GMS MEETINGS – ATTENDANCE RIGHT OF DIVIDEND PREFERENTIAL SHAREHOLDERS

The General Meeting of Shareholders (GMS) is the highest governing body in joint stock company, where strategic decisions are made that directly impact the operation and development of the business. The rights of the GMS are primarily exercised through meetings. Among the shareholders, dividend preferential shareholders enjoy the advantage of receiving higher and more stable dividends compared to common shareholders. However, in return, their participation in management is limited, particularly in terms of the right to attend and vote at the GMS meetings. Then, what are the current regulations under the laws of Vietnam, and what should dividend preferential shareholders understand to ensure their legitimate rights and interests are protected?

The rights of shareholders are primarily exercised through the GMS meetings

The GMS exercises its rights by addressing important and strategic matters and overseeing the company’s operations primarily through meetings.

According to the provisions of Article 139 of the Law on Enterprise 2020, joint stock companies hold annual and extraordinary meeting of GMS. In particular, the annual meeting must be convened at least once per year, within four months from the end of the fiscal year, for the approval of financial statements, dividend distribution, development plans, and other important issues.

The right to attend the GMS meetings not only safeguards the legal interests of shareholders as owners of the company but also functions as a critical mechanism for oversight. Participation in these meetings enables shareholders to directly vote on key decisions, such as the election of Board of Directors members (who are responsible for the company’s operational management), amendments to the company’s charter, dividend distribution, or the restructuring or dissolution of the company. Furthermore, the GMS provides the shareholders an opportunity to examine detailed financial reports, evaluate business performance, and hold the company’s leadership accountable for operational efficiency, thereby ensuring transparency and the long-term sustainability of the company’s operations and business practices.

Regulations on the attendance right of dividend preferential shareholders at the GMS meetings

Shareholders holding dividend preferential shares (dividend preferential shareholders) are entitled to receive higher dividends compared to common shareholders or dividends paid at a stable annual rate. Depending on the purpose of issuing the shares and ensuring a balance of interests between shareholders with control rights and those receiving financial benefits, preferential shares come with restrictions on voting rights and the right to attend meetings.

Dividend referential shareholders do not have right to attend regular GMS meetings

As stipulated in Clause 3, Article 118 of the Law on Enterprise 2020: “3. Shareholders holding preferential shares do not have the right to vote, attend the General Meeting of Shareholders, nominate candidates for the Board of Directors and the Board of Controllers, except in cases specified in Clause 6, Article 148 of this Law.

Therefore, shareholders holding dividend preferential shares do not have the right to attend or vote at regular GMS meetings.

Dividend referential shareholders still have the right to attend the GMS meetings in exceptional cases

It is important to note the exceptional circumstance in which dividend preferential shareholders are allowed to vote on issues that arise and have a direct and significant impact on their rights and interests.

Specifically, a resolution of the GMS regarding matters that adversely affect the rights and obligations of this group of shareholders can only be adopted if it is approved by shareholders holding at least 75% of the total number of shares of the same preferential class attending the meeting, or by preferential shareholders holding at least 75% of the total number of shares of the same preferential class, if the resolution is approved in writing.

The attendance right at the GMS meetings of each group of shareholders

The right to attend the GMS depends on the type of shares held by the shareholders, in accordance with the principle of balancing the rights and responsibilities of each corresponding group in corporate governance.

– Common shareholders: Always have the right to attend and vote on all matters presented at the GMS. Specifically, shareholders or groups of shareholders holding at least 5% of the total common shares (or a smaller percentage if stipulated in the company’s charter) have the right to request the convening of a General Meeting of Shareholders in certain circumstances.

– Voting preferential shareholders: Not only do they have the right to attend the GMS, but they also hold a higher number of voting rights compared to common shareholders, thus having greater influence over the company’s important decisions. Voting preferential shareholders are typically founding shareholders or state shareholders.

– Preferential shareholders (dividend preferential, redemption preferential, or other preferential rights): They only have the right to attend meetings in exceptional cases directly related to their interests, as discussed in the previous section.

Shareholders need to be aware of and fully understand their rights

Shareholders holding dividend preferential shares, similar to other preferential share groups, are not permitted to attend regular General Meetings of Shareholders according to current legal regulations. However, in exceptional cases, when issues discussed directly affect their interests, this group of shareholders still has the right to participate and vote in accordance with the provisions of the law and the company’s charter.

To fully protect their legal rights and interests, shareholders must thoroughly understand the legal regulations, carefully study the company’s charter and relevant internal regulations when buying and holding shares, and closely monitor notifications from the company. This allows them to proactively seize the opportunity to exercise their rights in a comprehensive manner.

>> SHAREHOLDERS, GENERAL SHAREHOLDERS OF A PUBLIC COMPANY https://linconlaw.vn/shareholders-general-shareholders-of-a-public-company/

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