A Chinese investor holding 30 percent of a manufacturing joint venture in Bac Ninh discovers that its 70 percent Vietnamese partner is pushing the company to sell project land to a firm owned by the partner’s relatives, at a price visibly below market. On a straight capital-weighted vote the deal would sail through and strip the venture’s core asset. Vietnamese law, however, gives the minority a dedicated blocking mechanism for exactly this kind of transaction, separate from ordinary majority rule.
Why self-dealing is carved out of ordinary majority rule
Article 167 of Enterprise Law No. 59/2020/QH14 requires contracts and transactions between a joint stock company and a shareholder holding more than 35 percent of ordinary shares, or that shareholder’s related persons, to be approved by the Board of Directors or the General Meeting of Shareholders. The decisive feature is the voting carve-out: the shareholder connected to the transaction, and its related persons, may not vote on it. In the scenario above, the 70 percent block of the benefiting side is removed from the count, and the decision effectively rests with the remaining 30 percent minority.
For a joint venture organised as a limited liability company, Article 67 of the same law applies the same logic: transactions between the company and a member or a member’s related persons need approval of the Members’ Council, and the interested member has no vote on that transaction. This is a statutory veto the minority holds even if the charter adds no protective clause at all.
If the deal is forced through anyway: voidness and compensation
Where the majority side-steps the mechanism by splitting the transaction, using a nominally independent buyer, or holding a defective meeting, the deal can still be attacked after signing. Clause 4 of Article 167 provides that a related-party contract or transaction concluded or performed without the required approval is void and handled in accordance with law; the persons who signed for the company and the related directors or managers must jointly compensate the damage and return any benefit obtained from the transaction to the company.
In parallel, Article 161 of the Enterprise Law allows a shareholder or group holding at least 1 percent of ordinary shares continuously for six months to sue board members and the director, in their own name or on behalf of the company, for breach of the duties of honesty and prudence in Article 166. In practice, a voidness claim is filed together with a claim to restore the asset and recover the gap between the transaction price and an independently appraised market price.
Building a second veto layer in the charter and shareholders agreement
The statutory mechanism only covers related persons whose identity can be established. To catch transactions routed through third parties, a minority investor should place reserved matters in the charter requiring a supermajority, for example 75 or 80 percent, for asset disposals above a set value, borrowings, guarantees, and any transaction in which a board member has an interest. Article 148 of the Enterprise Law permits the charter to set approval thresholds above the statutory 65 percent for important resolutions, and this design space is exactly what many joint ventures waste by adopting a template charter.
Action checklist when a self-dealing transaction is being pushed
- Demand the transaction file in writing: buyer identity, related-person links, valuation method.
- Send a written objection to the board citing Article 167 or Article 67 and demand exclusion of the interested votes.
- Commission an independent licensed valuation early to document the price gap.
- Attend the meeting, have the objection minuted, and keep a copy of the minutes.
- Prepare a voidness and damages claim under Articles 161 and 167 within the applicable limitation period.
Frequently Asked Questions
How can the minority stop the majority selling company assets to its own relatives?
Stop it at the vote itself. Under Article 167 of the Enterprise Law (joint stock companies) and Article 67 (limited liability companies), the shareholder or member related to the transaction cannot vote on it. The minority should write to the board identifying the related-person link, demand that the interested votes be excluded, and have its objection recorded in the minutes. Large transactions also belong to the General Meeting or Members’ Council, not to the director alone.
Can a court declare a self-dealing transaction void?
Yes. Clause 4 of Article 167 of the Enterprise Law states that a related-party contract or transaction concluded or performed without the required approval is void. The court or arbitral tribunal will examine whether approval was required, whether the interested party voted, and whether meeting procedure complied with the charter. The claimant should also seek interim measures to prevent the asset being transferred onward while the dispute runs.
How do you prove the transaction damaged the company?
Three bodies of evidence usually decide the case: an independent valuation by a licensed appraisal firm showing the deal price below market at the same date; documents proving the buyer’s link to the majority shareholder, such as enterprise registration records, family relationships and payment flows; and internal records showing abnormal speed or the absence of any competitive quotation. Damages are measured by the price shortfall plus consequential costs borne by the company.
If the charter grants no veto, does the minority lose its blocking right?
No. The interested-vote exclusion in Articles 67 and 167 of the Enterprise Law applies by force of law, not by courtesy of the charter. The charter is only the supplementary layer: extending the veto to unrelated third-party transactions, or lowering the value threshold that triggers approval, must be negotiated into the charter and the shareholders agreement when the joint venture is set up.
This article has been quality-reviewed by the FLAW AI Legal Council