Discussion Paper No.20
PROTECTION OF MINORITY SHAREHOLDERSUNDER THE MERGER LAW IN VIETNAM
Assoc. Prof. Dr. Nguyen Thi Anh Van
January, 2021

Nagoya University
Center for Asian Legal ExchangeCenter for Asian Legal Exchange (CALE)

Nagoya University, JapanPROTECTION OF MINORITY SHAREHOLDERS UNDER THE MERGERLAW IN VIETNAM

Nguyen Thi Anh Van

Vietnam

Contents

ABSTRACTI. INTRODUCTION ................................................................................................................................... 2

II. HISTORICAL DEVELOPMENT OF THE VIETNAMESE M&A MARKET IN BRIEF .......................... 3

III. CASE STUDY: a merger between Mediplast and Vinamed ..................................................................... 7

IV. CURRENT LAW OF VIETNAM ........................................................................................................... 9
1. Principal provisions under the current laws and regulations .............................................................. 9
1.1. Provisions on parties to a merger being more flexible than those under the old law ................. 10
1.2. Provisions on Merging Procedure almost remaining intact compared with those in the past ... 10
1.3. Provisions on anti-trust totally remaining unchanged compared with those under the old law .. 11
1.4. New provisions on post-merger registration being adopted ....................................................... 11
1.5. Provisions on voting mechanism being slightly relaxed .............................................................. 121.6. Provisions on dissenting shareholders or members being almost unchanged ............................ 13
2. Matching the current law against the specific case: a merger between Mediplast and Vinamed ........ 13
2.1. The business form, size, and the components of Management Board (MB) of the constituent
companies ............................................................................................................................................. 13
a/ Scrutinizing the merger from its constituent companies’ business forms ................................. 13b/ Scrutinizing the merger from its constituent companies’ size ................................................... 14
c/ Scrutinizing the merger from its MB’s components................................................................... 14
2.2. Merging procedure ......................................................................................................................... 14
V. EXPERIENCE FROM THE US AND JAPAN ....................................................................................... 15
1. The US experience ........................................................................................................................... 15
1.1. Rights to be advised and fully informed about the planned merger .................................... 16
a/ Rights to be advised ................................................................................................................... 16b/ Rights to be informed ................................................................................................................ 17b.1/ The DGCL ................................................................................................. 17b.2/ Federal law ................................................................................................. 17b.3/ The stock exchange rules ................................................................................................. 18
1.2. Voting rights .................................................................................................................................. 19
a/ Voting rights under the DGCL ................................................................................................... 19
a.1/ Who are entitled to vote? .................................................................................................. 19

a.2/ How to exercise voting rights? .......................................................................................... 21b/ Voting rights under the stock exchange rules............................................................................. 21
1.3. Appraisal rights ............................................................................................................................... 22
a/ Who entitled to appraisal rights? ................................................................................................ 22b/ How to exercise appraisal right? ................................................................................................. 22
2. The Japan experience ..................................................................................................................... 23
2.1. Right to be advised and informed ................................................................................................. 24
a/ Right to be advised ..................................................................................................................... 24b/ Right to be informed .................................................................................................................. 24b.1/ The JCA information disclosure requirements ................................................................ 24b.2/ Information disclosure under the FIEA ........................................................................... 25
b.3/ Information disclosure under the stock exchange rules .................................................. 26
2.2. Rights to vote ....................................................................................................................................... 26
a/ Who entitled to vote? .................................................................................................................. 26b/ How to exercise voting rights? .................................................................................................. 27
2.3. Appraisal rights .................................................................................................................................... 28
a/ Who entitled to appraisal rights? ................................................................................................ 28b/ How to exercise appraisal rights?................................................................................................ 28
3. Similarities and Differences between the US and Japan Law ........................................................... 30
3.1. Similarities ............................................................................................................................................ 29
3.2. Differences ........................................................................................................................................... 29
VI. WHAT CAN BE LEARNT FROM THE US AND JAPAN EXPERIENCE ............................................ 32

PROTECTION OF MINORITY SHAREHOLDERSUNDER THE MERGER LAW IN VIETNAM
Nguyen Thi Anh Van*

ABSTRACT
Minority shareholders are the most vulnerable group amongst stakeholders in merger transactions
and thus, need to be protected. Protection of minority shareholders has been deemed as one of effective
ways to promote a robust stock market since potential investors are more willing to take risks in amarket where they are well-protected. The stronger protections for the interests of minority
shareholders, the more money people invest in the stock market. Statutory provisions for the protectionof minority shareholders in general and those in merger transactions in particular are, therefore, of
importance. This paper examines the statutory provisions of Vietnam governing merger transactions
in comparison with those of the US and Japan and draws out some possible suggestions for the former.

* I would like to express my deep gratitude to the CALE, Nagoya University for sponsoring my research in the late 2018; to Hanoi

Law University for giving me nearly three-month sabbatical to do research at CALE; to Prof. Nakahigashi Masafumi and Prof.
Hamada Michiyo for their helpful comments to the drafts of this paper; to CALE staff for their administrative assistance. All remaining
errors and omission, however, are mine.

1

I. INTRODUCTION
In the last two decades, the number of mergers and acquisitions (M&A) transactions in Vietnam
have been dramatically increased. It is reported that, the M&A market experienced a boom in 2017with total M&A deals’ value amounting to 10.2 billion USD. 1 In such a fast market expansion,
shareholders, especially the minority ones of the constituent companies are the most vulnerable group
amongst stakeholders to M&A transactions. They are company’s owners having direct ownershipinterests in their company but do not have decision making power properly.
This paper argues that the law governing merger transactions in Vietnam cannot protect minority
shareholders’ lawful rights and interests in constituent companies to a merger, which might cause
potential investors refraining from investing their money into companies’ shares in the future while
the Vietnamese courts might have to try hard to cope with accelerating rate of merger litigations in thenext decade. The scope of the paper is confined to the legal rules governing mergers in their strict
senses. It does not cover those governing corporate acquisitions, consolidations, splits, and otherreorganization transactions. In practice, the number of acquisition deals outweigh that of mergers2, but
it seems that so far, only in the latter transactions, minority shareholders of the constituent companies
complain seriously about being unfairly treated. Other ways of company reorganization have not beenvery widely used in Vietnam. The paper does not cover mergers whose parties’ domiciles being indifferent countries rather focusing on the pure domestic merger transactions only.
The second section of this paper gives a quick look at the historical development of the Vietnam
M&A market to date in order to demonstrate the urgent need for complete laws and regulation
governing this newly emerging market. The third section focuses on a controversial merger transaction
being effected between the two Vietnamese companies in 2017. The fourth section discusses
weaknesses in statutory provisions under the current Vietnamese law that govern merger transactions.
The fifth section discusses the US and Japan experience to draw out the possible suggestions for
Vietnam. The US’ experience is chosen because of the US being an original place where the very firstwaves of M&A transactions were observed, and several big waves followed to date; therefore the US’
M&A law having become a major topic for world-wide legal scholars’ discussions. So far, it has
served as a model for so many countries around the world in shaping their M&A law. The Japan’s
experience is worth studying because as an economic power in the Asia, M&A between Japanesecompanies as well as between them and foreign companies is not rare phenomenon,3 so Japanese law

1
See ‘VN’s MA Market declines in 2018’, Vietnam News (25 Jul. 2018) < https://vietnamnews.vn/economy/462450/vns-ma-marketdeclines-in-2018.html> accessed 21 September 2018.
2
To date, there has not been a separate statistics of total number of merger deals, but only acquisition deals (for concrete statistics on
M&A deals, see Section II of this paper). However, in practice, a number of merger transactions have successfully been effectuated,such as those between Ha Tien 2 & Ha Tien 1; KMF & KMR/NKD; and KIDO & KDC. For more information, see: ‘Two Issues
Arising from M&A Activities on Securities Market’ (Hai van de voi hoat dong M&A tren TTCK), Người Đồng Hành (27 May 2010)< https://ndh.vn/co-phieu/hai-van-e-voi-hoat-ong-manda-tren-ttck-1002868.html> accessed 25 September 2018.
3
It is reported that M&A have sharply increased in Japan, & M&A transactions reached its peak in 2006 with almost 2800 deals andin 2013 that figure was over 2000 deals. For more information, see Ralf Bebenroth, International Business Merger and Acquisitionsin Japan, (Springer Japan 2015) 173. It is also reported that more than 6 years after the massive earthquake and resulting tsunami as
well as nuclear power plant accident, Japan is still struggling to rebuild its economy but business activities in other parts of the country
has returned to normal and Japanese M&A activity in the following years has been active both inbound and outbound. For further2

makers have strived hard to keep improving the laws governing M&A transactions. Furthermore, both
Japan and Vietnam situate in the Asia, their social and legal cultures, thus, might resemble one another
and, therefore, promise high possibility for Vietnam to learn effectively from Japanese experience instrengthening her merger law in general and shareholders protection rules in particular. The lastsection suggests how and what Vietnamese law-makers should learn from experience of the abovementioned two world – ranking economic powers for the best protection of minority shareholders inthe Vietnam’s M&A market. To reach that end, a comparative law approach will be employed whereappropriate, amongst the relevant statutory provisions made by the Japanese, the American, and theVietnamese law-makers.
II. HISTORICAL DEVELOPMENT OF THE VIETNAMESE M&A MARKET IN BRIEF
On a global scale, M&A has been deemed as an effective way to expand companies’ business4
and has rather long history, spreading throughout more than a century from the late 19th century todate. In literatures, the history of M&A is often discussed evolving their seven waves occurring inseven different periods of time. The first five waves occurred in the US throughout the end of the 19th
century to the new millennium. The first wave started in 1897 and ended in 1904 whose peak run from1898 to 1902 and its life is half of the second wave’s one, which began in 1916 and ended in 1929,
and being the longest one. Compared with the first two waves, the third one seemed to be much shorter:
initiated in 1965 and ended in 1969, while the fourth, the fifth, and the sixth waves’ length arecomparable to that of the first one, running from 1981 to 1989; 1992 to 2000; and 2001 to 2008,
respectively. Furthermore, while the first six waves have widely been discussed, the last wave, from2014 to 2017, is rarely mentioned in literature for being too recent phenomenon, and its closing datein some materials even remains open.5 It is worth noting that the starting and closing yeas for those
M&A waves are disputed in literature, especially the difference between the starting year of the firstwave, according to legal scholars, amount to ten years.6 However, generally speaking, most materials
agree that the first wave was spreading from the last decade of 19th century to the first decade of 20th
century.

information, see Yuto Matsumura, Hideaki Roy Umetsu, Mori Hamada & Matsumoto, ‘Japan’, in Michael E Hatchard & Scott V
Simpson, Merger and Acquisitions (7th Ed, Global Legal Insights 2018) 150<http://www.mhmjapan.com/content/files/00031602/2018_MA7-Japan.pdf> accessed 21 October 2018.
4
See, for example Patrick A Gaughan, Mergers, Acquisitions, and Corporate Restructurings (3rd edn, John Wiley & Sons 2002) 8.
5For the discussion of the first five waves, see for example, Gaughan (n.4) 23-54; Em and David Faulkner, Satu Teerikangas, andRechard J. Joseph, The Handbook of Mergers and Acquisitions (Oxford Scholarship Online September 2012) 21-25; for the discussionof the first six waves, see Claire A Hill, Brian J M Quinn, Steven D Solomon, Mergers and Acquisitions: Law, Theory, and Practice,(West Academic Publishing 2016) 4-15; the 7th wave is mentioned in the recent brochure: Marcos Cordeiro, The seventh M&A Wave,(Camaya Partners September 2014) < https://camayapartners.com/wp-content/uploads/2016/06/The-seventh-MA-wave.pdf> accessed
21 September 2018.
6
These two American legal scholars are William J Carney (in Mergers and Acquisitions: Cases and Materials [(Foundation Press,
2000) 2]) and Gaughan (n.4) 23. Carney points out, the first wave initiated in 1887 while according to Gaughan, it was in 1897. Other
authors mentioned in n.3 are disputed on the starting and ending dates of the sixth one (some say from 2001-2008; others say 20082010). Marbos Cordeiro merely points out the starting year for the seventh wave is 2014, then Partrick Foulis says it ended in 2017.
See “Business” (in The Economist at www.theworldin.com) accessed 21 September 2018.

3

In Vietnam, M&A activities appeared rather late compared with those in other countries aroundthe world with the very first transactions being completed in 1990s.7 The earliest M&A deals weresaid to be effected in 1995, when Unilever acquired P/S Toothpaste; and Colgate Palmolive’s took
over of Dalan Toothpaste. It is reported that in both cases, the foreign parties initially made a joint
venture with a Vietnamese counterpart, and later, the former employed a new technology in production
which caused the Vietnamese party facing two options of either subscribing further capital to the joint
venture, or “being squeezed out” to give way for the foreign party running the whole business.8
Two years later, from 1997 to 2004, the M&A wave in banking sector arrived, when rural banks
being merged into urban ones to implement the governmental policy of restructuring banking system.9
However, a clear trend of M&A has merely been witnessed in Vietnam since the country’s accession
to the WTO in 2007. It is reported that, the M&A market volume and value had gradually increased
every year from 2007 to 2010, being 108 deals with total value of 1.72 trillion USD in 2007; 146 deals
with total value of 1.1 trillion USD in 2008; 295 deals with total value of 1.14 trillion USD in 2009;
and 345 deals with total value of 1.75 trillion USD in 2010.10 In 2017, as pointed out earlier, the market
value reached its peak of more than 10 billion USD.
Vietnam has recently become one of the favorable M&A destinations for foreign investors,
especially those from Japan, South Korea, and Singapore.11 Key sectors becoming acquired targets byforeign investors include: real estate, food and beverage, retail, and manufacturing. Japan has beenamong the most active in M&A in real estate, retail, and banking sector. Some typical transactions
that deserve to mention include: (1) Unicharm acquired 95% shares of Diana Vietnam and has run thebusiness in Vietnam since November 25th 2011; 12 (2) Hankyu Realty and Nishi-Nippon Railroadacquired 50% of shares in APSL-PLB-Nam Long Co. Ltd in order to invest in Fuji Residence, a realestate project in Ho Chi Minh City.13 Japanese financial institutions also show their interest in banking
business in Vietnam by their stock acquisition of the two largest equitized-state-owned commercial
7See, Hoang Q Vuong, Dung T Tran and Ha T C Nguyen, Merger and Acquisitions in Vietnam’s Emerging Market Economy, 19902009 (Centre Emile Bernheim, Research Institute in Management Sciences. Solvay Brussel School of Economics and Management)
6 <https://dipot.ulb.ac.be/ RePEc_sol_wpaper_09-045.pdf > accessed 5 February 2018. The authors while posing this observation do
not invoke any example of the first M&A transaction. It is hard to find in literatures either which one is exactly the first M&A deal in
Vietnam carried out in 1990s although quite few reports pointed out the same starting point for the first M&A in Vietnam.
8

See Bao Linh, How Unilever, Colgate “swallowed” Vietnamese Toothpastes <https://vtc.vn/unilever-colgate-nuot-kem-danh-rangviet-the-nao-d101962.html> accessed 22 September 2018.
9
See Lan Thanh, How are Rural Banks now?
<http://ndh.vn/nhung-ngan-hang-nong-thon-thoi-ay-gio-ra-sao--20170703101352126p4c149.news> accessed 22 September 2018.
See Le Duy, ‘The whole picture of the Global M&A and M&A trend in Vientam in the coming time’ (Toàn cảnh hoạt động M&A
toàn cầu và xu hướng hoạt động M&A tại Việt Nam trong thời gian tới (22 June 2012) <https://thegioiluat.vn/bai-viet-hocthuat/TOAN-CANH-HOAT-DONG-MA-TOAN-CAU-VA-XU-HUONG-HOAT-DONG-MA-TAI-VIET-NAM-TRONG-THOIGIAN-TOI-6997/> accessed 25 September 2018.
10

11

See, Le Net, ‘Mergers and Acquisitions in Vietnam – Pitfalls and Resolutions’, Financier Worldwide (November 2014)<https://www.financierworldwide.com/mergers-and-acquisitions-in-vietnam-pitfalls-and-resolutions#.X-SQhy2B3v0> accessed 22
September 2018.
12
See Thanh Thuong, ‘Diana sold 95% shares of stock for Unicharm’ (Diana ban 95% co phan cho Tap doan Unicharm),<http://ibsc.vn/home/Tin-tuc/Chuyen-muc,Tin-tuc,Tin-trong-nuoc/Diana-ban-95-co-phan-cho-tap-doan-Unicharm/> accessed 24
September 2018.
13
See ‘The Mergers & Acquisitions Review – Edition 11: Vietnam’, The Law Review (Oct. 2017)<https://thelawreviews.co.uk/edition/the-mergers-acquistions-review-edition-11> accessed 23 September 2018.

4

banks in Vietnam, when Mizuho spending up to 562 million USD to become a 15% shareholder ofVietcomBank in 201114; and Mitsubishi UFJ paying ups to 743 millions USD to become a 20%
shareholder of VietinBank in 2012.15 These two banks, since being equitized to date, the government
remains their controlling shareholder, with equity holding of 64.46% in VietinBank and of 77.11% in
VietcomBank16.
However, in the last two years, a reversed situation has been witnessed when the acquirers in
M&A deals have no longer been confined within foreign investors but there have been a number oftransactions where Vietnamese companies acquired foreign ones. Amongst such deals, those
conducted by VinFast and FPT (currently, being the two Vietnamese economic giants) are the typicalones in 2017-2018. VinFast, a newly established automobile manufacturer (a subsidiary of Vingroup,a large Vietnamese multi-sectoral business group), acquired the whole manufacturing and distributing
business of General Motors in Vietnam. While FPT (a Vietnamese leading information technology
and telecommunication group) acquired Intellinet Consulting. Both of the acquired companies in theabove-mentioned deals are the US ones (see table 1 below). If one merely looks at the statistic
indicating the progress of M&A market in Vietnam, one might think that this new trend reflects thefast growth of Vietnam companies recently. However, if one further investigates in literature, then one
might find that it is not always the case since it is reported that recently, US companies have employedtax-avoiding merger to lower their tax bill,17 although this statement does not necessary imply that the
two US companies, in the two above-mentioned cases, entered the merger transaction for that purpose.
Recently, “Bao Dau tu”, an online public media of the Ministry of Planning and Investment
released a list of typical M&A deals in Vietnam in 2017-2018, according to which, apart from the two
above-mentioned Vietnamese acquiring companies, others acquirers from Thailand, Japan and South
Korea successfully effected remarkable deals in the said period of time (see table 1).

14

See ‘Mizuho – VietcomBank: new Appearance in Cooperation’ (Mizuho – VietcomBank: Dien mao moi trong hop tac) Tap Chi Tai
Chinh<http://tapchitaichinh.vn/tai-chinh-kinh-doanh/tai-chinh-doanh-nghiep/mizuho-vietcombank-dien-mao-moi-trong-hop-tac52848.html> accessed 24 September 2018.
15
See Phi Nga, ‘Comprehensive cooporation between VietinBank and Bank of Tokyo-Mitsubishi UFJ’ (Hợp tác toàn diện giữaVietinBank và Bank of Tokyo-Mitsubishi UFJ) <https://www.vietinbank.vn/web/home/vn/news/12/12/Hop-tac-toan-dien-giuaVietinBank-va-Bank-of-Tokyo-Mitsibishi-UFJ.html&p=1>, accessed 24 September 2018.
16
See:‘Shareholder
Struture/
Majority
Shareholders’
(Co
cau
co
dong
/
Co
dong
lon)
<http://investor.vietinbank.vn/majorsharesholders.aspx>; see also ‘Investors / Shareholder Structure’ (Nha dau tu / Co cau co dong)<https://portal.vietcombank.com.vn/Investors/Pages/chi-tiet-nha-dau-tu.aspx?ItemID=2291&devicechannel=default> accessed 24
September 2018.
17
See Carolyn Y. Johnson, ‘Tax-avoiding mergers allows US companies to lower their initial tax bill by 45 million USD, CBO says’<https://www.washingtonpost.com/news/wonk/wp/2017/09/18/tax-avoiding-mergers-allowed-u-s-companies-to-lower-their-initialtax-bill-by-45-million-cbo-says/> accessed 2 October 2018.

5

TABLE1. TYPICAL DEALS IN VIETNAM 2017 – 2018: ACQUISITIONS18

1

Parties to the Deals
Thaibev - Sabeco

2

Vinfast - GM Vietnam

3

FPT - Intellinet Consulting

4

Sojitz - Saigon Paper

5

The Nawaplastic Industries - SCIC Nawaplastic belongs to SCG Thailand acquired shares to increase(Binh Minh Plastic)
ownership ratio in Binh Minh Plastic, a leading provider of plastic
products in Vietnam.
Shinhan Card - Prudential Financial In January 2018, Shinhan (a South Korean Financial Group),Company
through Shinhan Card, reached an agreement to buy wholly
Vietnam Prudential Financial Company at an intended price of 151
million USD.
Stripe Vietnam - NEM Fashion
Stripe International (Japanese group) pronounces their acquisitionof Nem, a private fashion company, as part of the group’s decision
to join in Vietnam market.

6

7

8

Transactions
ThaiBev acquired 53% shares of Saigon Beer – Alcohol -Beverage
Joint stock Company (SABECO) at a price of 4.8 billion USD,
which made the biggest M&A deal in 2017 and in Vientam M&A
history.
In June 2018, VinFast and General Motors (GM) signed anagreement over a new strategic cooperation in Vietnam’s Market.
Under the agreement, VinFast acquire manufacturing anddistributing business of GM in Vietnam.
On 12th July 2017, FPT declared the acquisition of 90% shares ofIntellinet Consulting – one of the information technology
consulting firms that have fastest growth in the US, with total valueof the deal is 30 million USD.
Sojitz Group (Japan) declare to acquire Saigon Paper in order toreply to an increasingly demand on paper, hard covers, and paper
towers in South East Asia region. The deal’s value is 91.2 Billion
USD

Kyoei Vietnam -Viet Y SteelIn 2018, Kyoei Steel completed the acquisition of a controlling
block of shares of Viet Y Steel with the deal’s estimated value at
51 million USD.
9 Lotte - Techcom Finance
Lotte Card announces its acquisition of Techcom Finance at a priceof 70 million USD, with a view to focus on the issuance of credit
cards, consumer landing and installment financing.
10 Mirae Asset Life contribute equity to With an investment of 52 million USD into Prevoir, Mirae Asset
Prevoir Vietnam
Prevoir is formed , which is a remarkable M&A deal in insurance
sector last year.
All the figures and practically successful transactions show that a full- fledged M&A market hasreally come into existence in Vietnam for more than a decade. And such a market requires
comprehensive legal rules to ensure that all stakeholders, including minority shareholders are well
protected, which in turn, will promote a vibrant market in Vietnam. However, in practice, the current
legal rules have exposed their weaknesses when minority shareholders of constituent companies seemto be entirely excluded from the decision making process before the two companies entering M&A
transaction. The following case well illustrates such an observation.
18

The list was released by Investment News, written in Vietnamese, translated into English by the author of this paper<https://baodautu.vn/danh-sach-cac-thuong-vu-va-nha-tu-van-ma-tieu-bieu-2017-2018-va-thap-ky-2009---2018-d86112.html>
accessed 24 September 2018.

6

III. CASE STUDY: a merger between Mediplast and Vinamed19
The most typical merger transaction effectuated in 2017 is the one between Mediplast (Medical
Plastic Join stock Company: Cong ty co phan Nhua Y te), and VINAMED (General Corporation for
Vietnam Medical Equipment: Tong cong ty thiet bi y te Vietnam), where minority shareholders’ rightand interest were seriously impinged upon. Vinamed formally obtained an Enterprise Registration
Certificate on September 6th 201720 by the Hanoi Investment and Planning Department.
Vinamed was a state-owned enterprise operating under the administration of the Ministry of
Health (MoH), then being equitized under Decision No. 2265/QD-TTg dated December 15th 2015
(issued by the Prime Minister). Since July 12th 2016, it has formally become a joint stock company
with 20% of its stated capital being held by the state, represented by the MoH, which later, transferred
the state-ownership-representative to the State Capital Investment Corporation (SCIC). Before
equitization, Vinamed had been a state representative holding the state investment in some joint stockcompanies, one of which was Mediplast.21
Mediplast used to be a state-owned enterprise, being equitized in 2006, with registered capital of
16.5 trillion VND, whose 48% was held by the state shareholder, represented by Vinamed. In a
Mediplast’s extraordinary shareholders meeting held in October 2016, Pham Quang Huy, the presidentof the management board announced that Vinamed further acquired shares from two individual
shareholders of Mediplast which raised its equity ownership in Mediplast up to 69.32%. However, by
the end of May 2017, such figure had declined to 23.86% because Vinamed silently sold about 45.5%
of its equity ownership in Mediplast.22 This was allegedly done on purpose in connection with themerger23 because under Art.162.3 of the 2014 EL, as a related party in a merger transaction, Vinamed
is not entitled to vote the transaction or contract, that brought to the shareholders’ meeting for approval,
whose value reaches 35% or a higher figure of the total company’s assets). The finalized shareexchange ratio is 3 Vinamed shares to 1 Mediplast share. It is worth noting that at that time Mr. Pham
Quang Huy was also the president of the management board of Vinamed.24
19

This case has not brought into court yet, rather, minority shareholders merely filed their petition to the Ministry of Finance and thento the Vice Prime Minister Truong Hoa Binh. This case has been a controversial issue on public media. All relevant information about
this case in this paper comes from the following online news: Ha Phuong – Long Nguyen, ‘Ministry of Finance “taking part” in themerger between Mediplast and VINAMED’ (3rd episode) ; Ha Phuong, ‘Why are Mediplast Shareholders Crying when Merger
Transaction Occurred’ (Vi sao co dong nhua Mediplast ‘khoc rong’ khi sap nhap) (2nd episode); Ngoc Nhi, ‘Reasons for Medical
Plastic Mediplast merged into Vinamed?’. All the above-three news are < https://enternews.vn/vi-sao-co-dong-nhua-mediplast-khocrong-khi-sap-nhap-112974.html>; see also: Thong Chi ‘Mediplast merged into Vinamed: Board of Management Ignored Minority
Shareholders’ Voice’, < https://laodong.vn/kinh-te/sap-nhap-mediplast-vao-vinamed-hoi-dong-quan-tri-bo-qua-y-kien-co-dong-nho520979.ldo>; and The Kha, ‘The Ministry of Health reports to the Government about the merger between Mediplast and Vinamed’<https://dantri.com.vn/xa-hoi/bo-y-te-bao-cao-chinh-phu-lum-xum-sap-nhap-mediplast-vinamed-20171205110637794.htm>
accessed 1 October 2018.
20
See Ha Thuong, ‘Mediplast formally merged into Vinamed’, <https://suckhoedoisong.vn/chinh-thuc-sap-nhap-mediplast-vaovinamed-n136277.html> accessed 1 October 2018.
21
The Kha (n.19).
22
See Thy Tho, “Mediplast’s Shareholders worrying for State’s Equity Ownership ‘Evaporated’”, <https://nld.com.vn/kinh-te/codong-mediplast-lo-von-nha-nuoc-boc-hoi-20171019211233742.htm> accessed 1 September 2018.
23
See See Minh Trang, “Who stands behind the Mediplast-Vinamed Merger?” <https://nhadautu.vn/ai-dung-sau-thuong-vu-sap-nhapmediplast--vinamed-d3658.html> accessed 20 October 2018.
24
Minh Trang (n.23). According to this news, Mr. Pham Quang Huy, in 2016, was appointed MB president of Vietnam-Japan Medical
Equipment Shareholding Company (JVC: cong ty co phan Thiet bi Y te Viet Nhat).

7

Mediplast has produced medical equipment such as: syringes, infusion set, and etc… Its products have been
widely used in almost every hospital in Vietnam and also in expanded program on immunization. Mediplast isalso the sole company in Vietnam that has been a contracting party with a Japanese partner for plastic sex toys
processing. Those contracts have generated a huge profit and promise a potential development future forMediplast. It is reported that Mediplast’s net profits in the last three years approximately equal to 100% of its
registered capital. Apart from those values, Mediplast’s assets even extend to some valuable tracts of land in oneof the four original urban districts of Hanoi and in Bacninh.25 In contrast, Vinamed has registered capital 6 times
bigger than that of Mediplast, but for years, its net profits have remained too small compared to those of
Mediplast.26

The merging proposal, contract and the charter of the post-transaction surviving company were
all put into a discussion at both companies’ shareholders meeting. At the Mediplast’s shareholders
meeting, the percentage of voting for the merger mounted to 81.4% of voting shares held byshareholders being present at the meeting (while such a number in Vinamed’s shareholders meetingwas 79.55%).27 However, according to many Mediplast’s shareholders, the merger did not get approval
from minority shareholders because of the total contrast between the two companies’ businessperformance results. Despite of a strong objection from the Mediplast’s shareholders, the merger
between Mediplast and Vinamed did occur, which resulted in the lamenting of the former’sshareholders for the two following more concrete reasons.28
Firstly, the way of appraising companies’ assets in order to determine share exchange ratio as
well as the institutional evaluators for such appraisals remained unclear even at the date theshareholders meeting being held. However, the Mediplast president of management board maintains
that before effecting the merger transaction, a merger proposal was brought into the shareholders’meeting, according to which, the share value of individual companies were defined by using arithmetic
average of the four results coming from four calculating methods: (1) accounting book method; (2)asset method; (3) discounting of prospective profit line method; and (4) comparative method between
the market value and the accounting book value. As a result, Vinamed share is valued at 11,512 VND
while that of Mediplast is 34,946 VND, accordingly the share exchange ratio of Vinamed share forMediplast shares is 1:3.
Secondly, the appraisal of company’s shares ignored many Mediplast’s tangible and intangible
assets (such as: Mediplast’s trade mark, know-how, machinery, and advantages of land-use-rights in
Hanoi and Bacninh). Although Mediplast’s registered capital is merely at 16.5 trillion VND, its sharecapital goes up to 54.8 trillion VND while Vinamed’s stated capital is 88 trillion VND but share capitalis merely 88.5 trillion VND… In 2016, Mediplast’s turnover and net-profit are 108.5 trillion VND and15.7 trillion VND, respectively. Its net-profit of the two preceding years are even higher at 18.1 trillion
VND in 2014 and 19.8 trillion VND in 2015… Therefore, Mediplast’s shareholders maintain that theshare exchange ratio of 3 Vinamed shares for 1 Mediplast share causes substantial loss for them; and25

Ha Phuong; Ha Phuong & Long Nguyen (n.19).
Thong Chi (n.19).
27
The Kha (n.19).
28
Ha Phuong; Thong Chi (n.19).
26

8

that without the merger, Mediplast would continue to be a “cash printer” for its shareholders with apotential turnover in 2017 would mount to 125.5 trillion VND, as well as its profit would
approximately be equal to its registered capital.
A group of ten Mediplast’s shareholders (holding less than 5% Mediplast registered capital),
therefore, filed their letter of claim on the above-mention issues to the Ministry of Finance (MoF).
The MoF issued public letter No. 8282/BTC-TCDN requested the MoH to investigate and reply theMediplast shareholders’ letter of claim. According to the MoH, on October 10th 2017, the MoH signed
a minute to transfer the power of the state-ownership representative in Vinamed from the MoH to the
SCIC and to withdraw all the state equity ownership in Vinamed. The MoH, therefore, would not be
responsible for answering to the letter of claim from the former Mediplast shareholders because it is
the responsibility of the state-ownership representative for capital managing at Vinamed, which used
to be the SCIC but due to the withdrawal of all state-owned capital in the company, the duty to deal
with the claim therefore passes to Vinamed; that the MoH already transferred all the documents ofclaim to Vinamed and Vinamed has to be formally responsible for handling the letter of claim file by
the former Mediplast shareholders.29
In response to the above-mention claim, the general director of Vinamed, Trinh Van Mao,maintains that the merger between Mediplast and Vinamed were done inconformity with Article 195
Sub-article 2 of the Enterprises Law 2014: the two constituent companies prepared a merger agreement,a draft of the post-merger Vinamed charter, which were approved by majority shareholders at the twoconstituents companies’ shareholder meetings... He further argues that this group of shareholders (theclaimants) should be subject to the Enterprise Law of 2014 to sue Vinamed to the court rather thansending their letter of claim with many distorted allegations that have conversely affected Vinamed’s
image, which might in turn cause unwanted consequences to business performance of the company…
By that argument, he even requests the government to employ suitable measures to protect thecompany and its employees.30
What can be learnt from the above-mentioned case is that all procedures for the merging
transaction have been done inconformity with the law but the minority shareholders have remained
unprotected. This suggested that currently, relevant statutory provisions are not adequately adopted toprotect minority shareholders of the constituent companies in merger transactions.
IV. CURRENT LAW OF VIETNAM
1. Principal provisions under the current laws and regulations
At present, laws and regulations governing merger transactions in Vietnam include: the Civil
Code of 2015 (hereinafter, the CC 2015); the Enterprise Law of 2014 (hereinafter, the EL 2014); theSecurities Law of 2006 as amended in 2010 (hereinafter, the SL 2006-2010); Competition Law of29

See Nguyen Ha, ‘Around the merger between Mediplast and Vinamed: what the MoH says’< https://baodautu.vn/bo-y-te-phan-hoi-ve-viec-sap-nhap-mediplast-vao-vinamed-d72806.html> accessed 6 October 2018.
30
See Nguyen Ha, ‘Around the merger between Vinamed and Mediplast: suing to the court for deciding right or wrong’<https://hplogistics.com.vn/xung-quanh-vu-sap-nhap-giua-vinamed-va-mediplast-dung-sai-can-khoi-kien-ra-toa/>
accessed
6
October 2018.

92018 (hereinafter, the CL 2018)31; Decree No.78/2015ND-CP on Enterprise Registration, as amended
by Decree No.108/2018/ND-CP; Decree No.126/2017/ND-CP on Conversion of State-owned
Enterprises (SOEs) and Single Member Limited Liability Companies having 100% registered capital
invested by a SOE; Decree 58/2012/ND-CP on Guiding the implementation of SL 2006-2010, as
amended by Decree No.60/2015/ND-CP (hereinafter, Decree 58/2012) (hereinafter, Decree 60/2015);
and Decree No. 35/2020/ND-CP on Guiding the implementation of CL 2018.
For mergers between credit institutions, parties have to be subject to further legislation, namely:
Credit Institution Law of 2010 as amended in 2017; and Circular No.36/2015/TT-NHNN on
Restructuring of Credits Institutions.
However, for the purpose of examining the above-mentioned case, this paper mainly focuses on
those provisions of the EL 2014 and where relevant, provisions of the CC 2015, and of the CL 2018
will also be considered.
1.1. Provisions on parties to a merger being more flexible than those under the old law
The CC 2015 reserves one provision, Article 89 stipulating the mergers between legal entities.
Accordingly, a legal entity (merged legal entity) can merge into another legal entity (merging legal
entity). After the completion of the transaction, the merged legal entity ceases its existence; it rights,
civil duties shall be transferred into the merging legal entity.
The purview of this provision seems to be broaden for recognizing the mergers between “legal
entities” regardless of their organizational structures, whereas in the past, the CC 2005 (Art.95) merely
recognized the mergers between legal entities of the same species.
Such a provision of the CC 2015 has been further developed by Article 195, the EL 2014. It reads:
One or a number of companies [hereinafter, merged company (companies)] can merge into another company(hereinafter, merging company) by transferring all assets, rights, liabilities and other lawful interests to merging
company, and ceases its existence.

Similar to the purview of Article 89 of the 2015 CC, that of Article 195 of the EL 2014 is alsobroaden than its counterpart (Art.153) laid down in the EL 2005, where only companies of the same
species could merge into each other. For example, shareholding companies could merge into eachother; and limited liability companies could merge into each other, but the former could not merge
into the latter and vice versa. Such a limit is now abolished.
1.2. Provisions on Merging Procedure almost remaining intact compared with those in the past
Article 195.2 provides for the merger procedure, which consists of three steps.
Firstly, constituents companies prepare the merger agreement and the drafting charter of merging
company. The agreement shall state: the name, domicile of the head office of the constituent
31

The merger between Mediplast and Vinamed occurred in 2017, the applied law should be the Competition Law of 2004 because the
CL 2018 has merely come into force since 1st July 2019). However, the relevant statutory provision in the two laws remain the same,
therefore, the CL 2018 shall be discussed.

10companies; merging procedures and conditions; employees usage plan; ways, procedures, terms andconditions for conversion of assets, subscribed capital, shares, and bonds of the merged company into
those of the merging company; timespan for effectuating the merger transaction.
Secondly, members, owners, or shareholders of the constituent companies shall approve themerger agreement, the drafting charter of the merging company, and accomplish the enterpriseregistration for the merging company. The merger agreement must be sent to all company’s creditors
and announced to the employees within 15 days form the date of approval.
Thirdly, after the completion of enterprise registration, the merged company ceases its existence;and the merging company is entitled to enjoy all legal rights and interests, but being liable for all
unpaid debts, employment contracts and other financial duties of the merged company.
1.3. Provisions on anti-trust totally remaining unchanged compared with those under the oldlaw
Under Article 195.3, the EL 2014, in a merger where merging company having market shareamounting from 30 to 50 percent of the relevant market, then the legal representative of the company
is responsible to give a notice to the competition authority before the merger being effectuated unlessotherwise provided for under the Competition Law. It further prohibits mergers in which merging
company’s market share exceeds 50 percent of the relevant market unless otherwise provided by theCompetition Law. These thresholds seem agree with those provided for under Article 24 of the CL
2018. Pursuant to this Article, a company whose market share mounts to 30 percent of the relevantmarket is deemed having dominant market position; and two combined companies whose market share
mounts to 50 percent of the relevant market shall be deemed as having dominant market position.
1.4. New provisions on post-merger registration being adopted
Compared with the previous Article 153 of EL 2005, Article 195 of the EL 2014 has two new
sub-articles relating to registration of merging company.
Sub-article 4 lays down three kinds of document to be filed with the Enterprise Registration
Authority (ERA), namely: (a) merger agreement; (b) merging company meeting’s resolutions andminutes for approval of merger agreement; and (c) merged company meeting’s resolutions andminutes for approval of merger agreement, except for when the merging company is a member or ashareholder holding more than 65 percent of registered capital or of voting shares of the merged
company.
Sub-article 5 requires the ERA to update the legal status of the merged company in the National
Database for Enterprise Registration and to process the changes in the enterprise registration for
merging companies.
When merged companies have a head office located outside the province or city (which is under
the administration of the central government) where merging companies’ head office situated, thenthe ERA of the place where the merging company located shall inform the ERA of the place where

11the merged company situated about such enterprise registration for the purpose of updating the legal
status of the merged company in the above-mentioned database.
Previously, Article 153.2.b of the EL 2005 merely had a sentence saying that a copy of the merger
agreement must be included in the documents filed with the ERA. The two new sub-articles of Article
195, the EL 2014, thus, provide for more details on the post-merger registration formalities for
merging company.
1.5. Provisions on voting mechanism being slightly relaxed
Article 195 of the EL 2014 merely requires the approval of a merger agreement by the constituent
companies’ co-owners. Voting mechanism, therefore, shall be invoked from relevant provisions of the
EL 2014. It is necessary to point out that the EL 2014 recognizes four types of enterprise: limited
liability companies (LLCs); shareholding companies (SCs); partnership (PSs); and sole
proprietorships (SPs). LLCs are further divided into two sub-categories, namely multiple members
LLCs (MLLCs) and single member LLCs (SLLCs). Although Article 195.1 allows a merger
agreement entered into by enterprises of different types and although Article 195.2.b requires approvalof such an agreement by the constituent companies’ co-owners/members, only shareholders in SCs,
members in both MLLCs and SLLCs are statutorily given the rights to vote on company’s
reorganization.32 The law, however, keeps silence on those rights of members in PSs.33 When a PS
merges into another PS, or into SC, or LLC, the voting mechanism of the merger agreement, thus,
remains unclear.
Quorum to conduct a meeting: It is worth noting that unless otherwise provided for in company’s
charter, to hold a shareholder meeting in SCs, a quorum of at least 51% of total voting shares of thecompany is required for the first time the meeting being convened; if the quorum is not met, a quorumof 33% is required for the second time the meeting being summoned; and a quorum is not required forthe third time the meeting being convened for failure of the first and the second ones due to ineligible
quorums.34 Those figures in MLLCs are 65%, 50% and non, respectively.35 The voting mechanism in
SLLCs is quite different for its different governance structure. SLLCs have only one owner being
either an individual or an institution and the total number of the Board’s members range from 03 to
07, appointed by the LLC’s owner. The Board’s president is either appointed by the LLC’s owner orby simple majority vote of the Board’s members.36 To conduct a Board of members’ meeting in the
SLLCs, a quorum of 2/3 total Board’s members is required and voting rule is one member one vote.37
Approval thresholds: Being governed by different provisions, the approval thresholds in a
meeting of each type of company are therefore different as well, and subject to individual type ofenterprise. In SCs, the affirmative vote of at least 65% of shares represented at the meeting is required32
See arts.: 144(1)(d); 60(3)(b); and 79(6), respectively. Under Art.4.25, company reorganization includes: division; split;
consolidation; merger, and conversion of business forms.
33
See Art.177(3).
34
See Art. 141.
35
See Art. 59.
36
See Art. 79(1) and (3).
37
See Art. 79(6).

12for an approval of a merger agreement38 (compared with a higher threshold of 75% under the EL
200539). Such a figure in MLLCs is 75% of total subscribed capital represented at the meeting;40 and
in SLLCs is ¾ of the members attending the meeting41. The same approval thresholds in MLLCs andin SLLCs can be seen under the EL 2005, respectively.42
1.6. Provisions on dissenting shareholders or members being almost unchanged
Articles 52 and 129 of the EL 2014 lay down legal basis for MLLCs members and SCs
shareholders to request the company buy back their subscribed equity (in MLLCs) or shares (in SCs)
should he/she disagrees with the resolution on company reorganization (merger is one of which) of
the Members’ Board or of the shareholders’ meeting, respectively. Upon such a request, an MLLC
has to repurchase his/her equity at market value or at a price determined inconformity with appraisal
rules under the company’s charter. However, payment for that repurchase can only be made if afterthat the MLLC can discharge other debts and financial duties. Article 52 is merely a copy of Article
43 of EL 2005.
Similar provisions is applied to SCs in repurchase shares from dissenting shareholder, however,a SC and its shareholder has one more choice in appraisal of shares that is to use service of an
institutional appraiser to determine shares’ price. The SC shall introduce at least three institutional
appraisers for the shareholder’s choice which is final. Article 129 almost remains unchanged comparedwith Article 90 of the EL 2005.
2. Matching the current law against the specific case: a merger between Mediplast andVinamed2.1. The business form, size, and the components of Management Board (MB) of theconstituent companies
a/ Scrutinizing the merger from its constituent companies’ business forms
The merger between Mediplast and Vinamed was effectuated in 2017, therefore it falls into thepurview of the current law (EL 2014 and subordinated legislation). In contrast to the EL 2005, the EL
2014 does not prohibit mergers between companies of different species, while both companies used
to be a state-owned company being equitized and at the time the merger occurred, both areshareholding companies. The only difference between the two companies in terms of shareholderstructure is Vinamed having a state shareholder (holding 20% of its voting stock) but not Mediplast.
Therefore, in terms of the business form of the constituent parties to the transaction, the merger islawful. Even under Article 95 of the EL 2005 (that prohibits mergers between companies of different
species), the transaction would not be void because the state’s equity ownership in Vinamed does not

38

See Art. 144(1).
See Art. 104(3)(b).
40
See Art. 60(3)(b).
41
See Art. 79(6).
42
See Art.52(2)(b) & Art. 68(6), respectively.
39

13

exceed 50% of the company’s voting shares to cause Vinamed a SOE43 whereas Mediplast being apure shareholding company having no state invested capital after the equitization.
b/ Scrutinizing the merger from its constituent companies’ size
The related figures show that Mediplast is much smaller than Vinamed in terms of size for theformer’s registered capital (16.5 trillion VND) being more than 4 times smaller than that of the latter(88 trillion VND); and the former’s share capital (54.8 trillion VND) being smaller than that of thelatter (88.5 trillion VND) as well. However, this does not make the transaction unlawful because thecurrent law (similar to the previous law) does not prohibit mergers between companies of different
sizes.
c/ Scrutinizing the merger from its MB’s components
The MBs in the two constituent company have a common president, namely Mr. Pham Quang
Huy. On public media, there have been a number of news with a topic of who being behind the merger
between Mediplast and Vinamed as well as with the discussion of why Mr. Huy holding so many
important positions in different companies doing business in medical equipment industry.44 However,under Article 151.1.c and Article 152, the EL 2014, interlocking MB’s members in general andinterlocking MB president in particular are not banned.
Therefore, the results from scrutinizing all of the three aspects of the merger between Mediplast
and Vinamed, show that the merger is perfectly lawful.
2.2. Merging procedure
Under the current law, merger procedure consists of three steps: (1) drafting relevant documents;(2) approving those documents; and (3) re-registering for the surviving company.
The Vinamed’s director, Trinh Van Mao, maintains that the two constituent companies follow
all those three steps: they did prepare a merger agreement and a draft of the surviving company’s
charter; they also went through a shareholder meeting in each constituent company, where the number
of affirmative votes for the merger reach high levels at 81.4% and 79.55% in Mediplast and Vinamed,
respectively. These results are quite high in comparison to the requirement of 65% under Article 144.1of the EL 2014. Up to here, under the current law, the merger in question still remains lawful.
However, according to the groups of minority shareholders, the company’s asset appraisal was
not transparent. Even at the time of the meeting, they were not informed of which institution acting as
an appraiser. So many tangible and intangible assets of Mediplast were not included into thecompany’s value… Therefore, they do not agree with the share exchange ratio of 3 Vinamed sharesfor 1 Mediplast share.
So it appears that the problem that causes the unhappiness of minority shareholder lies in thecompany valuation requirement, which has not mentioned in the merger procedure under Article 195
43
44

See EL2005, Art.4(22).
See n.20.

14

of the EL 2014. As discussed in the above sub-section 1.6, Article 129 merely lays down legal basis
for share appraisal where a shareholder disagrees with a decision over company reorganization andseeks to be bought out. Nowhere in the EL 2014 says anything about the duties of constituent
companies in valuation of their asset before determining share exchange ratio, and in defining a fairvalue of shares where minority shareholders being squeezed out (not by their will); nor does it stateout which consideration can be used in merger transactions, whereas these two issues are so much
important in merger transactions for their strong impact on the interests of shareholders. Although it
is not easy to define valuation methods of companies and their shares directly and clearly under thelaw, at least, the law should impose a duty of asset valuing on the constituent companies either by
their own or by an institutional valuator of their choice before effectuating the merger transaction. It
can, thus, be said that Article 195 was poorly drafted.
The study of foreign experience is, hence, necessary to further clarify weaknesses of the merger
provisions under the law of Vietnam.
V. EXPERIENCE FROM THE US AND JAPANProtective measures being afforded shareholders of the constituent companies in merger
transactions are available in a number of forms: (1) shareholders’ rights to be advised and informed;(2) rights to vote; and (3) appraisal rights.45
1. The US experience
In the US, for the purpose of this research, merger transactions are governed by both federal law(the securities law and the rules of Securities and Exchange Commission, hereinafter, the SEC) andstate corporation laws. Apart from federal and state law, merger transaction by listed corporations
must observe stock exchanges’ rules… Among state law, the Delaware General Corporation Law46(hereinafter, DGCL) is the most popular one for the State of Delaware having been chosen by a highnumber of corporate incorporators to set up their large business corporations.47 This paper, therefore
focuses on the DGCL when discussing the US merger law.
Mergers are governed by Subchapters IX of Chapter I, Title 8 (Corporation) of the State of
Delaware Statutory Code (hereinafter, the DGCL), under which, mergers can be effectuated between
any types of corporation. Subchapter IX of the DGCL provides for 8 types of merger between different
kinds of business entities, including: (1) merger between domestic corporations (sec.251); (2) merger
between domestic and foreign corporations (sec.252); (3) merger between parent corporation andsubsidiary corporation (sec.253); (4) merger between domestic corporation and joint-stock or otherassociation (sec.254); (5) merger between domestic nonstock corporation (sec.255); (6) merger
between domestic and foreign nonstock corporations (sec.256); (7) merger between domestic and45

In both countries, shareholders of the constituent companies are entitled to seek an injunction from the court to cease the merger
when the BODs accomplish a merger in breach of law and regulation or against the company’s charter (eg.: see JCA, Art.796-2).
46
The DGCL includes all acts effective as of Sept. 17, 2018 <delcode.delaware.gov/title8/title8.pdf>.
47
See Nellie Akalp, The Pros and Cons of Incorporating in Delaware, <https://www.entrepreneur.com/article/287677> accessed 20
October 2018.

15

foreign nonstock corporations (sec.257); and (8) merger between domestic and foreign stock andnonstock corporations (sec.258). The following discussion shall not cover those transactions governedby Sections: 252, 256 and 258 because they involve corporations of different domiciles (oneconstituent company is a foreign one).
Those types of statutory merger seem to be so complicated. However, if relying on who being
the parties to merger transactions as criterion for mergers classification, such mergers under the DGCL
can be roughly classified into the following four categories: (1) direct mergers or long-form mergers(being those effectuated directly between an acquirer and a target company as provided for in sec.251);(2) indirect mergers or triangular mergers being those effectuated between a wholly-owned subsidiarycorporation (set up for merger purpose only by a parent corporation - the true acquirer but not directly
enter the transaction - thus, indirect triangular merger) and a target corporation, where the merger
between the subsidiary and the target is also governed by sec.251); (3) short-form mergers (being
those between a parent, holding at least 90% of voting shares of the subsidiary, and its subsidiary,
governed by sec.253); and (4) miscellaneous mergers consist of mergers of different types of business
entities. If setting aside all mergers between domestic and foreign corporations for not falling into thescope of this research, the remaining are those between different types of business organizations,
governed by secs.: 254 and 257).
In order to effect a merger, the constituent corporations have to draft a merger agreement, thenget an approval for such an agreement at both BODs meeting and then, shareholders meeting of thesaid corporations before the constituent corporations formally enter into the agreement. By theseapproval requirements over the merger, shareholders of the constituent corporations can exercise theirrights of different types.
1.1. Rights to be advised and fully informed about the planned merger
Section 251(b) (DGCL) lays down legal foundation for both sets of right. However, to ensure
shareholders being fully informed (the latter rights), the constituent companies in a merger might haveto observe information disclosure requirements not only under the DGCL but also under federal law.
a/ Rights to be advised
Under Section 251(b), before two or more corporations merging into a single surviving
constituent corporation, the BODs of each constituent corporation which desires to merge shall adopt
a resolution approving a merger agreement and declare its advisability. By laying down such a
statutory formality the BODs of each constituent corporations have to meet, sec.251(b) actually offers
the shareholders an initial protective measure provided that the BODs totally observed relevant duties
of directors in doing so. The reason lies in the fact that, although most of public corporations in the
US today having many sophisticated institutional shareholders, it does not mean that they only havesuch a kind of shareholders nor does it mean that they do not have individual shareholders who might
not be able to understand the complex financial and business issues behind a planned merger in order16

to cast a prudent vote for approval or disapproval of the merger. Many of them are simply capitalladen investors seeking to invest into company’s shares to receive dividends. Therefore, to ensure thatshareholders exercise their voting rights meaningfully and effectively, they need professional advice
before casting a vote. In a company, BODs consist of group of persons, who are in charge of handlingthe company’s day to day business activities with two broad duties: duty of care and duty of loyalty.48
The BODs, thus, must carry out pre-transaction due diligence to ensure that the merger will beeffectuated for the best interests of the company, as well as all the terms and conditions included in
the merger agreement have been carefully drafted to attain such best interests. When the law-makers
require BODs to meet and discuss before adopting a resolution for the approval of a merger agreement,
then to declare its advisability, they provide an initial protective tool for shareholders, because once
the BODs bringing such an agreement to the shareholders meeting for further discussion and action
on the agreement, it means that they finished due diligence and they have good cause to believe thatthe planned merger being advisable and for the best interests of the company, as far as the BODs fully
observed their duties in so doing.
b/ Rights to be informed:
Shareholders of the constituent corporations shall be informed of the merger under both the statelaw (the DGCL), the Federal securities law and regulations, as well as the stock exchange rules.
b.1/ The DGCL
Sec.251(b) lists all details a merger agreement has to include such as: terms, and conditions of
the merger; mode of carrying the same into effect; amendments or changes in the certificate ofincorporation of the surviving corporation; the manner of shares conversion or treatment; other details
such as: payment of cash in lieu of the issuance of fractional shares; rights or other securities of thesurviving corporation; rights or other securities of which are to be received in the merger … The
agreement will be submitted together with a notice to the shareholders before convening a shareholders’meeting [sec.251(c)], and by that way, shareholders are provided with necessary information whichgive them an image of how the merger will be transacted and how their investment interests will betreated if the merger is finally approved.
b.2/ Federal law
Where securities being used as consideration in a merger, the transaction is subject to registration
under the Securities Act of 1933 (as enacted on May 24th 2018,49 hereinafter, 1933SA) because in
essence, the surviving corporation does issue its securities to shareholders of the merged corporation.
Sec.5 of the 1933SA makes it unlawful to an offer or sale of a security being done without registration48

In the US, corporate directors have both duties, although sometimes not explicitly provided for in the state corporate law because
they already have their roots in common law and tradition. For more information, see Robert W Hamilton, The Law of Corporations
in a Nutshell (5th Edn, St. Paul, Minn 2000) 446.
49<https://legcounsel.house.gov/comps/securities%20Act%20Of%201933.pdf> accessed 13 October 2018.

17

with the Securities and Exchange Commission (SEC) except for those offers or sales being exempted
under the Act. To implement Sec.5 of the 1933SA, the SEC issued Rule 145,50 stating that when
corporate shareholders having to receive shares of the other corporation in a merger, or where mergers
involve the transfer of almost all of corporate assets to another company, then these transactions willbe treated as an offer for sale of securities to the target’s shareholders, which means that the acquirer
shall be subject to registration requirement. To register with the SEC, the surviving corporation has toprepare a registration statement for the securities whose contents following Form S-4.51
Rule 145 is designed to make available protection to those who are offered securities, in abusiness combination in general and in a merger in particular, under the 1933SA. Accordingly, allmaterial information concerning financial situation and business performance of the merging company
shall be provided for the merged company shareholders to enable them judging the value of shares orother non-voting securities they are going to receive in exchange for the shares they own in theircompany pre-merger.
It can be said that constituent companies are subject to information disclosure duties under boththe state and federal law to ensure that shareholders are fully informed of how and in what way, theirinvestment interests will be continued post-merger to decide how to vote or whether or not they should
keep investing or should disinvest before the merger being effectuated.
The necessary intertwinement of the two set of rights. In satisfying these statutory requirements
under the state and federal law, the BODs of the constituent corporations in fact have to give advices
as well as to fully disclose adequate information to their shareholders to enable them casting prudent
vote later. These two advised and informed requirements must co-exist because in deficiency of thefirst one, even though shareholders are fully informed and have rights to vote for or against the planned
merger, if they do not have necessary knowledge to judge the soundness of the merger, then theirdecision at the shareholders meeting might not prudent for lack of necessary knowledge to judge what
are going on; whereas, in deficiency of the second one, shareholders even though being advised, they
have no awareness of the financial and business situation of the acquirer to verify such an advice nor
can they clarify how their current investment interests will be treated while the merger being
effectuated. In other words, in laying down these statutory requirements and assuring that the corporate
BODs fully meet them, the law-makers create a very first protective measures to shareholders of theconstituent companies to a merger.
b.3/ The stock exchange rules52
The New York Stock Exchange issues a number of rules that require listed corporations to maketimely information disclosure when an extraordinary shareholders meeting being convened (for theirrights or privileges or any other matter not of routine nature being considered) (Rule 204.01); when50

<https://www.sec.gov/rules/final/finalarchive/finalarchive2007.shtml> accessed 13 October 2018.
The form used for a registration of securities issued by a domestic issuer in connection with a merger, consolidation, or exchange
offer.

51

52

See: NYSE Rule, s2: Disclosure and Reporting Material Information (as amended in Aug. 15th 2013)<http://wallstreet.cch.com/LCMTools/PlatformViewer> accessed 25 October 2018.

18

having any change in business purpose (Rule 204.04), director or executive officers (Rule 204.10),
form and nature of listed securities (Rule 204.13), and in nature of business (Rule 204.19); and when
the amount of outstanding securities increasing (Rule 204.20). Although these rule do not mention
mergers, all those changes are very likely to attach with a merger, thus, in any circumstance, when theconstituent corporations make any decision that leads to one of those changes, they are subject totimely disclosure duties under the NYSE rules.
These rules keep public investors in general and shareholders in particular being informed ofwhat are going on in the listed corporations.
1.2. Voting rights
The constituent companies’ shareholders can enjoy voting rights under the DGCL and in somecurtained circumstances, also under either the stock exchange rules or the SEC rules. However, theSEC rule governing voting rights of shareholders being confined within those transaction between a
US corporation and a foreign53 one, therefore, will not be further discussed here.
a/ Voting rights under the DGCL
a.1/ Who are entitled to vote?
In all direct mergers, where one corporation merged with and into another, shareholders of bothconstituent companies can enjoy voting rights under section 251(c) to decide whether or not the merger
will be effectuated finally. However, there have been some exceptions where the approval byshareholders of a surviving corporation is not required. Under section 251(f), such exceptions shallapply if: (1) the merger agreement does not result in any amendment in the survivor’s certificate ofincorporation; (2) the characteristics of the outstanding shares of the survivors remain intact; or (3)the surviving corporation newly issue less than 20% of its outstanding common shares prior to theeffective date of the merger. It is not too complicated to understand the philosophy behind the firstand second exceptions because when the merger does not trigger any change in the surviving
corporation certificate of incorporation nor does it alter the characteristics of its outstanding shares,
then there would be no harm to its shareholders that triggers the need for their protection. The third
exception can be explained in circumstances where the acquiring corporation is much bigger than themerged corporation to the point that the consequences of the merger are very much similar to the casewhere the acquiring corporation purchasing a big asset so that convening shareholders’ meeting for
approval becomes unnecessary. For example, when a large corporation having a chain of plants where
their best selling products in market being produced is seeking to acquire another plant which is even53
As pointed in section II of this paper, recently, many corporations in the US have sought to lower their tax bill by re-incorporating
oversea through a merger transaction, where an US corporation acquires a foreign company and merged with and into the latter. In
the next step, the surviving foreign company accomplishes a procedure to change its name into the name of the merged US corporation
so that finally, the US corporation becomes re-domiciled in a foreign country with lower tax obligations.
To combat with this problem, the SEC revised Rule 14a-4(a)(3) to cause such a merger more unwieldy with one more vote by theacquirer’s shareholders and by that way to slow down corporate inversions. Under this rule, shareholders’ approval is required shoulda material amendment to the acquirer’s organizational documents shall be made in relation to a statutory merger, while the acquirer
is still subject to state law to get approval from its shareholders to amend its certificate of incorporation in connection with the merger.

19

smaller than its smallest plant through a merger. The post-merger results does not significantly affectthe financial situation and business performance of the corporation.
By contrast, in indirect mergers (governed by sec.251), only an approval by the target’s
shareholders is required regardless of the transaction being reverse or forward triangular as far as theconsideration is shares rather than cash. The subsidiary’s single shareholder being the parent company,
obviously need not vote because it is the will of the parent company to acquire the target by setting up
its wholly owned subsidiary for that sole purpose to avoid the transfer of liabilities from the target toitself post-merger as well as to avoid a vote by shareholders of the parent corporation. Finally,shareholders of the true acquirer, the parent company, are not entitled to vote to approve the merger
simply because the parent company is not a constituent party in the transaction.
The DGCL lays down two ways for short form mergers: those being effected under section 253,
and others being effected under section 251(h). In the former, an approval of shareholders in thesubsidiary corporations is not required in any such transaction. It would be pre-ordain-result vote whena controlling shareholder being the parent corporation owns at least 90% of outstanding shares of thesubsidiary corporation which allows the will of such a controlling shareholder being always
predominated over the minority’s will. The approval by the shareholders of the parent corporation is
not required if the parent is the surviving corporation and its articles of association is not changed by
the merger. The reason is that the merger does not substantially affect shareholders’ rights when theircorporation holds up to 90% voting stock of the subsidiary corporation, the remaining 10% of voting
stock generate little benefit to the parent corporation post-merger.
In the latter [short form mergers being effectuated under section 251(h)], an approval of theremaining target shareholders’ is not required where a merger being accompanied by a friendly tender
offer. In other words, the merging and the merged corporation carry out two activities at the same time,that is signing a merger agreement and announcing a tender offer for any or all of the target shares.
The contents of such an agreement must explicitly state out that the merger is done pursuant to section
251(h); that the merging corporation will attain voting control of the corporation at theaccomplishment of the tender offer; and that the same consideration will be offered in the tender ofshares and in the merger that is carried out immediately prior to the merger under section 251(h).
As for the last category of mergers being those combined between corporations of different types(different in business forms or in the country of incorporation…), shareholders’ voting rights will be
exercised either under section 251 or under section 255 of the DGCL.
So what different between voting right under these two sections? The answer is those who fall
into the purview of section 251 will exercise their voting rights in a shareholders’ meeting while others
who fall into that of section 255 will enjoy their voting rights in a members’ meeting. The difference
is not significant in terms of the rights and interests of those having voting right, it rather lays down
legal basis for the co-owners of other types of business entity to vote since the law allows mergers
between different forms of business entity while shareholders are only available in corporations, notin other forms of business organizations, whose co-owners are often referred to as members.

20

a.2/ How to exercise voting rights?
Unless all three conditions laid down in Section 251(f) are met or where indirect mergers or shortform mergers are involved, an approval of shareholders of constituent corporations is required. Section
251(c) [and similarly sec.255(c)] requires the BODs (or governing body in other business forms,
hereinafter, BODs) submit the merger agreement to shareholders (or members in other business forms,
hereinafter, shareholders) of each constituent corporation (or other business entities, hereinafter,
corporations) so that they can act on the agreement at a meeting. Prior to the date of voting at least 20
days, shareholders of the constituent corporations shall be noticed of the time, place, and purpose of
the meeting. The notice shall be accompanied by a copy of the merger agreement or its summary forshareholders’ reference.
At the meeting, shareholders will consider the agreement, then vote for either its adoption or
rejection. The agreement shall only be approved if receiving affirmative vote from a majority of theoutstanding voting shares in both the constituent corporations. When the law-makers give shareholders
rights to vote for or against merger agreement before the transaction being effected, they equip themwith another weapon to protect their investment interests in the constituent companies before a merger
being effected.
b/ Voting rights under the stock exchange rules
With respect to corporations whose shares are listed or quoted on a stock exchange, even though
an approval by their shareholders is not required under the DGCL, it can be triggered under the New
York Stock Exchange54 listing rule. However, the object of the vote according to the stock exchange
rules is the issuance of additional shares while that under the DGCL is the merger; and not all shareissuances trigger approval from shareholders of the issuing corporations, rather only those being equal
to or in excess of 20% of the issuer’s outstanding shares in connection with a merger transaction
having to subject to such stock exchange requirements. Section 3 subsection 312.03(c)(1) & (2) of
NYSE Rule (as amended Jul. 2013)55 reads:
Shareholder approval is required prior to the issuance of common stock, or of securities convertible into or exercisable for common
stock, in any transaction or series of related transaction if: (1) the common stock has, or will have upon issuance, equal to or inexcess of 20% of the voting power outstanding before the issuance of such stock or of securities convertible into or exercisable forcommon stock; or (2) the number of shares of common stock to be issued, or will be upon issuance, equal to or in excess of 20%of the number of shares of common stock outstanding before the issuance of the common stock or of securities convertible into or
exercisable for common stock.

On the appearance, the concern of the law-makers while drafting the DGCL and that of thecreators of NYSE Rule look different because the former cares about how the investment interests ofshareholders of constituent companies being treated in merger transaction while the latter cares about
the dilutive possibility of shareholders’ equity ownership if their company going to issue additional

54
55

NASDAQ also has a similar listing rule: Rule 4350(i), <https://www.nasdaq.com/about/rulefilings> accessed 20 October 2018.
<wallstreet.cch.com/LCMTools/platformViewer.asp?> accessed 16 October 2018.

21

shares. However, in essence, both those groups have the same goal, that is to protect company
shareholders’ investment interests.
1.3. Appraisal rights
a/ Who entitled to appraisal rights?
The above-discussed provisions on shareholders’ voting rights in connection with mergers under
the DGCL show that a merger to be effected merely requires majority consent of shareholders, aquestion that may, therefore, arise is how to handle with the remaining minority shareholder who seem
excluded from decision making process. The answer can be found in Section 262(a) of the DGCL,
under which shareholders who oppose a merger are entitled to ask their corporation to buy back theirshares at fair market value, determined by the Court of Chancery. Article 262(b)(1) makes appraisal
rights available for the shares of any class or series of stock of a constituent corporation in a merger
to be effected under Sections: 251, 252, 254, 255, 256, 257, 263, or 264. Article 262(b)(1), however,provides for a number of exception where the BODs shall complete a merger without shareholders’approval: where the target’s shares being either (1) listed on a national securities exchange; or (2) heldof record by more than 2,000 holders; and where a merger did not require for its approval byshareholders of the surviving corporation as provided in sec. 251(f), no appraisal rights are given to
any shares of that corporation.
Furthermore, under Section 262(b)(2), shareholders are entitled to refuse anything in exchange
for their shares except: (i) stock of the surviving corporation or depository receipts in respect thereof;(ii) stock of any other corporation that at the effective time of the merger will be listed on a national
securities exchange or held of record by more than 2,000 holders; (iii) cash in lieu of fractional sharesor fractional depository receipts in respect of the foregoing; or (iv) any combination of the abovementioned shares of stock, depository receipts and cash in lieu of fractional shares or fractional
depository receipts.
b/ How to exercise appraisal right?
Under Section 262(d), a dissenting shareholder shall exercise appraisal rights by delivering awritten demand for appraisal rights of his/her shares to the corporation within 20 days from the dateof mailing of the notice by the surviving corporation about the effective date of the merger. The
demand is only sufficient if it clarifies the identity of the shareholder and his/her intention to demand
appraisal rights of his/her shares.
Under Section 262(e), within 60 days after the effective date of the merger, any shareholder who
has not commenced an appraisal proceeding shall have the right to withdraw such shareholder’sdemand for appraisal and to accept the terms offered upon the merger. By contrast, within 120 days
after the effective date of the merger, the shareholder entitled to appraisal rights may commence anappraisal proceeding by filing a petition in the Court of Chancery for determination of their stock’s
value. At the hearing on such petition, if the Court determines the shareholders being entitled toappraisal rights, the appraisal proceeding shall be conducted in accordance with the rules of the Court

22

of Chancery. The Court shall determine the fair value of the shares exclusive of any element of value
arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid
upon the amount determined to be the fair value [(sec.262(g)(h)].
2. The Japan experience
In Japan, merger transactions are mainly governed by the Company Act of 2005 (hereinafter,
JCA); and the Financial Instruments and Exchange Act of 1948 (hereinafter, FIEA).
Part V of the JCA provides for different ways of company’s reorganization, including: conversion,
merger, split, share exchange and share transfer. Merger under the JCA consists of “absorption-typemerger” and “consolidation-type merger”. However, this paper does not deal with consolidation,
therefore, hereinafter, the term “merger” will be used as contracted form of “absorption-type merger”
in discussing the law governing this type of transactions in Japan.
The JCA recognizes mergers between companies of different types, 56 and it also allows
entrepreneurs set up their business entities in one of the following four vehicles: stock company;
limited liability company; general partnership company; and limited partnership company.
Consequently, apart from mergers between stock companies or between membership companies,
mergers can be done between a stock company and a membership company. In other words, thosefour types of company can merge into each other under the current JCA.
The JCA adopts different types of merger: (1) direct or long-form mergers where the constituent
companies shall directly go through the whole merger procedure (Arts. 749 and 783); (2) short-form
mergers where a target company is not required to get shareholders’ approval because of the surviving
company being a special controlling shareholder (holding at least 90% of voting shares) of thedisappearing companies (Arts.: 784, 796); (3) simplified mergers where the total net assets theacquiring company being paid to the target company’s shareholders as consideration shall not exceed
20% of the total net assets of the former [Art.796(2)]; and (4) triangular mergers. Since Article749(1)(ii), the JCA recognizes very flexible consideration that can be used in mergers, which can beeither shares or non-voting securities, or cash or assets (including shares of other company rather thanof the acquiring company), the cash-out mergers as well as triangular mergers have come into
existence. However, cash-out mergers do not make a new type of merger, rather they can be any of
the above-mentioned types of merger when the two following conditions are available: one is the cashconsideration being paid to the target company’s shareholders; and the other is minority shareholders
being squeeze-out. In triangular mergers, a subsidiary is set up for a sole purpose of acquiring anothercompany (Arts.: 135 and 800). Article 135 and Article 800 seem disagree to each other when thelanguage of the former merely permits triangular mergers where a party to the merger is a foreigncompany whereas that of the latter recognizes even triangular mergers amongst purely domestic
companies. Triangular mergers have merely been introduced in Japan since the Company Act of 2006
being adopted, and have been deemed as the Japanese Government’s intention to loosen the merger

56

JCA, Art.748.

23

procedure to increase foreign direct investment into Japan.57 Below, only merger transactions between
domestic companies will be considered in all related issues.
In order to effectuate a merger transaction, the constituent companies shall enter into a merger
agreement which was drafted by the constituent companies (Art.749 JCA). However, before
concluding such an agreement, the draft agreement shall go through two steps: BODs’ approval andthen, shareholders’ approval. These two levels of statutory approval reflect different rights ofshareholders as true owners of the constituent companies, having supreme power in deciding importantmatters of the company. These rights now will be considered.
2.1. Right to be advised and informeda/ Right to be advised
Article 298(4) of the JCA requires the BODs pass a resolution for all decision of all mattersrelated to the shareholders’ meeting to be convened. Those matters under Article 298(1)(ii) include“any matter which is the purpose of the shareholders meeting.” By the language of these provisions,obviously, in order to decide whether or not a merger agreement shall be brought into shareholders
meeting for approval, the BODs have to conduct due diligence before passing a resolution. Pretransaction due diligence over a merger agreement to ensure that the merger truly benefits the company
and its shareholders, therefore, is an indispensable task the BODs having to accomplish. Once the
BODs submits the agreement to the shareholders’ meeting for approval, such an agreement shall beadvisable to enter into from the standpoint of the BODs. In other words, by seeking the approval ofthe merger agreement at the shareholders’ meeting, the BODs declares its advisability to its
shareholders.
By the same reason for the corresponding provisions under the DGCL which has been proven, it
can be said that the JCA also provides shareholders of the constituent companies in a merger the firstprotective measure.
b/ Right to be informed
Shareholders of the constituent companies to merger transactions shall be informed under the
JCA, the FIEA, and the stock exchange rules.
b.1/ The JCA information disclosure requirements
Article 748, the JCA merely requires the conclusion of a merger agreement to effect a merger
transaction, and it gives way to Article 749 providing for all details of such an agreement. According
to that, types of information to be included in a merger agreement include: (1) trade name and domicileof the constituent companies; (2) different forms of consideration (money, shares, bonds, stock
options; bonds with share options or other property) and the method for calculating number or amount57

See William R Huss, Yuju Iwanaga, & Mariko Osawa, “Japan’s New Triangular Merger Rule – Acquisition of Japanese Companies
through share exchanges” <www.Mondaq.com/x48012/Corporate+Commercial+Law/Japans+New+Triangular> accessed 24 October
2018.

24

of each type of consideration in exchange for shares held by shareholders of the target company; (3)matters concerning the allotment of consideration to shareholders of the target company; (4) mattersconcerning share options issued by the target company and how the surviving company handle suchshare options; (5) matters concerning allotment of share options by the surviving company; and (6)the effective date of the merger. Articles 182 and 191 of the Regulation for Enforcement of theCompany Act 58 further list information target companies and surviving companies have to makeavailable, respectively. Those items required by both the JCA and Article 182 of the Ordinance showthat the Japanese law-makers pay much attention to the consideration used in merger transaction andthe way to define such consideration in relation to shares of the target company, which are prudent
because consideration is the most important element that affects the investment interests ofshareholders in the constituent companies, especially the target one.
Prior to the date of the shareholders’ meeting, where the merger agreement shall be approved bya resolution, the constituent companies shall make the document available at their head office with
contents of the merger agreement and the reasonableness of the consideration used in the merger for
shareholders’ and creditors’ reference (JCA, Arts.: 782 & 794).
Under Article 299(1), prior to the date of shareholders meeting (two or one week depends onwhether or not the stock company is a public company), the BODs shall file a written notice to theshareholders. The notice shall specify or record the following information: (1) date, time, place of theshareholders meeting; (2) matter being the purpose of the shareholders meeting; (3) the rights to votein writing of shareholders who cannot attend the meeting; (4) rights to vote by electronic or magnetic
means enjoyed by shareholders; (5) any matters provided for under the Ordinance of the Ministry ofJustice [Art. 299(4), and Art.298(1)]. By this provision, shareholders are informed in advance themerger to have a prudent vote. Article 782 and 794 require both dissolving companies and surviving
companies to keep all the said documents at the head offices of the companies from at least 2 weeks
prior to the date of shareholders’ meeting for viewing by shareholders or other specified persons. In
addition, Article 794 also requires the surviving company to keep the same documents at the head
office during 6 months from the effective date of the merger, since Art.828(1)(viii) allows specified
persons (including shareholders) to appeal for invalidation of the merger during the period. Anyway,
the JCA lengthens the time where shareholders of the constituent companies to a merger caninvestigate the relevant information to protect their lawful interests.
b.2/ Information disclosure under the FIEA
Under the FIEA, a surviving company need not to disclose information concerning the issuanceof new shares in exchange for the shares held by shareholders of the target company. However, Article
24-5.2 of the FIEA requires reporting companies or listing companies to file an extraordinary reportwith the competent agency to be published on a governmental website namely the EDINET. The report

58

Regulation for Enforcement of the Companies Act, Ministry of Justice Order No.12, Feb. 7th 2006, as amended by the Ordinance ofthe Ministry of Justice No.6 of 2015.

25

shall consist of certain categories of decisions made and event occurred during the course of businessbeing deemed necessary and appropriate to protect public interests and investors. Under the Cabinet
Office Ordinance on the Disclosure of Corporate Affairs,59 among such decisions made by the abovementioned companies are those on company’s reorganization which covers mergers; and thecompetent authority is the Director-General of the Local Finance Bureau (Art.19).
In addition, Article 2-2 of the FIEA provides for companies undergo reorganization including
mergers having to subject to disclosure duties of corporate affairs and other related matters. Article
4.1 of the FIEA requires those companies issuing shares in connection with a merger to file securities
registration statement with the competent authority. However, the law gives broad exemptions tolisting or reporting companies for the reason that they are already subject to periodic and extraordinary
disclosure requirements. Article 4.1, thus, mainly apply to non-listed companies.
b.3/ Information disclosure under the stock exchange rules
Tokyo Stock Exchange has Securities Listing Regulations60 whose Rules 402 to 420 governing
timely disclosure of corporate information… Under Rule 402(1)k, a merger is one of the items which
companies fall into subject to timely disclosure of information. Rule 402 requires listed companies todisclose decisions and event that might affect the share price in a timely and appropriate manner
through their own website, TDnet system and other public media. Decisions and events companies
having to disclose under the rule are even more than those required by the FIEA. Failure to comply
with the rules shall cause the company being subject to sanction by the stock exchange.
2.2. Rights to votea/ Who entitled to vote?
Generally, in almost of all mergers, shareholders of both constituent companies are entitled tovote for or against the merger agreement (Arts.: 783 and 795). However, there are some circumstanceswhere shareholders of the constituent companies are not required to vote. Firstly, in a merger between
a special controlling company and its controlled company, if: (1) the controlling company is thesurvivor, then the target (controlled) company’s shareholders need not vote [Art.784(1); andArt.468(1)]; (2) a target (controlling) company holds more than 90% of all voting shares of theacquiring (controlled) company, then shareholders of the acquiring company need not to give approvalover the merger [Art.796(1)]. Secondly, in mergers, where the consideration to be paid to the target
company’s shareholders does not exceed 20% of the total net asset of the acquiring company, then,the shareholders of the acquiring company need not go through voting procedure [Art.796(3)].
b/ How to exercise voting rights?

59

See Ordinance No.5, issued by the Ministry of Finance on Jan. 30th 1973, as revised Jan. 26th 2018<www.japaneselawtranslation.go.jp/law/detail_download/?ff=09&id=2341> accessed 23 October 2018.

60

Securities Listing Regulations (Rule No.1 – Rule No.826, as revised of Jun. 1st 2018)<https://www.jpx.co.jp/english/equities/listing/disclosure/index/html> accessed 23 October 2018.

26

It is pointed out while discussing shareholders’ rights to be informed, that the BODs of theconstituent company shall file the notice to the shareholders prior to the date of shareholders meeting.
The notice shall specify or record the meeting’s agendas for shareholders’ discussion and approval.
Then, at the meeting, how shareholders in each constituent company exercise their voting rights is acomplicated issue, and depends on individual circumstances provided for by the JCA.
In all long-form mergers (direct mergers), both constituent companies are required to get anapproval by a resolution of shareholders meeting on the day immediately before the effective day of
the agreement (Arts.: 783 and 795). Article 309(2) requires the approval by a majority of 2/3 of theaffirmative votes of shareholders present at the meeting to approve a merger agreement. However, formore details, voting rights of shareholders in target company and surviving company are provided
separately under Articles: 783 and 795, respectively.
As for target companies: Under Articles: 783(1), if all or part of the cash or other consideration
to be handed over to the target’s shareholders is certain equity interests of a membership company or
those stipulated in the Ordinance of the Ministry of Justice, the consent of all the target’s shareholders
is required. Article: 783(3) requires an extraordinary resolution of the class shareholders where thetarget company is a corporation with class shares, and if all or part of the consideration is shares withtransfer restrictions of the surviving company. Article 793 requires the approval of all members of themembership company where the target company is a membership company.
As for surviving companies: Article 795(2)(i)(ii) requires directors to explain at the shareholders
meeting if: the liabilities the surviving company assumes from the target company exceeds its
succeeded assets; or the book value of cash or other payments to the target shareholders exceed thedifference between the value of assumed liabilities and the value of succeeded assets. Under Article
802(1)(2), the approval of all members is needed if a membership company is surviving posttransaction.
In short-form mergers, if the acquiring company holds more than 90% of all voting shares of thetarget company (being target’s special controlling shareholder), no approval of the target company’s
shareholders is required [Art.784(1); and Art.468(1)]. This, however, shall not apply if all or part ofthe consideration to be delivered to the target company’s shareholders is shares with transfer
restrictions and the target company is a public company and not a corporation with class shares[Art.784(1)].
In contrast to the above-mentioned circumstance, where a target company holds more than 90%
of all voting shares of the acquiring company, shareholders’ approval in the acquiring company is not
required [Art.796(1)]. This, however, shall not apply if all or part of consideration to be delivered tothe target company’s shareholders is share with transfer restrictions and the surviving company is nota public company, then the surviving company may have to get shareholders’ approval [Art.796(1)].
In merger between companies of significantly different sizes, the voting requirements are
simplified…. reducing the merger procedure where the target company is far smaller compared withthe acquiring company, and more concretely, where the consideration to be paid to the target
company’s shareholders does not exceed 20% of the total net asset of the acquiring company, the latter27

need not get approval from its shareholders [Article 796(3)] by, provided that the merger does not
result in loss for the acquiring company, or the surviving company is a public company and all or partof the consideration to be paid to the target company’s shareholders are not shares with transfer
restrictions of the acquiring company [Art.796(3)].
2.3 Appraisal rights
a/ Who entitled to appraisal rights?
In discussing the shareholders’ voting rights and the requirement for approval of a BODs decision,
it can be seen that in some specific circumstances, the JCA seems to be so strict in requiring the consent
of all company’s members or shareholders in order to effect a merger agreement. However, in theremaining circumstances, to get an approval of shareholders, company needs 2/3 affirmative votes ofshareholders present at the meeting, which means that the will of those that hold 1/3 of voting shares
being ignored, and this figure is even sometimes bigger when the approval of shareholders may beomitted. Furthermore, the adoption of flexible consideration by the current JCA, under which cash
consideration being recognized means that minority shareholders are statutorily squeezed out. Even
with other types of consideration, if the way to determine exchange ratio is not fair or shares can bevalued unfairly…, it may cause minority shareholders incurring loss. Such circumstances trigger theneed for protection of minority shareholders, whose votes are either ignored or no voting at all
sometimes. Under the JCA, minority shareholders who no longer want to continue their investment
interests in the surviving company post-merger for not happy for unfair treatment prescribed in themerger agreement can dissent from the merger and they are dissenting shareholders.
However, under Article 785(2), dissenting shareholders is understood in a broader sense,
consisting of those who give prior notice to the target company of his/her dissent from the merger
being brought into a shareholders meeting’s agendas for voting; those who cannot exercise voting
rights; and others that are not special controlling companies [provided for in Art.784(1)]. To giveprotective measures to them, the law-makers create number of provisions under the JCA.
b/ How to exercise appraisal rights?
Upon the notice of the planned merger from the target company, shareholders who oppose to thatmerger are entitled to demand their company to purchase their shares at a fair price, following certain
procedures (Art.785). This provision is aimed to ensure that dissenting shareholders’ shares shall not
be bought at unfair price because of the merger being done under unfavorable conditions.
To exercise appraisal rights for the shares they hold, the shareholders shall indicate number ofshares they seek to be bought back and submit the share certificates to the target company. They may
not withdraw their demand for appraisal without the approval of the target company; and their demand
for appraisal rights shall lose effect if the merger being cancelled. The repurchase of such shares
become effective on the effective date of the merger.
Where the dissenting shareholders and their company can successfully negotiate the share price,then the company must pay that price within 60 days from the effective date. Should the parties cannot

28

reach an agreement on the share price within 30 days from the effective day, the shareholders may filea petition with a court to determine the price within 30 days after the expiration of that period (Art.786).
3. Similarities and Differences between the US and Japan Law
3.1. Similarities
The above discussion over the US and Japan experience shows that both countries have extremelycomprehensive law and regulations governing merger transactions. All the three sets of shareholders
right are available in very details statutory provisions and even in stock exchange rules.
In both countries, the BODs are subject to duty of care in exercising due diligence before passing
a merger agreement and making it available for shareholders’ reference. Both countries offer three
information channels to which shareholders can access, by requiring companies to disclose relevant
information under company law, securities law and even stock exchange rules. It is necessary to pointout that in providing for the information shareholders entitled to access, the law-makers in bothcountries seem to pay much attention to the conversion manners of shares and the kinds ofconsideration can be used in merger and the way to calculate consideration in relation to sharesconversion of the target company. Sec.251(b) of the DGCL requires merger agreements to specify
clearly the manner of shares conversion or treatment; other details such as: payment of cash in lieu of
the issuance of fractional shares; rights or other securities of the surviving corporation; rights or othersecurities of which are to be received in the merger … Similarly, under Article 748, the JCA, merger
agreements must state out different forms of consideration (money, shares, bonds, stock options; bonds
with share options or other property). More importantly, the method for calculating number or amountof each type of consideration in exchange for shares of the target company must also specified in theagreement. These provisions are of importance for their potentially substantial impacts onshareholders’ investment interest, and ensure that shareholders of target companies will be wellinformed of what they are going to receive when such a merger transaction really effectuate.
In both countries, shareholders enjoy the rights to vote to approve or disapprove a merger
agreement their companies going to enter into and those who oppose the agreement are entitled toappraisal rights.
However, getting closer to individual rights provided for in the relevant law and regulations of
the two countries, a number of differences still can be found.
3.2. Differences
As for the shareholders’ rights to be advised, the protective measures under the DGCL seem tobe broader and stronger than that under the JCA. Although both statutes require the BODs to pass a
resolution to approve a merger agreement, the DGCL goes further in imposing another duty on BODs,
that is to declare its advisability to shareholders. The drafters of the DGCL explicitly make the BODs
being aware of their duty of care throughout the preparatory period of the merger agreement and thenegotiating process (by “declare its advisability”) to ensure that the merger proposal truly benefits thecorporation and its shareholders before filing the agreement to shareholders for approval at a29

shareholders meeting. It can be said that while the advising responsibility of BODs under the JCA is
implicit, that under the DGCL is obviously explicit.
As for the shareholders’ rights to be informed, a number of differences can be found.
Firstly, the American law-makers seem to pay better care for shareholders compared with theJapanese ones in requiring the corporations filing not only a notice of a merger but also a merger
agreement to shareholders’ residential address; in contrast, under the Japanese law, companies merely
send the notice of the merger to shareholders whereas make merger agreement available at their head
office for shareholder reference either in electronic or magnetic form. The law does not require thecompanies to post such document on their website, which is understandable for business confidential
reason. However, in case of public companies which have shareholders living throughout the country
and even abroad, then it is really troublesome for them to access such an agreement.
Secondly, perhaps, in compensation to the above-mentioned “hardship” facing Japaneseshareholders, the JCA requires a merger agreement to be drafted in more details compared with that
required by the DGCL. Pursuant to Art.749 of the JCA, six types of information must be included in
the agreement, and four of which directly relate to financial interests of shareholders of the merged
company. They are: different forms of consideration and the method for calculating of the number oramount of individual type of consideration in exchange for shares of the target company; mattersconcerning the allotment of consideration to shareholders of the target company; matters concerning
the share options issued by the target company and to be handled in which way by the surviving
company; matters concerning allotment of share options by the surviving company). By this statutory
provision, shareholders in Japan are fully informed of what and how they will receive post-merger
once they are present at the head office of their companies. However, this is not to say that the DGCL
ignores shareholders’ interests because Sec. 251(b), although does not go into such details, does
require a merger agreement to include a number of information for the sake of shareholders such as:
the manner of shares conversion or treatment, the payment of cash in lieu of the issuance of fractionalsahres, rights or other securities of the surviving corporation, as well as rights and other securities tobe received in the merger…
Thirdly, the information disclosure requirements under the rules of stock exchange in the twocountries are somewhat different. The NYSE lists different kind of changes the relevant corporations
having to make immediate report such as: changes in company directors, executive officers, businesspurpose and nature, characteristics and number of shares…; whereas, the Tokyo Stock Exchange rules
seem to be adopted in a wiser manner by simply saying that listed companies have to report in a timely
and appropriate manner if they have a decision or any event that might affect their shares price. The
purview of the Tokyo Stock Exchange rules are, thus, obviously broader compared to those of the
NYSE. Surprisingly, by that rule-making way, Japanese rule-makers tend to give more room forjudges to interpret by handling the relevant problems brought into courts although Japan is a Civil
Law country which opposes to a Common Law country as the US, where judge-made law has formallylong been recognized.

30

As for the rights to vote, perhaps, some differences can be found in this set of rights. Firstly, in
the US, constituent corporations have to offer voting rights to shareholders under both company law
and stock exchange rules, whereas in Japan, such companies are subject to the company law only.
Secondly, the number of exceptions where no voting rights to be exercised by shareholders in the twocountries also differ where the DGCL offers more exceptions (5 exceptions) which means broader
limit on shareholder voting rights than the JCA (only 2 exceptions: parent and the specially controlledsubsidiary (i.e., subsidiary hold 90% or more of its voting rights by parent), merger where thesubsidiary’s shareholders need not vote; and where the consideration paid not exceed 20% of total net
asset of the surviving company). Thirdly, it seems that in compensation to the broader limit on
shareholder voting rights as above-mentioned, the DGCL merely require an approval of simple
majority vote while the JCL is quite strict, in demanding up to 2/3 of affirmative vote and in somecircumstances, that requirement amount to 100% (in membership companies…)
As for the appraisal rights, some differences can also be found. Firstly, the scope of shareholders
entitled to appraise under the DGCL seems to be narrower than that under the JCL since the former
allows only shareholders opposing a merger to enjoy the rights while the latter further covers evenshareholders who cannot attend the shareholders meeting to exercise voting rights. That is not tomention a number of exceptions the DGCL adopts under which shareholders are not entitled toappraisal rights. Secondly, the JCA seems to adopt a very peaceful approach in dealing with the way
shareholders enjoy their appraisal right by giving a chance for shareholders and their company tonegotiate on the shares price and resource to court injunction is merely a second step; by contrast, the
DGCL in the first step allows shareholders to seek justice in courts although such a proceeding shallbe initiated after the effective date of the merger, which means that the written demand file to thecorporation bears only the value of a notice not a negotiation request. Thirdly, while the JCL does not
permit dissenting shareholders withdraw their dissenting demand once filed with the company without
an approval of the company, such withdrawal within certain time after the effective date of the merger
is permitted under the DGCL.
VI. WHAT CAN BE LEARNT FROM THE US AND JAPAN EXPERIENCE
It is hard to judge which country adopts better law since the DGCL seems to be stricter in someareas but more flexible in some others compared with JCA and vice versa. So what should be the best
lessons for Vietnam from experience of the American and Japanese law-makers? Whether Vietnam
should select all the strict provisions from the law of the two countries to ensure shareholders being
well protected or in the opposite direction, Vietnam should choose all the flexible provisions fromthose oversea experience to create a favorable environment for merger transactions being effectuated
so that enterprises in Vietnam can easily change their business and financial conditions for betterbusiness results? Perhaps the answer cannot be found in either directions, rather it depends on
individual rights and with each right while being considered, should be put in a concrete businessenvironment in today Vietnam and needless to say that it mainly depends on what the current law says.
If the law already has good provisions compared with those of these two foreign countries then31alteration need not to be done. However, where it fails to govern merger transactions by its vague
provisions or in the absence of necessary provisions, then new and adequate provisions should be
introduced.
As pointed out earlier in Section IV of this paper, the most serious problems concerning thecurrent law of Vietnam governing companies’ merger are twofold. One is the absence of a statutory
requirement on valuation of company assets pre-merger, which is of importance to define shareexchange ratio fairly in merger transactions. The other is the lack of statutory provisions on the typesof consideration that can be used in a merger transaction; on the calculation of the number or amountof consideration in exchange for shares of the target company; on the payment of cash in lieu offractional shares; on the rights and other securities of surviving corporation; and on the share appraisal
for the sake of squeezing-out-minority shareholders. Article 195 of the EL 2014 is too simple and its
language is too vague with five sub-articles but only the first two of which are relevant to what havebeen discussed here.
Sub-article 1 clarifies the way to understand a merger by saying: “One or a number of companies(hereinafter, merged companies) can merge into another company (hereinafter merging company) bytransfer the whole assets, rights, obligations and legal interests into merging company, and themerged company cease to exist.” This way of understanding merger is quite comparable to that inother corresponding laws in other countries.
The second sub-article has three items, item (a) reads:[T]he constituent companies prepare a merger agreement and a drafting charter of the merging company. Merger
agreement must have the following contents: name, domicile of the head office of the merging company; andthose of the merged company; procedure and conditions for a merger; employees usage proposal; way, procedure,
and term as well as conditions for the conversion of assets, subscribed equity, shares, bonds of the target into
those of the surviving company; and timespan for effectuating a merger

In order to judge this provision, relevant foreign experience might be useful. As previously
discussed, in the US, before two or more corporations merging into a single surviving constituent
corporation, the BODs of each constituent corporation which desires to merge shall scrutinize thedrafting merger agreement in order to adopt a resolution approving the agreement (Section 251(b) of
the DGCL). Similarly in Japan, the BODs is required to pass a resolution for all decision of all mattersrelated to the shareholders’ meeting to be convened (Article 298(4) of the JCA). Those matters are“any matter which is the purpose of the shareholders meeting” (Article 298(1)(ii)), which surely
includes merger agreements should they be brought into shareholder meeting for approval. In such a
circumstance, the BODs have to discuss the advisability of the agreement in order to decide pass or
not pass a resolution. This means that the BODs must conduct due diligence over a merger agreement
to ensure that the merger truly benefits the company and its shareholders.
However, in Vietnam, Item (a) of Art.195.2, the EL 2014, does not even mention the roles of“BODs” (under the Vietnam law, the Board of Members in LLCs and the Management Board in SCs.
Hereinafter, the MB). Art.56.2, sub-article l and m, and Art.149.2.p of the EL 2014, while providing

32

for the rights and duties of MBs, merely say the MBs are entitled to propose changes including
company reorganization, dilution, and bankruptcy to the shareholders’ meeting. Art.162.2 confers
upon the MB the right to approve all company’s contracts or transactions whose value is less than 35%of the total company’s asset reflected in the latest financial statement or a smaller percentage asprescribed in the company charter. These provisions obviously cannot “touch” most merger
transactions because the changes in the constituent companies’ assets cannot usually meet the abovementioned statutory threshold. Even where a merger transaction merely results in a change of 34.9%of the merging company’s asset, it always cause a 100% change in the merged company’s asset. And
only in such a rare circumstance, the merging company’s MB is entitled to approve the merger
agreement before submitting the agreement to the shareholders’ meeting. It, thus, can be said that
under the current law, the MB has no concrete duty in pre-merger period to adopt a resolution
approving the merger agreement, to ensure the merger agreement being advisable and truly benefits
the constituent companies and their shareholders; nor are they in charge of declaring the advisabilityof the merger to their companies’ shareholders.
Furthermore, a number of significant contents concerning shareholders’ rights and interests are
not required to include in the merger agreement under Item (a), such as: list of consideration that canbe used for share conversion; calculation of the exchange ratio for share conversion; refusal of a typeof consideration in exchange for shares if dissenting shareholders do not like (as their counterpart in
the US could do under Sec.262(b)(2), DGCL); treatment of rights and other securities of the merged
and merging company; cash as a type of consideration… By ignoring these issues, minority
shareholders might be put at a disadvantageous position. For example, since the law does not provide
for concrete types of consideration nor does it prohibit some certain kinds of asset in exchange forshares, it seems that constituent companies can use whatever consideration for shares conversion in amerger transaction. Minority shareholders, therefore, are likely to be squeezed out simply for not being
able to accept what they will receive for their shares, which also means that they reluctantly reject themerger plan.
Item (b) reads:
Members, owners or shareholders of the constituent companies shall approve the merger agreement, themerging company’s charter and then shall register the merging company inconformity with this Law. Merger
agreement must be sent to all creditors and employees must be informed of the merger within 15 days fromthe effective date of the merger.

The failure of this provision is threefold. Firstly, the constituent companies’ creditors andemployees are entitled to be informed of the merger because they have financial interests in thecompanies to a merger transaction. However, in providing the right to information of these two groupsof person, the second sentence in Item (b) ignored a very important and even more deserved group of
person being entitled to enjoy this right, namely shareholders of the constituent companies. Apart fromthe EL 2014, the SL 2006-2010 can be expected as a source of law from which shareholders mightrely on to obtain the right to information. However, it can hardly find anywhere in the SL laying down33

legal basis for this right of shareholders. Decree No.58/2012 and Decree No.60/2015, in guiding theimplementation of the SL 2006-2010, merely mention the term “merger” twice, in Art.18 and Art.
23.3, but none of them is relevant to the issue in discussion here.
Secondly, the approval right of shareholders under this provision is hard to enjoy effectively.
Shareholders cannot access the merger agreement at all for reference before casting their vote toapprove or disapprove the agreement at the shareholders meeting. Nowhere in Item (b) or even in thewhole Art.195 requires the MB or any one in charge of company management to send such an
agreement to the shareholders. In fact, apart from institutional shareholders, other individual
shareholders might have no knowledge of M&A in general and of corporate finance in particular to
cast a prudent vote… Obviously, the advising role of the MB is not employed, which also means thatshareholders do not have the rights to be advised. So up to here, shareholders are not entitled to advice
on the benefit of the merger transaction , and even to necessary information of what they are going tovote for or against at the coming shareholders’ meeting. In such a circumstance, it is hard for eveninstitutional investors to cast a prudent vote, as the merger agreement is not something simple that canbe read and grasp all its meaning immediately at the meeting. Shareholders need to obtain such
document in advance to study thoroughly in order to make a right decision at the shareholders’ meeting.
That is not to mention the surviving company’s charter they are also entitled to approve but are notable to access beforehand. So although the law confers upon shareholders voting right to approve thetwo important documents, it does not equip them with necessary tools that enable them to enjoy theirright fruitfully.
Thirdly, the task of shareholders to register the surviving company under this provision issomewhat abnormal because it is not the duty of shareholders, rather it is the task of the company
promoters should the company is going to incorporated for the first time. However, in this situation,
the surviving company is registered on the basis of an already-exist company pre-merger, and having
just acquired more asset, value and maybe duties as well from the merged company post-merger, so
registration of the merging company should be the task of the surviving company (either its MB or its
statutory representative, or a person in charge as provided for in company charter). Even if it was thetask of the shareholders, then, perhaps another shareholders’ meeting needed to be convened in orderto determine who amongst hundreds, thousands or even millions of shareholders in a public company
will do the job. Under such a vague statutory provision, it is hard to define who shall exactly
responsible for business registration of merging company, especially when the merging company is a
public one, whose number of shareholders is unlimited.
Item (c) reads:
After the completion of the enterprises registration, the merged company ceases its exist; the merging
company enjoys legal rights and interests, is liable for unpaid debts, employment contracts and other assets
obligations of merged company.

34

This provision fails to ensure that the merging company have to be responsible for liabilities ofthe merged company which both companies cannot foresee, for example, product liabilities of themerged company, which might incurred in the future. In the absence of this provision, consumers
expose to danger of being unprotected.
Up to here, perhaps, the Vietnamese law-makers should revise the EL 2014 by omitting all
redundant provisions as earlier pointed out, and amending others as well as putting in place thefollowing provisions:Firstly, creating a new provision to impose a concrete duty on company MBs of constituent
companies in doing due diligence over the merger agreement, following by an approval process theMBs has to go through before proposing such an agreement to the shareholders’ meeting. It might beuseful to learn the experience of the American law-makers in requiring the BODs to adopt a resolution
approving the merger agreement and to declare its advisability to shareholders. This duty shall ensurethat the MBs take enough care in negotiating and drafting the agreement as well as assure that theagreement truly benefits the companies and their shareholders.
Secondly, revising the current provision on the contents of a merger agreement to ensure that it
states clearly the manner of company asset evaluation; the way to define share exchange ratio; thetypes of consideration that can be used in merger transactions; the way to appraise shares in case cash
consideration being used; the treatment of rights and other shares of merged company; the refusal ofundesired consideration by squeezing-out-shareholder.
Thirdly, introducing a new provision that gives shareholder the right to be informed of the merger
at least two weeks before the date of the shareholders meeting; that clearly requires the companies tosend shareholders a notice of the meeting with agenda of the meeting as well as attached therewith acopy of a merger agreement for shareholders’ reference to ensure that they are aware of what they aregoing to vote for or against.
Fourthly, adding a new provision to confer upon shareholders the appraisal right when they areforcefully cashed out. Perhaps, here, lesson from the Japanese law-makers is useful by offering two
steps for shareholders to enjoy their appraisal rights: one is to file a written demand of appraisal to thecompany for share price negotiation between shareholders and the company. In the failure of thenegotiation, then the second step will be taken, that is to institute a proceeding to court for a fair shareprice. This peaceful approach employed by Japan can save both money and time since obviously any
procedure taken in courts is more time consuming and costly than negotiation between disputed parties.
Fifthly, inserting a provision to ensure that merging company shall be liable to even unforeseen
liabilities of the merged company for the reason already pointed out while discussing the relevant
provision.
Sixthly, omitting a provision that imposes a duty of enterprise registration on shareholders of themerging company since if such a registration required, it is not the duty of shareholders but of thesurviving company itself.
Seventhly, rewording the current provisions on drafting and approving of the merging company’s
charter to ensure that where the merger results in a change in the merging company’s charter, then,35

the MBs of the surviving companies shall amend the existing charter or draft the new one. However,
the approval right of shareholders over the revised or new surviving company’s charter should remain
intact.

36

Asso. Prof. Dr. Nguyen Thi Anh Van
Nguyen Thi Anh Van is an Associate Professor of Law, Comparative Law
Institute, Hanoi Law University. She obtained a bachelor’s degree from
Hanoi Law University in 1988, a master’s degree from Melbourne
University Law School (Australia) in 1996, and Ph.D. from Nagoya
University Graduate School of Law (Japan) in 2003. Her researchinterests include: securities regulations, banking law, tax law, corporate
finance law, comparative law, jurisprudence, and legal education(teaching curriculum reform and legal writing). Her books and journal
articles cover all of the areas as mentioned above, published both insideand outside Vietnam.

C ALE Discuss i on P ap er No. 20
PROTECTION OF MINORITY SHAREHOLDERSUNDER THE MERGER LAW IN VIETNAM
AuthorAsso. Prof. Dr. Nguyen Thi Anh Van

Published byCenter for Asian Legal Exchange (CALE)
Nagoya University464-8601 Furo-cho, Chikusa-ku, Nagoya, JAPAN
Tel: +81 (0)52-789-2325
Fax: +81 (0)52-789-4902
http://cale.law.nagoya-u.ac.jp/

Issue date

January, 2021

Printed by

Nagoya University Co-operative Association© All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted
in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the priorpermission of the publisher.