Question: I am a shareholder holding 36% of the total shares of company A. Besides me, there are 2 shareholders, B owns 30% and C owns 34% of the total shares of Company A, in which, C is the Chairman of the Board of Directors. Due to a conflict, we could not agree on the organization of the General Meeting of Shareholders and C refused to convene the General Meeting of Shareholders. Is it possible if B and I want to actively convene the General Meeting of Shareholders without approving C?
Answer:
Thank you for your inquiry. For this question, we would like to advise as follows:
Given your question, we have not gotton whether this is an annual General Meeting of Shareholders or an extraordinary one. However, we understand that, 02 shareholders owning more than 65% of the charter capital of Company A all want to convene and hold a General Meeting of Shareholders to approve the contents under their authority, but encounter obstacles by one shareholder representing 34% of the total shares. In fact, this case is not uncommon and can be solved quite simply, but it is necessary to follow the precise procedure as per the law to avoid the invalidation of relevant documents.
Under Article 140.1 of the Law on Enterprises, the Board of Directors is obliged to convene the General Meeting of Shareholders, in which, the annual General Meeting of Shareholders must be convened at least once a year and the organization time limit shall not exceed June 30 every year. For the extraordinary General Meeting of Shareholders, it is convened in the cases prescribed by the Law and the Company’s Charter, including the case of convening at the request of a shareholder/group of shareholders or at the request of the Supervisory Board.
In this case, if C – as the Chairman of the Board of Directors does not convene a meeting of the Board of Directors to approve the organization of the General Meeting of Shareholders, the remaining shareholders can exercise the right to convene a meeting of the General Meeting of Shareholders without C. The procedure shall be as follows:
1. The remaining shareholder/group of shareholders sends a written request to convene a meeting of the General Meeting of Shareholders
According to Article 115.2(b) of the Law on Enterprises, a shareholder/group of shareholders, owning 05% of the total number of ordinary shares or more or owning a smaller percentage as prescribed in the Company’s Charter, has the right to: request to convene a meeting of the General Meeting of Shareholders in one of the following cases: (i) The Board of Directors seriously violates the shareholders’ rights, obligations of executives or issues decisions ultra vires; and (ii) Other cases prescribed by the company’s charter.
If this is an annual meeting of the General Meeting of Shareholders and the time limit for the organization of the meeting has been extended compared to the provisions of law, or when the Company arises issues within the competence of the General Meeting of Shareholders leading to the need of a meeting but the Chairman of the Board of Directors, due to personal purposes, ignores and/or fails to perform his obligations, pursuant to the aformentioned provisions, you can yourself sign a document with shareholder B to request the Board of Directors or the Supervisory Board to convene the General Meeting of Shareholders. The Board of Directors is obliged to convene within 30 days from the receipt date of the request and shall be responsible to compensate the company for damage arised in case the Board does not convene a meeting.
After 30 days from the date the request sent, if the Board of Directors does not carry out relevant works, the Supervisory Board must convene a meeting of the General Meeting of Shareholders on behalf of the Board of Directors.
2. Shareholders/groups of shareholders organize if the Board of Directors and Supervisory Board do not fulfill their obligations
After 30 days from the date of having to convene a meeting but the Supervisory Board fails to perform its obligations, you could convene the General Meeting of Shareholders by yourself or in combination with shareholder B.
In case the Charter or internal documents of company A contain clearer or supplement for the aforementioned contents (provided that it is not contrary to the aforementioned regulations), the shareholder/group of shareholders when convening a meeting of the General Meeting of Shareholders should fully comply with the regulations of company A in parallel with the current legal regulations.
The above is the consulting contents of ATA Legal Services. If you have any inquiries, please contact us by phone number, email or directly at the our office.
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