Through the Receiving and responding System to recommendations of enterprises, The Civil Engineering Construction Corporation 5-JSC (in Da Nang City)would like to request the authorities to answer some issues about members of the Board of Directors (BOM) who have related interests and determine the value of transaction contracts prescribed in the Enterprise Law.

In the process of applying the Enterprise Law, the Civil Engineering Construction Corporation No. 5 - JSC (CIENCO 5) encountered some problems as follows:

In Clause 2, Article 162 of the Law on Enterprises 2014 provides:

When the company signs contracts with the subjects specified in Clause 1, Article 162, with regard to contracts under the approving authority of the Board of Directors (BOD), the members of the Board of Directors who have no related interests voting rights. So how are members with related interests?

Pursuant to Clause 2, Article 159 of the Law on Enterprises, members of the Board of Directors ... must declare their related benefits including: Enterprises in which they own contributed capital or shares; enterprises in which their related persons (members of the Board of Directors) jointly or privately own contributed capital or shares greater than 10% of the charter capital. The CIENCO 5 Corporation would like to ask, how to identify related persons of the BOD members?

Therefore, members of the Board of Directors are not allowed to vote because they have related interests only when the company signs contracts with enterprises where such member owns equity or shares; or the company contracts with businesses where the spouse, father, adoptive father, mother, adoptive mother, offspring, adopted children, siblings, brother-in-law, sister-in-law of the member of the Board of Directors jointly or privately owns the capital contribution or shares greater than 10% of the charter capital.

The Corporation would like to ask for answers, does the understanding as the above analysis correct?

Accordingly, if company A (with Mr. H as the General Director; member of the Board of Directors, the shareholder with controlling capital contribution is company X) signs a contract with company B (the company X owns the contributed dominant capital, the company Y is a capital contributing member; Mr. H and his related persons do not own the contributed capital, Mr. H is a member of the Board of Directors of company Y), will Mr. H have the right to vote?

Regarding the content of "Contracts, transactions with a value of less than 35% of the total value of assets" in Clause 2, Article 162 of the Law on Enterprises, the CIENCO 5 Corporation offers answers and ways of determining contract value, How is the transaction in the following cases:

Case 1: The Company A signs a joint venture contract with 3 other investors to participate in bidding for project implementation. Total investment is VND 1,000 billion (greater than 35% of the total value of assets). The Company A contributes capital to the partnership at a rate of 25% or VND 250 billion (not more than 35% of the total value of assets). So the value of the contract, the transaction here is VND 1,000 billion or VND 250 billion?

Case 2: The Company A signs a building lease contract with the price of VND 200 million / month for 10 years, paying every 3 months. So the value of the transaction contract here is VND 200 million or VND 2 billion?

Regarding this issue, The Ministry of Planning and Investment has the following opinions:

Clause 2, Article 159 of the Law on Enterprises discloses the related interests, where the company's charter does not provide stricter provisions, the publicization of interests and related persons of the real company currently following regulations:

“Members of the Board of Directors, Controllers, Directors or General Directors and other managers of the company must declare their related interests with the company, including:

a) Name, enterprise identification number, address of the head office, business lines of the enterprise in which they have contributed capital or shares; rate and time of ownership of such contributed capital or shares;

b) Name, enterprise identification number, address of the head office, business lines of the enterprise in which their related persons jointly or privately own contributed capital or shares of over 10% of charter capital ”.

At Points b and dd; Clause 17, Article 4 of the  Law on Enterprises2014 stipulates that related persons are organizations and individuals that have direct or indirect relationship with enterprises in the following cases:

“b)  Subsidiaries are related person of the parent company in the same group;;

… đ) Spouse, parents, adoptive parents, children, adopted children, brothers-in-law, sisters-in-law of the enterprise manager or the members/partners/shareholders who have the controlling stake or shares;”.

We would like to propose CIENCO 5 Corporation based on the above provisions to determine voting rights for members of the BOD.

Regarding the valuation of transaction contracts, the Enterprise Law 2014 does not provide for how to determine the value of transactions and contracts. Therefore, the Corporation is requested to determine the value of transactions or transaction contracts in accordance with relevant laws.