Reserved matters are the decisions a Vietnamese company cannot take without the approval of a protected shareholder or a specified supermajority. They are the practical dividing line between the decisions management may take alone and the decisions that touch an investor’s economics, control or exit.
Getting the list right matters more than making it long. A well-drafted schedule of reserved matters gives minority investors real protection while leaving the board free to run the business; an overloaded schedule produces delay, deadlock and, eventually, a dispute about whether consent was withheld in good faith.
Each consent item should be tested against the company’s real decision calendar. Photo: Pexels.
Reserved matters are decisions that cannot be taken without the approval of a protected shareholder or a specified voting majority. In a Vietnam shareholders’ agreement, they are a central tool for protecting minority investors and aligning founders, strategic partners and financial investors. The list must be strong enough to prevent value destruction but focused enough to let management run the company.
Purpose of reserved matters
Ordinary voting power may leave a minority investor unable to stop major changes to the business or capital structure. Reserved matters create contractual approval rights over decisions that materially affect ownership, risk, value or exit. They are not intended to give the investor control over routine operations.
Shareholder-level matters
Important shareholder reserved matters commonly include:
- amending the company charter or changing shareholder rights;
- issuing shares, options, convertible instruments or new share classes;
- reducing or reorganising charter capital;
- declaring dividends or other distributions;
- approving a merger, acquisition, disposal or restructuring;
- changing the principal business or investment strategy;
- listing, liquidation, dissolution or insolvency action; and
- entering a transaction that changes control.
The approval threshold should be coordinated with Vietnamese enterprise law, the charter and the investor’s actual ownership percentage.
Board-level matters
Operationally significant decisions may be reserved at board level, including annual budgets, business plans, debt, capital expenditure, guarantees, material contracts, litigation settlements and senior-management appointments. Financial thresholds should be clear and reviewed as the business grows.
Where a reserved matter is placed at board level, quorum and voting rules must ensure that the investor nominee can participate without allowing repeated absence to paralyse the board.
Related-party transactions
Related-party transactions can transfer value from the company to founders, controlling shareholders or affiliates. The agreement should require disclosure, arm’s-length terms and approval by disinterested decision-makers or the protected investor. The rule may cover loans, management fees, leases, asset transfers, service contracts and waivers of receivables.
Financing and security
Investors may reserve new borrowing, guarantees, security interests and changes to bank mandates above agreed limits. The company should retain authority to use working-capital facilities within the approved budget. Emergency funding provisions can prevent a veto from threatening solvency.
Budgets and business plans
Approval of the annual budget gives the investor forward-looking oversight. The documents should explain what happens if a new budget is not approved. A common solution is to continue the prior budget with specified adjustments for inflation, contractual commitments or essential expenditure.
Material deviation thresholds should allow management flexibility while requiring consent for decisions that alter the agreed investment case.
Senior management and remuneration
Appointment or removal of the chief executive, chief financial officer and other key officers may require investor approval. The company may also reserve material changes to remuneration, incentive plans and founder arrangements. The scope should not extend to routine hiring unless the investment thesis depends on particular personnel.
Shareholder-level and board-level approvals are set at different thresholds. Photo: Pexels.
Thresholds and materiality for reserved matters
Low thresholds create constant consent requests and can delay business. High thresholds may make the protection ineffective. Thresholds can be expressed in currency, a percentage of revenue or assets, or reference to the approved budget. Aggregation rules should prevent related transactions from being divided below the threshold.
Monetary thresholds keep the schedule proportionate. Set them in absolute figures, state whether they apply per transaction or cumulatively over a financial year, and say expressly whether a series of related transactions is aggregated. A threshold the company crosses every month converts a protection into a standing approval process and is the most common reason reserved matters fail in practice.
Emergency and legal-compliance exceptions
Management should be able to act urgently to protect people, assets, licences or legal compliance. The exception should be narrow, require prompt notice and prevent misuse for avoidable commercial decisions.
Information supporting consent
A consent right is meaningful only if the investor receives sufficient information. Notices should describe the proposal, financial impact, related parties, alternatives and required timing. The investor should respond within a defined period, and deemed consent may be appropriate for routine time-sensitive matters.
Charter alignment
Key governance rights should be reflected in the company charter where permitted. The shareholders’ agreement binds its parties, while the charter governs internal corporate action. Inconsistency can lead to a valid corporate decision that nevertheless breaches contract.
The reserved-matter regime should form part of the wider protection described in protecting a minority investment in a Vietnamese company.
The charter binds the company and is filed with the licensing authority; the shareholders’ agreement binds only its signatories. Where the two conflict, a counterparty dealing with the company will usually rely on the registered charter. The safest structure is to put the core reserved matters and their voting thresholds into the charter, and keep procedure, information rights and remedies in the agreement.
Deadlock risk
Every veto can create deadlock. The agreement should distinguish fundamental matters from decisions where escalation, mediation or an alternative solution is appropriate. Continuing obligations, interim budgets and emergency funding should preserve the company while the dispute is resolved.
Enforcing reserved matters: remedies that work
The documents should specify whether approval is a condition to corporate action, a contractual covenant or both. Remedies may include injunctions, specific performance, compensation or shareholder transfer rights, depending on governing law and forum. The dispute clause should support urgent interim relief.
Drafting checklist
- Reserve only decisions that materially affect value or risk.
- Separate shareholder and board approvals.
- Use measurable thresholds and aggregation rules.
- Protect against related-party value leakage.
- Create annual budget and fallback procedures.
- Provide information and response deadlines.
- Include narrow emergency exceptions.
- Align the shareholders’ agreement and charter.
- Design a proportional deadlock mechanism.
Conclusion
Reserved matters in a Vietnam shareholders’ agreement should establish focused strategic protection, not shadow management. Clear categories, realistic thresholds, timely information and charter alignment allow the investor to protect essential interests while the company continues to make ordinary commercial decisions efficiently.
Frequently asked questions about reserved matters
What are reserved matters in a shareholders agreement?
Reserved matters are listed decisions that require the consent of a named shareholder, a class of shareholders or a supermajority before the company or its board may act. In Vietnam they are used alongside the statutory approval thresholds in the Law on Enterprises 2020 to give minority and financial investors protection over items such as new share issues, changes to the charter, disposals of key assets and related-party transactions.
Which decisions should be shareholder-level rather than board-level?
Anything that changes the shareholding structure, the constitutional documents, the company’s business scope, its capital or its solvency belongs at shareholder level: share issues and buybacks, charter amendments, mergers, dissolution, dividend policy and the sale of the business. Operational approvals such as budget variances, senior hires and single contracts above a threshold are better placed at board level, where they can be dealt with quickly.
Do reserved matters have to be in the company charter?
They do not have to be, but the important ones should be. A registered charter is enforceable against the company and visible to third parties, whereas the shareholders’ agreement is a private contract between the signatories. Charter wording must stay consistent with the Law on Enterprises 2020: a charter may set a higher approval threshold than the statutory minimum, but it cannot set a lower one.
What remedies apply if a reserved matter is approved without consent?
A resolution passed without a required charter approval can be challenged as invalid under company law, while a breach of the agreement alone gives a contractual claim for damages, specific performance or an agreed remedy such as a put option or enhanced governance rights. Because damages are hard to quantify in governance disputes, well-drafted agreements pair the consent list with a defined escalation and exit mechanism.
How do reserved matters interact with deadlock?
Every consent right is a potential deadlock. The usual answer is a graduated process: a short deemed-consent period, escalation to senior representatives, then mediation, and only after that a structural remedy such as a buy-sell mechanism. Emergency and legal-compliance carve-outs should also be included so that the company can still act where a delay would breach the law or damage the business.
Next step
Review the schedule against two things before signing: the statutory approval thresholds in the Law on Enterprises, and the decisions the company actually expects to take over the next twelve months. Items that recur monthly belong in a threshold or a budget safe harbour rather than on the consent list.
IVLF Lawyer drafts and negotiates reserved matters for founders, funds and strategic investors in Vietnam, and aligns the charter with the agreement so the protections survive registration. Working with an experienced Vietnam M&A lawyer at term-sheet stage avoids costly renegotiation later. See our legal services or contact IVLF Lawyer.
Related reading: Designing investor veto rights without paralysing the company, Shareholders agreement in Vietnam: veto rights, and Vietnam minority protection: tag and drag along.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
