Assignment about the comparison between g20 oecd principles of corporate governance and corporate law 2005

Name Trần Thanh Tùng Student code 11154840 Assignment about the comparison between G20/OECD Principles of corporate governance and corporate law (2005) Contents I, Introduction 2 II, Content 3 Chapter[.]

Name: Trần Thanh Tùng Student code: 11154840 Assignment about the comparison between G20/OECD Principles of corporate governance and corporate law (2005) Contents I, Introduction II, Content Chapter I: Ensuring the basis for an effective corporate governance framework Chapter II The Rights and equitable treatment of shareholders and key ownership functions Chapter III : Institutional investors, stock markets and other intermediaries Chapter IV The role of stakeholders in corporate governance .11 Chapter V Disclosure and transparency 14 Chapter VI The Responsibilities of the Board 17 III, Conclusion 24 I, Introduction “The lack of corporate governance practice in the private sector is appalling.“ - Judge Denis Davis According to his mentioned, the corporate governance is really important to the success of company Corporate governance represents a set of principle, system and processes by which a company is governed It provides guidelines on how a company can be directed and controlled so as to reach its goals and objectives and add value, benefit to a company, all of which is in the interest of stakeholders Nevertheless, good corporate governance isn’t inclusive everything It is means to make market confidence and business integrity which is necessary for companies that need access to equity capital for long term investment This is significant for future oriented growth companies and to balance any increase in leveraging The OECD Principles of corporate governance provide a timely and tangible contribution to support investment as a forceful driver of growth The corporate governance framework in Vietnam is at an early stage of development, and relevant laws and regulations are being developed The informal sector is still informal in that the informal securities market is much larger than the formal one, and the state maintains a significant shareholding equitized enterprises The capacity and resources of agencies and organizations responsible for management, enforcement and market development are limited The principles are intended to help policy makers evaluate and improve the legal, regulatory and institutional framework for corporate governance, with a view to support economic efficiency, sustainable growth and financial stability This primarily achieved by providing shareholders, board members and executives as well as financial intermediaries and service providers with the right incentives to perform their roles within a framework of checks and balance So, with the corporate law in 2005 and OCED Principles, we have a comparison between OECD Principles of Corporate Governance and Corporate Law (2005) to find out some similarity and difference, This report provides a basis for Vietnam to assess compliance with corporate governance practices in relation to OECD corporate governance principles This report describes current practices and issues policy recommendations in six areas: (i) corporate governance framework; (ii) rights of shareholders; (iii) equal treatment with shareholders; (iv) the role of stakeholders in corporate governance; (v) disclosure and transparency; and (vi) the responsibilities of the Board The report shows that Vietnam has made significant progress in setting up a corporate governance framework However, there are still some big challenges ahead These challenges include ensuring the implementation of new legal changes, strengthening the capacity of the securities market regulator, enforcing compliance with the law developing the framework and standards for the informal securities market, raising awareness and training board members on corporate governance, and encouraging quality, timely and easy information to approach II, Content The revised Principles maintain many of the recommendations form earlier versions as continuing essential components of an effective corporate governance framework They also introduce some new issues and bring greater emphasis or additional clarity to others While some of the principles may be more appropriate for larger than for smaller companies, it’s suggested that policymakers may wish to raise awareness of good corporate governance for all companies This section assesses Vietnam's compliance with each of the OECD Corporate Governance Principles, which is relied on the corporate law presented in 2005 Policy recommendations can be made if a principle is not fully complied The Principles provide guidance through recommendation across chapters These are supplemented by annotations that contain commentary on the Principles and are intended to help readers understand their rationale Chapter I: Ensuring the basis for an effective corporate governance framework The corporate governance framework should promote transparent and fair market, and the efficient allocation of resources It should be consistent with the rule of law and support effective supervision and enforcement A The corporate governance framework should be developed with a view to its impact on overall economic performance, market integrity and the incentives it creates for market participants and the promotion of transparent and well-functioning Listed companies operate in the form of joint stock companies The majority of listed companies are "equitized" SOEs, of which the state still holds a majority stake In 2005, the average share of state ownership in listed companies was approximately 26% 12 Foreign investors, mostly institutional investors, averaged 17% ownership Ownership of foreign investors in statutory listed companies is limited to 49% In some companies, foreign investors own up to 30% The remaining shares in listed companies are held by individual investors and institutional investors, but the main problem is the ability of foreign companies to acquire and control one company Local companies are very limited This may limit some of the potential benefits of improving corporate governance and performance of listed companies through the acquisition of foreign business, technology and management capabilities B The legal and regulatory requirements that affect corporate governance practices in a jurisdiction should be consistent with the rule of law, transparent and enforceable Listing regulations Decree No 144/2003 / ND-CP sets forth regulations on issuance of securities to the public, continuous obligations of listed companies, regulations relating to securities transactions and the provision of securities and services related to the securities market in the territory of the Socialist Republic of Vietnam The issuance of government bonds, local government bonds, securities of credit institutions, shares of equitized SOEs and convertible bonds of foreign-invested enterprises The company is not regulated by Decree 144/2003 / ND-CP.15 In this context, these companies are exempted from the obligation to report and disclose information enforced by the SSC On the unofficial market has not been managed, the benefits of Minority shareholders are not effectively protected to avoid being abused by issuers or major shareholders According to §30 of Decree 144/2003 / ND-CP, the regulations on listing include:  A joint stock company with a minimum charter capital of VND billion;  Have a healthy financial situation, no overdue debt over one year;  The result of business operation is profitable for at least the last two years, there is no accumulated loss;  The board of directors, board of directors and board of supervisors of the company are committed to hold at least 50% of their shares in the company at least years from the date of listing, regardless of the state capital they are in may be authorized to represent;  At least 20% of the capital is held by more than 50 outside investors For companies with a charter capital of 100 million VND or more, the minimum rate is 15% C The division of responsibilities among different authorities in a jurisdiction should be clearly articulated and ensure that the public interest is served D Stock market regulation should support effective corporate governance E Supervisory, regulatory and enforcement authorities should have the authority, integrity and resources to fulfill their duties in a professional and objective manner Moreover, their rulings should be timely, transparent and fully explained F Cross-border co-operation should be enhanced, including through bilateral and multilateral arrangements for exchange of information Chapter II The Rights and equitable treatment of shareholders and key ownership functions G20/OECD Principles of corporate governance A Basic shareholder rights Enterprises Law 2005 (Viet Nam) Secure methods of ownership registration Article 86 Register of shareholder Convey or transfer shares The shares are freely transferable, except  Clause 3, Article 81  Clause 5, Artucle 84 Obtain relevant and material information TT-BTC Participate and vote in general shareholder meetings Select and remove members of the board corporation Amendments to the statutes, or articles of incorporation or similar have the right to approve or governing documents of the participate in, decisions company corporate changes shareholders Article 96 General Meeting of Article 79 Rights of ordinary shareholders sufficiently informed about, concerning fundamental Article 79 Rights of ordinary Shareholders Share in the profits of the B Shareholders should be Mentioned in Circular 52/2012 / The authorization of additional Clause Article 104 Passing of resolutions of General Meeting of Shareholders Mention in Law on securities shares Extraordinary transactions, including the transfer of all or substantially all assets, that in effect result in the sale of Clause Article 104 Passing of resolutions of General Meeting of Shareholders the company C Shareholders should have Shareholders should be furnished the opportunity to with sufficient and timely participate information effectively and vote in concerning the date, location and general shareholder meetings agenda of general meetings Article 100 Invitations to General Meeting of Shareholders Article 99 Program and agenda of General Meeting of Shareholders Article 98 List of shareholders Processes and procedures for general shareholder meetings should entitled to attend General Meeting of Shareholders allow for equitable treatment of all shareholders Shareholders should have the opportunity to ask questions to the board, including questions relating Right to ask questions: The law does not provide for this right of shareholders to the annual external audit, to place items on the agenda of general meetings, and to propose resolutions, subject to reasonable limitations Effective shareholder participation Article 101 Right to attend General Meeting of Shareholders in key corporate governance decisions, such as the nomination Clause Article 79 Rights of ordinary shareholders and election of board members, should be facilitated Shareholders should be able to vote Enterprise Law recognizes both forms in person or in absentia, and equal of effect should be given to votes authorized person, allow voting by mail whether cast in person or in or by remote voting, voting through the absentia General Meeting of Shareholders Impediments to cross border voting should be eliminated direct meetings or Not mention approval D Shareholders, including Article 78 Classes of shares institutional shareholders, should be allowed to consult with each other on issues concerning their basic shareholder rights Chapter III : Institutional investors, stock markets and other intermediaries The corporate governance framework should ensure equal treatment for all shareholders including minority shareholders and foreign shareholders Every shareholder should have the opportunity to make an effective complaint when their rights are violated A All shareholders of the same series of a class should be treated equally Within any series of a class, all shares should carry the same rights All investors should be able to obtain information about the rights attached to all series and classes of shares before they purchase Any changes in voting rights should be subject to approval by those classes of shares which are negatively affected Joint stock companies are also required to submit the approved annual report to the business registry Individuals and organizations have the right to view and copy annual reports maintained by the business registrar For unlisted companies, only shareholders holding more than 10% of shares have the right to obtain information from the six-month financial statements (six-month report not approved at the General Meeting of Shareholders and not audited, and the quality of this report is not high) (Article 79 Corporate Law 2005) When a stock is offered to the public, a company must disclose information about its shareholding structure, stating the types of shares Shares must be registered; Registered content includes information related to the type of stock, and shareholders are aware of this information (Article 79 Corporate Law 2005) Adoption of changes in voting rights adversely affects the class of shares Corporate Law 2005 does not have clear regulations This is a serious violation of this principle Minority shareholders should be protected from abusive actions by, or in the interest of, controlling shareholders acting either directly or indirectly, and should have effective means of redress - Ability to convene: The law stipulates that a group of shareholders owning 10% of shares shall be entitled to convene the General Meeting of Shareholders.(Article 79 Corporate Law 2005) - Ability to check documents: The 2005 Corporate Law provides for the right to view and extract information relating to the list of shareholders entitled to vote, the charter of the company and minutes of the general meeting of shareholders and resolutions adopted by the General Meeting of Shareholders - Right to withdraw: In case of merger, restructuring, large transaction and amendment of the company charter, shareholders who voted against or did not participate in the General Assembly of Shareholders have the right to resell their shares to the company at the price market(Article 90 Corporate Law 2005) - Possibility to sue to cancel the decision of the General Assembly of Shareholders: Under the 2005 Corporate Law, minority shareholders have the right to request the court to revoke any resolution violating company regulations - Ability to request the cancellation of resolutions of the General Meeting of Shareholders: Shareholders have the right not to admit the resolutions of the General Meeting of Shareholders (Article 107 Corporate Law 2005) - The right to postpone the General Meeting of Shareholders Corporate Law 2005 is not clearly defined - Appeal in court: According to the Law on Enterprises, if the list of shareholders has the right to vote incorrectly, shareholders may request the company correct Shareholders may request economic court or arbitrators to consider and cancel invalid resolutions approved by the General Assembly of Shareholders (Article 107 Corporate Law 2005) Votes should be cast by custodians or nominees in a manner agreed upon with the beneficial owner of the shares Impediments to cross border voting should be eliminated Since the General Meeting of Shareholders is only informed days in advance of the Corporate Law 2005, foreign investors have great difficulty in exercising their voting rights.(Article 100 Corporate law 2005) Processes and procedures for general shareholder meetings should allow for equitable treatment of all shareholders Company procedures should not make it unduly difficult or expensive to cast votes B: Insider trading and personal trafficking should be prohibited Review: Basic not complied Basic rules on insider trading The 2006 Securities Act has no general provision prohibiting trading based on information that is not disclosed to the public Disclosure of insider trading Transactions of internal employees are allowed on condition that they report to SSC, STC and listed companies Internal staff must report to the SSC at least 10 working days prior to the transaction date and must notify HOSTC and the company within days of the transaction being commenced.63 Penalties civil / administrative Violation of this rule will result in penalties.64 There is no criminal law in the Penal Code relating to insider trading, but provisions relating to general offenses may be issued to apply C: Members of the Board of Directors and senior management must disclose to the Board of Directors that they have significant benefits in any transaction or matter affecting the company whether directly, indirectly or on behalf of a third party, 10 Regulations on disclosure of information on transactions with related parties According to the new provisions of the Enterprise Law 2005, members of the Board of Directors, members of the Supervisory Board, the General Director and other managers of the company must report to the company within days of all benefits They may put them in a conflict of interest with the company.66 The information that must be reported includes: name, address, business registration certificate, business sector and stockholding percentage the part of the officer or person involved with this object Regulations on approval of transactions with related parties / regulations of the Board of Directors / General Assembly of Shareholders The law stipulates that transactions with related parties must be approved at the General Meeting of Shareholders when the value of transactions exceeds 50% of the total value of the company's assets for unlisted companies, and 20% for listed companies There are some regulations on conflict of interest and using of business opportunities Conflicts of interest must be reported to the company, reported at the annual meeting of shareholders and recorded in the company's books Shareholders, members of the board of directors, members of the board of supervisors, and general director (executive director) have the right to review the contents of the reported information Company employees are not allowed to use the business opportunities of the company to serve their own interests Chapter IV The role of stakeholders in corporate governance The corporate governance framework should recognize the rights of stakeholders as defined by law or under bilateral agreements, encouraging the company to actively cooperate with stakeholders in asset creation, employment and financial stability for businesses A The rights of stakeholders with respect to the law or under bilateral agreements must be respected Review: Partially compliant 11 According to the 2005 Enterprise Law and the Model Charter 2002, stakeholders, including employees, unions, suppliers, or creditors, are not involved in the enterprise's internal decisionmaking process Stakeholders in Vietnam may include party organizations, women's unions, previous line ministries, and people's committees These agencies have an influence on the company's decision A list of relevant stakeholder rules No codes of conduct or recommendations for dealing with stakeholders have been developed At present, the level of awareness of corporate social responsibility is low Labor relations are governed by the Labor Code Trade unions have significant influence in state-owned enterprises and former SOEs B When the interests of interested parties are protected by law, interested parties must have the opportunity to file a complaint when their rights are violated Workers and creditors can file a lawsuit Workers are protected under the Labor Code, collective bargaining agreement (if any) and Bankruptcy Law The creditors are protected under the Civil Procedure Code and the Bankruptcy Law In practice, however, there are few cases that could support the effectiveness of existing mechanisms C The mechanism to improve the efficiency of workers' participation should be allowed to be built There are some regulations on the right to buy shares of employees There are no official regulations In fact, some companies are unanimously approved by the shareholders to issue convertible preferred stock as a bonus to the management or right to purchase shares of the employees This method has become more popular over the last two years D When shareholders participate in corporate governance, they must have access to appropriate, adequate and reliable information in a timely and regular manner The law does not provide for the right of specific stakeholders to have access to information Stakeholders are not allowed access to the information of the business other than the information disclosed to the public Creditors may have special access to information under the terms of the 12 loan Annual report on economic and financial prospects Annual report on economic and financial prospects The annual report publishes important data on employees The number of employees is stated in the annual report Timely and regularity of the information Compliance with the regulations on periodic disclosure of listed companies is weak E Interested parties, including employees and their representatives, should have the freedom to express concerns about unlawful or unethical practices up the board, and this is not allowed to affect their rights Rules of protection of whistleblowers Denouncers must provide accurate evidence, not just their concerns before the agency recognizes the concerns Their hesitation is justifiably to continue processing Vietnam does not have a "Whistleblower Rules" similar to the one set out in the US Sarbanes Oxley Act Interested parties, particularly employees of the company, may express their concerns to the board of supervisors and request that the board take action in the interests of the company In fact, there is no denunciation outside the official channels F The corporate governance framework should be complemented by an effective framework for bankruptcy and enforcement of creditor rights Creditors rarely use the Bankruptcy Law to exercise their rights Over the past 10 years, only 46 bankruptcy claims have been filed by the lender (1993-2003) In these comparisons, the legal rights in Vietnam are weaker than in other countries Access to credit information and credit card coverage are also considerably weaker Creditors' rights index Mortgage Viet Nam Creation 2.0 Average area Average OECD 5.2 5.2 6.3 1.8 5.0 Fee (% of income per capita) Legal Rights Index (on a scale of 10) Credit information index 13 Coverage of public credit 17 76.2 96 577.2 registration (borrowers per 1000 adults) Private coverage sector (borrowers per 1000 adults) Chapter V Disclosure and transparency Corporate governance frameworks must ensure timely and accurate disclosure of actual company -related issues, including financial status, performance, ownership and corporate governance A: Information disclosure must include, but is not limited to, information facts about: Review: Basic not complied (1) Financial results and operations of Annual report Listed companies must submit the company to the SSC and HOSTC the audited financial statements within 90 days of the end of the financial year.72 Required financial reporting must include a balance sheet, a statement of income, cash flow statement, and notes to the financial statements The audit report is attached to the audited financial statements Annual reports must be submitted in parallel with the financial statements.73 Annual reporting formats are required by law74, and include reports from the board of directors, explanatory reports and analysis by the board of directors , financial statements and audit reports Brief financial statements must be published in 14 a central newspaper, or through the HOSTC website and media Biannual reports and quarterly reports Listed companies must submit quarterly reports to HOSTC within 20 days of the end of the quarter.75 Six-month reports are filed on behalf of the second quarter report These reports not need to be audited The content of these reports includes the balance sheet and the statement of income Disclosure of information continuously For listed companies, material information is published 24 hours after the event When the market gets public opinion, SSC and HOSTC may require the company to disclose the issue if public opinion is deemed to affect stock prices Reporting obligations of listed companies are much higher than unlisted companies Unlisted companies are required to submit annual financial statements to the appropriate authorities, such as the business registration office and the local tax office, but not have to disclose the financial statements This In addition, there is no effective mechanism to monitor the compliance of unlisted joint stock 15 companies (2) The purpose of the company Annual reports of listed companies, including the board's report on the company's future plans and prospects (3) Ownership of majority shares and voting Annual reports include information on the rights ownership structure (by type of shareholder), number of investors who are not founding shareholders and their shares, total number of shares by type, number of shares circulation, stock holdings and treasury shares There is no requirement to disclose information on indirect ownership and / or the final beneficiary (4) Remuneration policy for the board of Remuneration and other information about the management and senior management, board of directors and the board of directors information about members of the Board must be disclosed in the annual report In fact, remuneration information is provided in the form of aggregate remuneration (5) Transactions with related parties Information about related party transactions must be stated in the financial statements in accordance with Vietnamese Accounting Standards Stakeholder transactions are now very common, especially in state-owned 16 enterprises Existing regulations on disclosure are inconsistent with IAS 24, and should be improved by broadening the definition of stakeholder (6) Predictable risk factors Risk factors are not required to be reported or disclosed However, in practice, joint stock banks have an analysis of risk factors in their annual reports (7) Issues related to workers and stakeholders Number of employees and environmental issues are analyzed in the annual report (8) Management structure and policy The governance structure is set out in the company charter, but the public is not easily accessible to them B: Information must be prepared and disclosed in accordance with the high quality standards for disclosure of financial and non-financial accounting information Review: Partially compliant C An annual audit should be conducted by an independent, competent and qualified, auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the company in all material respects D External auditors should be accountable to the shareholders and owe a duty to the company to exercise due professional care in the conduct of the audit E Channels for disseminating information should provide for equal, timely and costefficient access to relevant information by users F The corporate governance framework should be complemented by an effective approach that addresses and promotes the provision of analysis or advice by analysts, brokers, rating 17 agencies and others, that is relevant to decisions by investors, free from material conflicts of interest that might compromise the integrity of their analysis or advice Chapter VI The Responsibilities of the Board The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders OECD Corporate Law 2005 The board should fulfill certain key Reviewing and guiding functions, including: The board only reviews and guides the following things: Reviewing and guiding corporate strategy, major plans of action, risk management policies and procedures, annual budgets and business plans; setting performance objectives; (Article 108) The Board of Management shall have the following rights and duties: monitoring implementation and a) Deciding on the company's medium-term development corporate performance; and strategies and plans and annual business plans; overseeing major expenditures, acquisitions capital and divestitures Monitoring the effectiveness of the company’s governance practices and making changes as needed Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning b) To decide on the offering of new shares within the scope of the number of shares offered for sale of each type; Decision to mobilize more capital in other forms; d) To decide on the offer price of shares and bonds of the company; e) To decide to buy back shares according to the provisions of Clause 1, Article 91 of this Law; f) To decide on the investment plan and investment project within its competence and limit in accordance 18 Aligning key executive and board with this Law or the Charter of the company; remuneration with the longer term interests of the company and its shareholders g) Deciding solutions to market development, marketing and technology; To approve the purchase, sale, borrowing, lending and other contracts valued at 50% or Ensuring a formal and transparent more of the total value of assets recorded in the latest board nomination and election financial statement of the company or a smaller process percentage The company's charter, except for contracts Monitoring and managing potential conflicts of interest of management, and transactions specified in Clauses and 3, Article 120 of this Law; board members and shareholders, Monitoring including misuse of corporate assets and abuse in related party transactions Ensuring Same as OECD (Article 108) h) According to article 108, to appoint, remove, dismiss, the corporation’s integrity accounting of the and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards contract or terminate the contract with the director or general director and other important managers stipulated in the charter of the company; Determine salary and other benefits of such managers; To appoint the authorized representative to exercise the ownership of the shares or the capital contribution in another company, to decide on the level of remuneration and other benefits of such persons; i) Supervise and direct the director or general director and other managers in running the day-to-day business of the company; j) To decide on the organizational structure, internal management regulations of the company, decision on the establishment of subsidiary companies, establishment of 19 branches and representative offices, and capital contribution and share purchase of other enterprises; l) To approve the program and contents of documents serving the meeting of the General Meeting of Shareholders, convene the meeting of the General Assembly of Shareholders, or collect opinions for approval of the General Assembly of Shareholders; =>Selecting, compensating, monitoring and, when necessary, replacing same as OECD h) (Article 108) To appoint, remove, dismiss, contract or terminate the contract with the director or general director and other important managers stipulated in the charter of the company; Determine salary and other benefits of such managers; To appoint the authorized representative to exercise the ownership of the shares or the capital contribution in another company, to decide on the level of remuneration and other benefits of such persons; Aligning key executive and board remuneration  Same as OECD without providing for remuneration in shares (Article 117) The company has the right to pay remuneration, salary to members of the Board of Directors, Director or General Director and other managers according to the results and business results Unless otherwise stipulated in the charter of the 20 ... the corporate law in 2005 and OCED Principles, we have a comparison between OECD Principles of Corporate Governance and Corporate Law (2005) to find out some similarity and difference, This report... Remuneration policy for the board of Remuneration and other information about the management and senior management, board of directors and the board of directors information about members of the Board must... employees of the company, may express their concerns to the board of supervisors and request that the board take action in the interests of the company In fact, there is no denunciation outside the official