Answers

Applied Skills, LW – VNM

Corporate and Business Law – Vietnam (LW – VNM) December 2019 Answers

Section A

1 A
It is a provision of the Law on Enterprises that decisions on investment projects require this level of consent.

2 C
Not all offers have to be time limited, in written form, or include payment terms. However, the offeror must be prepared to be legally
bound.

3 B
Layering is the second of three stages of money laundering. It occurs once the funds have been placed in the financial system, in
this case transferring the funds to other accounts and locations.

4 A
It is a provision of the Law on Enterprises that reconvening the meeting is the chairman’s responsibility.

5 D
The causal link between action or inaction and harm done is an essential test of liability for breach of a non-contractual obligation.

6 D
As Bian’s communication met the requirements for a valid offer and Danh did not reply, there was no acceptance and no contract
formed, so Danh was able to sell to Cuc.

7 C
Rescission of a contract entitles a party to walk away, but that party may also have a right to claim damages.

8 C
A guarantor cannot terminate a guarantee without the consent of the principal creditor and has no automatic right to data or
information. However, the guarantor has a right of subrogation by making a claim against the debtor.

9 A
The Constitution provides that the Standing Committee has a duty to explain the Constitution and its ordinances.

10 C
Without correct notarisation, the contract is void and has no legal effect.

11 D
The duties of the inspection committee are set down in the Law on Enterprises. Although the committee may prevent or detect fraud,
this is not an explicit duty.

12 D
Insider dealing offences only relate to securities which are listed on a recognised capital market, such as the stock exchange.

13 B
Article 48 of the Labour Code provides that the severance allowance due to an employee who has worked regularly for a period of
at least 12 months is half of the monthly salary for each year of work.

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14 B
Tasks carried out by an employee in the course of duty, or by an accountant for their client, are contractual. A duty to a visitor to the
premises is non-contractual.

15 A
The Constitution provides that the Standing Committee supervises and guides the activities of the People’s Councils.

16 B
It is a provision of the Law on Bankruptcy, as amended in 2014, that such a resolution requires more than 50% of the unsecured
creditors present at the particular meeting and that they must together represent at least 65% of the company’s total unsecured
debts.

17 A
The Civil Code provides that, despite being minors, persons who are between full six years old and under full eighteen years old
do not require the consent of their representatives for transactions which are suitable to meet the needs of daily life and which are
suitable to their age group.

18 B
The publication of a prospectus is an invitation to treat. An application to purchase shares is an offer.

19 C
Damages are intended to put the parties in a position which would have persisted had the contact been performed. This is in
contrast to rescission, which is restitutory and returns the parties to the pre-contractual position.

20 C
It is explicitly stated in the Labour Code that the clause in the contract will apply if the addendum conflicts with the contract itself.

21 B
It is a provision of the Constitution that a two-thirds majority is required in such cases.

22 A
Since only one party has the obligation under such a contract, it falls within the definition of a unilateral contract under the Civil
Code.

23 D
The Law on Bankruptcy provides that the committee must request permission from a judge in such circumstances before selling the
goods.

24 A
The Law on Enterprises provides that the shareholders are liable under such circumstances.

25 D
Company bonds are fixed interest, long-term debt securities, conferring no constitutional rights in the company’s affairs.

26 B
The Constitution assigns this role to the Supreme People’s Procuracy.

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27 C
While the relevant property may be sold under either type of secured lending contract, the Civil Code provides that the pledger is
obliged to hand over pledged property to the pledgee.

28 A
The Constitution provides that the National Assembly may set up Special Tribunals.

29 D
As the contract included a specific clause relating to the consequence of breach, this clause will apply.

30 C
Vicarious liability applies to tortious acts by employees, with the employer bearing responsibility. However, the employer may make
a claim against the employee, subject to the employee’s financial means.

31 B
The Civil Code provides that an offer by email to a company is effective at the point when it enters the company’s information system.

32 A
This time limit is provided for by the Law on Bankruptcy, as amended in 2014.

33 B
The Labour Code allows for an employment contract to be partially invalid where part of its contents are illegal; if the remaining parts
of the contract are unaffected, they remain valid.

34 D
The Law on Enterprises provides that the heir of a deceased unlimited liability partner may only become an unlimited liability partner
with the unanimous approval of the partners’ council.

35 A
The insolvent company has a separate legal personality both from the companies which own it and from the individuals who manage
it.

36 C
The Law on Enterprises provides that there must be at least three founding shareholders.

37 B
Under the provisions of the Labour Code, statutory probationary periods vary depending on the level of employee and some workers
can be engaged without a labour contract.

38 B
This is provided for in the Law on Bankruptcy, as amended in 2014.

39 B
Under the provisions of the Civil Code, a right of offset arises when a creditor retains assets until the debtor pays.

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40 D
This is covered by the provisions of the Law on Bankruptcy which deal with debts secured by mortgaged or pledged assets and
provides that the part of the debt uncovered by the relevant assets shall be paid during the process of liquidation.

41 C
Under the provisions of the Civil Code, a power of attorney cannot lawfully be acted upon if it is not signed or dated.

42 B
Under the provisions of the Labour Code, redundancy or retrenchment may be brought about due to ‘restructuring or changes in
technology’.

43 C
Under the Civil Code, socio-political organisations may provide fidelity guarantees to enable poor individuals or households to borrow
money.

44 B
This is covered by the provisions of the Law on Enterprises on contracts signed prior to business registration.

45 D
The probationary period is within the limits provided for in the Labour Code for employees holding a technical qualification, so there
is no entitlement to notice of termination.

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Section B

46 (a) Quyen was in breach of contract by not completing the work on Lan’s bathroom to a reasonable standard. Lan would be entitled
to take action on the grounds that the shower could not be used, and possibly any other deficiencies in the quality of the work.
As Quyen’s offer to return in six weeks’ time would be unacceptable, Lan would be entitled to engage the services of another
tradesman to complete the work and remedy any defects attributable to Quyen’s poor quality work.
In the event of a breach of contract, the legal remedy awarded should put the injured party in a position which approximates
to that which should have been the case had the contract been performed properly.
Lan would be entitled to claim for any additional cost of completing the work on the bathroom, or deduct any additional cost
of the work from Quyen’s invoice.

(b) Sang’s inability to complete the work on the kitchen was a breach of contract because the obligations under the contract were
not fulfilled.
The remedy in this case is for Lan to claim from Sang the additional cost of completing the work. Depending on the amount
of work which Sang had done, he could be entitled to claim for partial fulfilment of the contract, but it is likely that the extra
outlay of 5 million dong to complete the work would be deductible from his fees.

47 (a) Under the provisions of the Law on Enterprises, every partner in an unlimited partnership acts as an agent for the enterprise,
unless the charter specifies otherwise. Chinh would be entitled to conduct transactions with the bank under the terms agreed
when the business account was opened. The withdrawal of 30 million dong suggests that the bank had a mandate to permit
this transaction.
Chinh’s use of the funds to purchase a family holiday violated his obligations to the partnership, as the transaction was contrary
to the best interests of the partnership. Chinh also misrepresented the transaction by stating that the funds were needed to
purchase inventory. This could potentially be a ground for claiming that Chinh has committed a fraudulent act.
Tien could make a claim against Chinh for the return of the 30 million dong to the partnership.

(b) All partners have a statutory duty under the provisions of the Law on Enterprises to conduct business in a manner which
is consistent with laws and the constitution of the partnership. The charter sets down the registered business lines of the
enterprise.
Tien’s expenditure of 25 million dong for DVDs was inconsistent with the registered business lines of the partnership. Even if
she had the best interests of the partnership in mind, she should first have taken steps to agree a change in business lines with
Chinh, with appropriate changes to the charter.
If Tien purchased the DVDs without making the necessary constitutional changes, she would be obliged to return the
25 million dong to the partnership.

48 (a) Under the provisions of the Law on Enterprises, ordinary shareholders in a shareholding company have four sets of rights.
First, they have a right to a dividend if declared, but this is subject to the recommendation of the board of management, and
in turn is reliant on the company generating sufficient earnings to pay a dividend.
Second, they have a right to receive information from the company, including the financial statements and formal notices issued
by the company.
Third, shareholders have a right to attend general meetings and exercise voting rights.
Last, shareholders are entitled to the return of their capital in cases specified by law. However, if the company becomes
insolvent, this right is not absolute, as shareholders’ claims are subordinate to all other claimants against the company.
Applying these rights to the scenario, Tuyet cannot be guaranteed a good return on her funds, as the dividend will depend on
the earnings of the company and also the recommendation of the directors in respect of dividends. Her requirement to receive
information from the company and attend meetings can be met, as she would have the same rights as all other shareholders.
However, her right to requesting that her capital be returned would be extremely limited.

(b) While shares and bonds are securities and represent a claim against the company, the rights and obligations attached to them
are fundamentally different.
A share is a contract of membership, and a shareholder is a partial owner of the company. By contrast, a bondholder lends
money to the company, so the relationship is that of a debtor and creditor.
Bonds have a fixed rate of interest and in most cases have a redemption date, so this feature of bonds meets the requirement
for regular income. This means that Tuyet would be able to decide in advance of purchasing bonds whether or not the return
was adequate. There would be a guarantee of return of capital on the redemption date, subject to the solvency of the company.
Bonds do not entitle the holder to constitutional rights such as attending meetings and voting. However, some rights to
information can be reserved in the covenants attached to bonds, subject to agreement between the issuer and the purchaser.

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49 (a) Members of the board of management should disclose any related party interests, such as potential conflicts of interest arising
from family relationships.
Danh should disclose to Lit Company that his wife has set up Pod Company, which has similar business activities, and also
the involvement in this company of his wife and other family members. Danh’s disclosures should be full, including the extent
to which he has assisted Pod Company, including his contacts with the company’s potential customers.

(b) Danh has a statutory duty under the provisions of the Law on Enterprises to disclose information in a timely manner to the
board of management of Lit Company. The duty of disclosure arises when first taking up a position on the board, and thereafter
as conflicts of interest arise.
If Danh derives any income, profits or other benefits from his involvement in Pod Company, he should transfer these to Lit
Company.
It was inappropriate for Danh to encourage his colleagues on the board of Lit Company to outsource business to Pod Company.
If this is pursued further, he should play no part in the discussions on the matter, and should not vote on any resolutions
concerning an outsourcing decision.

(c) If the shareholders consider that Danh’s actions have harmed the company or will potentially harm the company in future,
they may require that Danh desists from acting in a manner which is prejudicial to Lit Company and may instigate an action
for compensation if they believe he has caused harm to the company.
The shareholders may convene a general meeting to remove Danh from his position on the board of management, or may place
an item on the agenda for the next scheduled annual general meeting for this purpose.

50 (a) Insider dealing is a criminal offence through which an individual uses price-sensitive information relating to the securities of a
listed company in order to make a profit or avoid a loss. Price-sensitive information is that which is not in the public domain
but has the potential to materially affect the market for securities.
There are three primary insider dealing offences: dealing in securities, disclosing price-sensitive information and encouraging
another person or persons to deal.

(b) As an employee of Lup Company, Hai is an insider. He committed two offences. He used the information as a basis for deciding
to deal in securities and he encouraged Mai, his sister, to deal in the securities.
It is possible that Mai committed an offence when she acted on Hai’s advice to buy securities. However, she may argue that
she had no knowledge that the information given to her was price-sensitive, and did not understand the implications of acting
on her brother’s advice.

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Applied Skills, LW – VNM
Corporate and Business Law – Vietnam (LW – VNM) December 2019 Marking Scheme

Section A

1–45 One or two marks per question; total marks 70

Section B

46 (a) Why Quyen’s actions were a breach of contract 1 mark

Right of Lan to engage another person to complete the work 1 mark
Right of Lan to damages 1 mark
(3 marks)

(b) Why Sang’s actions were a breach of contract 1 mark

Right of Lan to engage another person to complete the work 1 mark
Right of Lan to damages, possible force majeure 1 mark
(3 marks)
(Total 6 marks)

47 (a) Duty to act in best interests of the partnership 1 mark

Consequences of breach of duty Up to 2 marks
(3 marks)

(b) Duty to comply with registered business lines 1 mark

Consequences of breach of duty Up to 2 marks
(3 marks)
(Total 6 marks)

48 (a) Rights of ordinary shareholders 1 mark

Application to scenario Up to 2 marks
(3 marks)

(b) Rights of bondholders 1 mark

Application to scenario Up to 2 marks
(3 marks)
(Total 6 marks)

49 (a) Mandatory disclosures under Law on Enterprises 1 mark

Application to scenario 1 mark
(2 marks)

(b) Duty to avoid conflict of interest 1 mark

Application to scenario 1 mark
(2 marks)

(c) Damages may be claimed if harm caused to the company 1 mark

Possibility of dismissing Danh 1 mark
(2 marks)
(Total 6 marks)

50 (a) Definition of insider dealing and offences Up to 2 marks

(2 marks)

(b) Offences by Hai Up to 2 marks

Offence by Mai and mitigants Up to 2 marks
(4 marks)
(Total 6 marks)