Many foreign investors entering Vietnamese joint ventures still carry the old numbers from the 2014 Enterprise Law: hold 10 percent continuously for six months and a special bundle of shareholder rights follows. The 2020 Enterprise Law split that bundle into two tiers: supervision and meeting-convening rights now start at 5 percent, while the right to nominate candidates to the Board of Directors and the Supervisory Board remains anchored at 10 percent. For an investor holding exactly 10 percent of a joint venture, the practical question is not whether a nomination right exists, but how many candidates it buys, through what procedure, and how to stop the nominated seat being neutralised.
The current statutory frame: two tiers at 5 and 10 percent
Clause 2 of Article 115 of Enterprise Law No. 59/2020/QH14 gives a shareholder or group holding at least 5 percent of ordinary shares (or a lower ratio set by the charter) the rights to examine and extract board minutes, resolutions and decisions, financial statements, Supervisory Board reports, and contracts and transactions requiring board approval; to demand a General Meeting in the statutory cases; and to require the Supervisory Board to examine specific management issues. Notably, the 2020 law dropped the six-month continuous holding requirement for this tier, a clear break from the 2014 law.
The right to nominate candidates to the Board of Directors and the Supervisory Board belongs to shareholders or groups holding at least 10 percent of ordinary shares. Nomination follows the charter; where the charter is silent, Clause 5 of Article 115 applies, under which the number of candidates each shareholder or group may nominate rises in steps with the ownership ratio, capped by the total membership of the board and the Supervisory Board. Nominees must still be elected at the General Meeting under cumulative voting, so nomination is a right to place names on the ballot, not an automatic seat.
Why 10 percent on paper may not convert into a real seat
Three bottlenecks recur. First, cumulative voting mechanics: each shareholder holds votes equal to its shares multiplied by the number of seats to be filled, and may concentrate them on one or a few candidates. A 70 percent majority can still concentrate to take most seats; a 10 percent group that focuses all its votes on a single candidate usually wins one seat on a board of five or more, but loses if it spreads votes across several names. Second, a silent or outdated charter: if the charter still carries 2014-law nomination language with a six-month holding condition, a dispute over the applicable conditions erupts at the very first general meeting. Third, the underrated Supervisory Board seat: for a minority, one seat on the body empowered to inspect books and financial reports is often worth more in practice than a board seat that is permanently outvoted.
Drafting nomination rights into the charter so they hold
A 10 percent investor should negotiate four specifics instead of copying the statute: the charter states the 10 percent threshold and the minimum number of candidates a qualifying group may nominate to each body; the filing procedure and deadline for candidate dossiers, with an undertaking that candidates will not be excluded for immaterial formal defects; a transparent cumulative voting procedure published before the meeting; and access rights for minority-nominated directors and supervisors to financial records and related-party contracts as part of performing their functions. In a limited liability joint venture, the equivalents — a member’s right under the charter to place its people on the Members’ Council and the Supervisory Board — are pure charter design, with no detailed statutory ladder as in a joint stock company.
Turning 10 percent into a real governance voice
- Audit the current charter against Clauses 2 and 5 of Article 115: thresholds, holding conditions and nomination procedure, hunting for leftover 2014-law language.
- Decide allocation: concentrate all cumulative votes on one board candidate, or prioritise a Supervisory Board seat, depending on the monitoring goal.
- File the nomination dossier within the charter deadline, in writing with proof of delivery, including the candidate’s profile.
- At the meeting: verify the cumulative voting rules are published before ballots are cast; minute any objection if a candidate is excluded contrary to the charter.
- After the meeting: ensure the elected person receives records access matching the office; refusal is ground for Supervisory Board and General Meeting action.
Frequently Asked Questions
Holding 10 percent, how many people can I nominate to the board?
The law sets no single number for every company: where the charter is silent, the number of candidates a group may nominate rises in steps with its ownership ratio under Clause 5 of Article 115 of the Enterprise Law. In the 10 to under 20 percent band, the statutory ladder allows up to two candidates. Remember this is the number placed on the ballot; election depends on the cumulative voting result at the General Meeting.
Where should the nomination right be written to be secure?
Most securely in the company charter, in specifics: the threshold ratio, the number of candidates, the procedure and filing deadline, and candidate standards. The charter is registered and applies internally and before state authorities. A shareholders agreement can add mutual undertakings to vote for each other’s candidates, but that binds only the signatories; breaching it sounds in contract damages and does not by itself annul the election resolution.
What if my nomination is refused?
First demand the refusal reasons in writing and test them against the charter: excluding a candidate on wrong conditions or procedure is a defect in the election process. The shareholder may object at the General Meeting and have it minuted, require the Supervisory Board to examine the matter, and within the statutory period ask a court or tribunal to annul a General Meeting resolution adopted through an election process that breached the charter and the law. A timely filed dossier with proof of delivery is the central evidence.
Should a 10 percent minority prioritise a board seat or a Supervisory Board seat?
It depends on the goal. A board seat gives a voice in business decisions and a vote in transaction approvals, including related-party deals. A Supervisory Board seat gives access to books, financial inspection powers and the ability to trigger thematic examinations — the early-warning tool against transfer pricing and abnormal costs. For a minority more worried about asset stripping than strategy votes, the Supervisory Board seat is usually the more effective buy for the same capital.
This article has been quality-reviewed by the FLAW AI Legal Council