independent member of the

(a) To pass the developmental directions of the company;

Article 153.1 of the LOEs prescribes that:

The Inspection Commitee is established by the General Meeting of Shareholders with 3 to 5

1.3.4. Contract Approvals

Contracts with related parties

“(a) A member or the authorized representative of a member; the director or general

“(a) Shareholders or authorized representatives of shareholders being entities holding

A related person is defined in Article 4.23 of the LOEs as:

member and shareholder holding a controlling portion of capital contribution or

Under Article 195.1 of the LOEs,

Substantial property transactions

1.4. Company Meetings and Resolutions

The purpose of company meetings is to enable members or shareholders to attend in person,

• He attends and votes in person at the meeting;

1.4.2. Meetings of the Members’ Council of a multiple member LLC