A Board of Directors signs, on its own, a contract to sell a factory worth 40% of the company total assets — is that valid? The answer depends on whether the transaction falls within the authority of the General Meeting of Shareholders. The Enterprise Law (cited per consolidated document 67/VBHN-VPQH 2025) uses a 35% of total asset value threshold as the dividing line, but applies it differently across two regimes: ordinary transactions and related-party transactions. Confusing the two regimes is the most common governance mistake in Vietnamese joint stock companies.
1. The 35% rule and the two transaction regimes
General Meeting of Shareholders — large transactions (point d clause 2 Article 138): the General Meeting of Shareholders “decides on investment in or sale of assets valued at 35% or more of the total asset value recorded in the company latest financial statements, unless the company charter provides a different ratio or value.”
Board of Directors — large transactions (point h clause 2 Article 153): the Board of Directors “approves purchase, sale, borrowing, lending and other contracts and transactions valued at 35% or more of the total asset value recorded in the company latest financial statements, except where the charter provides a different ratio or value and the contract or transaction falls within the decision-making authority of the General Meeting of Shareholders under point d clause 2 Article 138, clause 1 and clause 3 Article 167.”
In other words: the Board may “approve” a transaction of 35% or more only when that transaction does not fall within the General Meeting authority. The two regimes coexist — the transaction must first be classified before asking “who signs”.
2. Related-party transactions — Article 167
Covered persons (clause 1 Article 167): (a) shareholders or authorized representatives of shareholders owning more than 10% of ordinary shares and their related persons; (b) members of the Board of Directors, the Director/General Director and their related persons; (c) enterprises that company managers must declare under clause 2 Article 164.
Below 35% — approved by the Board of Directors (clause 2 Article 167): the company legal representative must notify Board members of the related person and attach the draft contract or principal contents of the transaction; the Board decides on approval within 15 days (unless the charter provides a different time limit). A Board member with a related interest has no voting right.
35% or more — approved by the General Meeting of Shareholders (point a clause 3 Article 167): transactions other than those under clause 2 (i.e., 35% or more) fall to the General Meeting of Shareholders.
The special 10% threshold (point b clause 3 Article 167): borrowing, lending or asset sale transactions valued at more than 10% of the company total asset value between the company and a shareholder owning 51% or more of the total voting shares, or a related person of such shareholder — only above 10% is already enough to trigger General Meeting of Shareholders authority. Note the two different 10% figures: more than 10% of ordinary shares is the criterion for identifying a related person (clause 1), while more than 10% of total asset value is the approval threshold for dealings with a controlling shareholder (clause 3).
3. Threshold map (statutory default — the charter may provide otherwise)
- Related-party transactions: below 35% → Board of Directors (clause 2 Article 167); 35% or more → General Meeting of Shareholders (point a clause 3 Article 167); for borrowing/lending/asset sales with a shareholder owning 51% or more: more than 10% → General Meeting of Shareholders (point b clause 3 Article 167).
- Ordinary purchase/sale/borrowing/lending transactions (not with related parties): 35% or more → Board of Directors “approves” (point h clause 2 Article 153), but investment/asset sale decisions of 35% or more → General Meeting of Shareholders (point d clause 2 Article 138).
The threshold is calculated on the total asset value recorded in the company latest financial statements (the law does not specify audited or unaudited, annual or quarterly — no inference should be added).
4. The charter may be stricter
The law allows the charter to provide a different ratio or value (point d clause 2 Article 138; point h clause 2 Article 153). However, under clause 2 Article 167, the charter may only provide a ratio or value lower than 35% — i.e., the charter may only tighten (bringing more transactions to the General Meeting), not loosen. Companies should state the threshold clearly in the charter to avoid authority disputes.
For public companies, point b clause 4 Article 293 of Decree 155/2020/ND-CP has separate rules: transactions of 35% or more (or aggregate transactions within 12 months from the first transaction reaching 35%) with members of the Board of Directors, the Supervisory Board, the General Director, other managers and their related persons; shareholders or authorized representatives owning more than 10% of ordinary shares and their related persons → approved by the General Meeting of Shareholders of the public company.
5. Authority allocation table
| Criterion | General Meeting of Shareholders | Board of Directors |
|---|---|---|
| Investment/asset sale ≥ 35% of total assets | Decides (unless the charter provides otherwise) | May “approve” only if not within GMS authority |
| Related-party transaction < 35% | No approval | Approves (15 days; interested members may not vote) |
| Related-party transaction ≥ 35% | Approves | No approval |
| Borrowing/lending/asset sale > 10% with a ≥ 51% shareholder (or related person) | Approves (special lower threshold) | No approval |
| May the charter provide otherwise? | Yes — different ratio/value | Yes — but only a lower ratio/value |
| Threshold base | Total asset value in the latest financial statements | |
Sources: point d clause 2 Article 138, point h clause 2 Article 153, Article 167 of the Enterprise Law; point b clause 4 Article 293 of Decree 155/2020/ND-CP.
6. Checklist: 4 questions before signing a large transaction
- Is it a related-party transaction? (check clause 1 Article 167 — the more-than-10% ordinary shareholding test)
- What percentage of total assets? (based on the latest financial statements)
- What does the charter say? (any threshold lower than the statutory one)
- Who approves? (General Meeting or Board — and interested members must be excluded from voting)
Caution: the boundary between “deciding on investment/asset sale” (point d clause 2 Article 138) and “approving purchase/sale contracts” (point h clause 2 Article 153) is not rigidly defined by the law — the charter should define it clearly; in doubtful cases, the safest course is to submit to the General Meeting of Shareholders.
FAQs
Do all transactions of 35% of total assets or more belong to the General Meeting of Shareholders?
No. Two regimes must be distinguished: (1) investment/asset sale decisions of 35% or more — decided by the General Meeting of Shareholders (point d clause 2 Article 138); (2) related-party transactions — the 35% threshold allocates approval between the Board of Directors (below 35%) and the General Meeting of Shareholders (35% or more) under Article 167.
What is the “15 days” in clause 2 Article 167?
It is the time limit for the Board of Directors to decide on approval of the transaction — not the notification period.
May an interested Board member vote to approve the transaction?
No. Clause 2 Article 167 provides that a member with a related interest has no voting right.
Legal sources
- Enterprise Law (consolidated document 67/VBHN-VPQH 2025 — Articles 138, 153 and 167 not amended by Law 76/2025/QH15): point d clause 2 Article 138; point h clause 2 Article 153; Article 167 (related-party transactions).
- Decree 155/2020/ND-CP (amended by Decree 245/2025/ND-CP): point b clause 4 Article 293 (separate rules for public companies).
Is your company about to sign a large-value transaction and unsure who has approval authority? Reach us via the Contact page of FLAT Law Firm for an authority review, drafting of Board or General Meeting resolutions and risk control for related-party transactions.
The legal content of this article is being reviewed by FLAT’s AI Legal Council and will be submitted to the owner for approval before publication; it is not an opinion of a licensed lawyer and does not replace legal advice for specific cases.
For reference only, not legal advice.