VAFI considering setting up club of minority shareholders

The idea of setting up a club of minority shareholders, which has been suggested by Head of the Division for Macroeconomic Studies Research under the Central Institute of Economic Management (CIEM) Nguyen Dinh Cung, is being considered by the Vietnam Association of Financial Investors (VAFI).

Mr Cung said that in Vietnam there existed legal loopholes which could cause small shareholders, called ‘minority shareholders’, losses. He said that while waiting for the legal framework to be perfected, minority shareholders should stand in an organisation, a club for minority shareholders, so as to be able to protect themselves better.

Regarding the legal loopholes, Mr Cung said that the Enterprise Law and Securities Law both mentioned provisions for the protection of minority shareholders. However, the provisions are still far from reaching the highest standards in international practice.

For example, current laws require listing companies to expose regular information, irregular information as stipulated in Circular No 38 issued by the Ministry of Finance. However, information relating to the assessment about the future of listing companies is not required by the laws, while the information is very important.

For example, investors should know the assessment by listing companies’ management boards on the changes of the markets, the impacts of the capital market, and so on. They also deserve to know how many percent of stakes the management board holds in one company or another and the ability of the members of the management board.

Mr Cung said that only when investors were provided with the information they needed, especially information about possible changes with the listing companies, could they make suitable investment decisions ensuring healthy and transparent transactions.

He said that minority shareholders should gather to propose amendments to the legal documents that could help protect their benefit. For example, the current laws do not prohibit members of management boards from transferring shares. And in order to limit transfers, minority shareholders should ask for the stipulation that a transfer would only be allowed if the deal was accepted by the management board to ensure that it did not cause a supply-demand imbalance and losses for them.

For the time being, minority shareholders should gather in one club, in which they can exchange information and protect each others’ benefits.

Mr Cung has admitted that it is difficult to gather shareholders in one club. In fact, several groups of investors have been thinking of such clubs, but these are just small-scale clubs. “Such a club should be organised on a bigger scale, and there should be supporters, and a pioneer who leads the club,” he said.

Source: VNE