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

Name Hà Phương Linh Student code 11152431 Assignment about the comparison between G20/OECD Principles of corporate governance and corporate law (2005) Table of Contents I, Introduction 2 II, Content 3[.]

Name: Hà Phương Linh Student code: 11152431 Assignment about the comparison between G20/OECD Principles of corporate governance and corporate law (2005) Table of 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 .5 Chapter III : Institutional investors, stock markets and other intermediaries 17 Chapter IV The role of stakeholders in corporate governance .20 Chapter V Disclosure and transparency 23 Chapter VI The Responsibilities of the Board 27 III, Conclusion .31 I, Introduction “If management is about running the business, governance is about seeing that it is run properly.” – Robert Ian Tricker said According to his mentioned, the corporate governance plays an important role on 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 However, 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 So, let’s take a quick look about corporate law in 2005 and 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 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 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 At this point, the corporate law ( 2005) was followed the OECD Principles in some way For instance, Central agencies oversee the company Listed in Vietnam are the SSC and the STC The SSC was established in 1996 as a government agency reporting directly to the Prime Minister In 2004, the agency was reorganized and is now a unit under the Ministry of Finance The mandate of the SSC is set out in Decree 144/2003 / ND-CP SSC is responsible for organizing, managing, supervising and enforcing the entire operation of the securities market Under the Securities Act 2006 (which will come into effect in 2007) STCs will become selfgoverning organizations D Stock market regulation should support effective corporate governance Stock markets can play an important role in improving corporate governance by establishing and enforcing requirements that promote effective corporate governance by their listed issuers Some state agencies such as the State Securities Commission (SSC), the Steering Committee State Treasury (NSCERD), MOF, SBV, Academy of Finance (AOF) and CIEM Promote good corporate governance In 2002, there were three different sample formats, including corporate governance provisions that were introduced for listed companies, joint stock banks and equitized SOEs 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 The corporate governance framework should protect and facilitate the exercise of shareholders’ rights Basic shareholder rights should include the right to: 1) secure methods of ownership registration; 2) convey or transfer shares; 3) obtain relevant and material information on the corporation on a timely and regular basis; 4) participate and vote in general shareholder meetings; 5) elect and remove members of the board; and 6) share in the profits of the corporation OECD Corporate Law 2005 Basic shareholders’ rights Secure methods of ownership shareholders (Article 86) Secure methods registration of registration all ownership (Clause 3, Article 86) Convey or transfer shares The register of shareholders shall be kept at the head office of the company or the center for securities Obtain relevant and material registration, depository, clearing and settlement information on the corporation on a Shareholders have the right to check, look up or extract and copy the contents of the register of shareholders timely and regular basis during working hours of the company or the center for Participate and vote in general registration, depository, clearing and settlement of securities shareholder meetings Elect and remove members of the Convey or transfer shares board all shareholder except preference shareholders (Article Share in the profits of the corporation 87) For common shareholders: (Clause Article 79) d / To freely transfer their shares to other shareholders and non-shareholders other than those prescribed in Clause 5, Article 84 of this Law; Except: (Clause 3, Article 81) A shareholder owning a voting preference share is not allowed to transfer the shares to another person (Clause 5, Article 84) Within three years from the date the company is granted a business registration certificate, founding shareholders have the right to freely transfer their ordinary shares to other founding shareholders, but only transfer ordinary shares to non-founding shareholders if approved by the General Meeting of Shareholders In this case, the shareholder intending to transfer the shares does not have the right to vote on the transfer of such shares and the transferee automatically becomes the founding shareholder of the company After three years from the date the company is granted a business registration certificate, the restrictions on ordinary shares of founding shareholders will be abolished Obtain relevant and material information on the corporation on a timely and regular basis For common shareholders: (Clause Article 79) e) To consider, look up and extract information on the list of shareholders with voting rights and request the correction of inaccurate information; e) Reviewing, searching, extracting or copying the company's Charter, book of minutes of the General Assembly of Shareholders and resolutions of the General Assembly of Shareholders; For shareholders in Clause Article 79: b) Reviewing and extracting minutes and resolutions of the Board of Directors, mid-year and annual financial statements according to the form of the Vietnamese accounting system and reports of the Board of Supervisors; Participate and vote in general shareholder meetings all shareholders except dividend shareholders and redeemable shareholders For common shareholders: (Clause Article 79) Common shareholders have the following rights: a / To attend and speak at the shareholders' congresses and exercise their right to vote directly or through their authorized representatives; Each ordinary share has one vote; For preference shareholders: (Clauses and Article 81) Voting preference shares are shares with a higher number of votes than ordinary shares The number of votes of a voting preference share shall be stipulated in the charter of the company Shareholders owning voting preference shares shall have the following rights: a) To vote on matters falling under the competence of the General Meeting of Shareholders with the number of votes as stipulated in Clause of this Article; b) Other rights as ordinary shareholders, except as provided for in paragraph of this Article Except: Shareholders owning dividend preference shares not have the right to vote, attend the General Meeting of Shareholders, nominate persons to the Board of Directors and the Control Board (Article 82) (Article 83) The redeeming preference shareholders not have the right to vote, attend the General Meeting of Shareholders, nominating candidates to the Board of Directors and the Board of Supervisors Elect and remove members of the board only shareholders in Clause Article 79 A shareholder or a group of shareholders owning more than 10% of the total number of ordinary shares for at least six consecutive months or a smaller percentage as stipulated in the charter shall have the following rights: a / To nominate persons to the Managing Board and the Control Board (if any); Share in the profits of the corporation all shareholders (Article 93) Shareholders should have the opportunity to participate effectively and vote in general shareholder meetings and should be informed of the rules, including voting procedures, that govern general shareholder meetings: Be informed about the time, place, schedule, issues presented in the meeting all shareholders(Article 100) According to article 100, the person who convenes the General Meeting of Shareholders must send a notice of invitation to the meeting to all shareholders entitled to attend the meeting at least seven (7) working days prior to the opening of the meeting if the charter of the company does not specify a time limit Notice is sent by the method of guarantee to the permanent address of shareholders The meeting invitation must include the name, address of the head office, the number and date of issuance of the business registration certificate of the company; the name and permanent address of the shareholder or the authorized representative of the shareholder; time and place of meeting The procedures and procedures for shareholder meetings should allow equitable treatment of all shareholders (Article 103) The General Meeting of Shareholders shall discuss and vote on each issue in the program content Voting is carried out by collecting the voting card approving the resolution, then collecting the voting card without endorsement, finally counting the vote counting vote of approval, disapproval, no opinion The results of the counting shall be announced by the chairperson just before the closing of the meeting; Shareholders or delegates who arrive after the opening of the meeting are registered and have the right to participate in voting right after registration The chairperson shall not stop the meeting for late registration; In this case, the validity of the votes cast shall not be affected; Shareholders should have the opportunity to ask questions to the board, to place items on the agenda of general meetings, and to propose all shareholders According to Article 99, Shareholders or groups of shareholders stipulated in clause of Article 79 of this Law shall have the right to recommend matters to be included in the agenda of the General Meeting of Shareholders The proposal must be in writing and sent to the company no later than three working days before the opening date, unless otherwise stipulated in the charter of the company The petition must clearly state the name of the shareholder, the number of each kind of share held by the shareholder, the number and date of shareholder registration at the company, the proposed issue to be included in the agenda The convener of the General Meeting of Shareholders shall have the right to refuse a petition referred to in clause of this article in any of the following cases: a / The petition is sent not within the prescribed time limit or inadequate or inappropriate; b) The petition does not fall under the decision-making authority of the General Assembly of Shareholders; c) Other cases as stipulated in the charter of the company The convener of a meeting of the General Meeting of Shareholders must accept and make recommendations as prescribed in clause of this Article in the proposed agenda and content of the meeting, except for the cases stipulated in clause of this Article; The proposal is 10 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) 15 - 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 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 16 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 Penalties civil / administrative Violation of this rule will result in penalties 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, 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 17 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 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 So that, we can see at this point, it’s partially compliant 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 18 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 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 about 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 The creditors' rights (although not specifically mentioned in this report) are considered to be low compared to regional and international standards A series of benchmarking measures developed by the World Bank for 130 countries have compared Vietnam to its regional average and the OECD 19 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 Average area Average OECD 5.2 5.2 6.3 information 1.8 5.0 Coverage of public 17 76.2 96 577.2 Mortgage Viet Nam Creation 2.0 Fee (% of income per capita) Legal Rights Index (on a scale of 10) Credit index credit 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 20