Minority Shareholder Dispute Commentary: Article 153 of the Enterprise Law 2020

Introduction

The rights of minority shareholders in joint-stock companies remain a relatively underdeveloped area of Vietnamese law. The Enterprise Law 2020 made meaningful advances, but court application has been uneven.

This case, decided at first instance by the HCMC People's Court in 2023, is among the first to apply Article 153 of the Enterprise Law 2020 on derivative actions (kiện thay mặt công ty). This is a newly codified mechanism to protect minority shareholders against self-dealing by the Board of Directors (BOD) and senior executives.

Facts

Joint-Stock Company X (the "Company") had:

  • 12 shareholders, charter capital of VND 50 billion
  • A controlling shareholder holding 60% (also Chairman of the BOD)
  • Plaintiff: a Group of Shareholders Y holding 18% in aggregate

In 2022, the BOD signed an interest-free loan agreement worth VND 8 billion with another company controlled by the Chairman's relative. The deal was approved without convening a General Meeting of Shareholders (GMS) — contrary to Article 167 of the Enterprise Law 2020 on related-party transactions.

Group Y sought:

  1. A declaration that the loan agreement is void
  2. An order requiring the BOD to indemnify the Company for VND 8 billion (paid to the Company, not to Group Y)
  3. Disclosure of the Company's detailed financial records for the past 3 years

Issue 1: Standing for derivative action

Article 153 of the Enterprise Law 2020

Article 153 grants any shareholder or shareholder group holding at least 1% of ordinary shares for a continuous period of at least six months the right to:

"Sue for civil liability against members of the Board of Directors, the Director or General Director... in the following cases: a) Violations of the duties of company managers under Article 165 of this Law; b) Failure to perform, incomplete or untimely performance, or performance contrary to assigned obligations; c) Abuse of position, use of company information, know-how or business opportunities for personal gain or for the benefit of others; d) Other violations."

This is a new mechanism compared to the Enterprise Law 2014, which restricted certain rights to shareholders holding at least 10%.

The court's reasoning

The trial court accepted:

  1. Group Y (18% > 1%) had standing under Article 153
  2. The interest-free loan to a related party without GMS approval violated Article 167
  3. This was also a breach of the duty of care of BOD members under Article 165

The court ordered:

  • The loan agreement is void
  • The BOD shall return to the Company the entire VND 8 billion (with market interest)
  • Defendants bear costs

Commentary

This is one of the first cases in HCMC to apply Article 153 in full. Three points stand out:

  1. Affirms standing for derivative action — recovery flows to the Company, not to the plaintiffs
  2. Applies a high duty of care — the BOD cannot rely on commercial-judgment reasoning to justify self-dealing
  3. Integrates with Article 167 — establishes that procedural breach in related-party dealings is itself a duty-of-care breach

Issue 2: Right to information

Legal framework

Article 115 of the Enterprise Law 2020 allows shareholders holding at least 5% for six continuous months to:

  • Inspect minute books and BOD resolutions
  • View interim and annual financial statements
  • Request the Supervisory Board to investigate governance matters

For more granular records (vouchers, tax filings, specific contracts), the law is unsettled.

The court's resolution

The court partly granted:

  • Ordered the Company to produce BOD minutes and three years of financial statements
  • Denied access to specific vouchers and contracts except those directly relevant to the case

The court reasoned that shareholder information rights must balance against trade-secret and third-party privacy interests.

Commentary

The court's approach is cautious but defensible. It does, however, expose a practical weakness for minority shareholders — they typically lack legal tools for pre-suit investigation. Some jurisdictions provide pre-action discovery (e.g. Singapore's section 175A Companies Act); Vietnam has no equivalent.

Counsel should advise minority clients to build internal information networks — including allies on the Supervisory Board or in management — to develop the factual case before filing.

Issue 3: Right to convene an extraordinary GMS

Article 140 of the Enterprise Law 2020

A shareholder or group holding at least 5% for six continuous months may demand the BOD convene an extraordinary GMS.

Group Y (18%) had so demanded prior to suit, but the BOD refused, asserting "no significant matter requires consideration". This produced the familiar minority-shareholder paradox: the right exists but lacks a direct enforcement mechanism.

The court characterised the refusal as a violation of Article 140 and folded it into the broader duty-of-care analysis.

Lessons for counsel

Representing minority shareholders

  1. Identify the equity threshold before strategising — 1%, 5%, 10% unlock different rights
  2. Preserve evidence of continuous holding for six months — brokerage statements, transfer slips
  3. Exercise information rights first — Article 115 — to build the evidentiary record
  4. Demand an extraordinary GMS — even when refusal is expected — to create a paper trail for litigation
  5. Consider derivative action — recovery restores share value rather than producing personal damages

Representing the company / BOD

  1. Strict compliance with Article 167 on related-party transactions — require GMS approval
  2. Maintain comprehensive minutes of governance decisions, especially where related-party interests touch the matter
  3. Comply with information requests within the law — flat refusal weakens position at trial

Conclusion

This case establishes important precedent for derivative actions in Vietnam — a mechanism still little used but with substantial potential. For practising counsel, mastery of the minority-shareholder triad (information, meeting demand, derivative suit) is the key to advising effectively in increasingly complex Vietnamese corporate disputes.

Apolo Lawyers has advised in many similar matters and observes that building the evidentiary record over multiple stages — rather than filing immediately — is the optimal strategy for minority shareholders. A case prepared 6–12 months before filing has a win rate roughly three times that of a hastily filed action.